Telix Pharmaceuticals Ltd (TLX) 2022 Q4 法說會逐字稿

Good morning, good afternoon to those overseas and welcome to the 2022 full year results presentation from Telix Pharmaceuticals. Today, I have on the line Dr. Christian Behrenbruch, our Group CEO and Managing Director; Darren Smith, Group CFO; and Colin Hayward, Chief Medical Officer. My name is Kyahn Williamson. I'm SVP of Investor Relations and Corporate Communications. If we just move to the opening slide, please. You'll notice that we've placed the practice and lodge our full year results, annual report appendix your investor presentation at the close of market yesterday. In Australia, this is really reflecting our increasing global investor base and allowing people some sufficient time to review those documents.

So thank you for tuning in. Just by way of introduction, 2022 has been a really outstanding year for Telix. Notably, we've had a successful launch of Illuccix and the completion of the ZIRCON Phase III study. And I think what this slide shows you here is the achievement of the year really show what Illuccix is capable of and why we're uniquely positioned to lead in the fast-growing sector of radiopharmaceuticals. Care companies have the depth and breadth of theranostic pipeline and the expertise across the spectrum of product development from identification of assets to commercialization. We have a very clear vision to deliver further value through our diagnostic and therapeutic assets and as we regenerate the pipeline with new targets. We'll talk you through about this in the context of our growth strategy today.

Next slide, please. And here, our key results in Australian dollars. We finished 2022 in a very healthy financial position and the metrics do really demonstrate the maturation of our business. Since launching Illuccix in April 2022, we delivered excellent month-to-month growth, resulting in a 20x increase in revenue, and Chris will talk to that a bit later. Over the course of the year, and in particularly in H2, we delivered an improvement in gross margins, and we've seen key expenditure items reduced as a percentage of revenue. We finished the year with a strong cash balance sheet and a healthy cash balance of $116.3 million.

The loss position reflects a year of investment in scaling up the organization to support commercial launch and increased clinical development activity. And considering that last year, we also have the benefit of an $18 million R&D tax credit, and we have maintained the status flow. If you could move on to the next slide, please. Darren will take you through these in more detail later. As I mentioned, we do have a very clear growth strategy. This slide, I'm not going to read it out in detail, really outlines the intent behind each of those building blocks designed to maximize value for short, medium and long term.

And next slide, please. This summary here really shows how we've delivered against each aspect, and Chris and Colin will take you through this in more detail. But it's a pertinent reminder that while the muteness has been placed on the launch of Illuccix and the ZIRCON readout, there's many other achievements that are happening along the pipeline and behind the scenes in the business. This includes a number of clinical milestones, data readouts and patient dosing across the clinical programs and some excellent outcomes in our R&I programs as well. We've also expanded our clinical manufacturing and process development capabilities with the acquisition of Optimal Tracers and we'll have our own commercial manufacturing operation in Europe in 2023. Next slide, please. I think with that, is a reminder of the core pipeline, I'll hand over to Chris to take you through the operational highlights for the year.

I hope that my audio is nicely clear. This slide is really just a reminder of the breadth and depth of our core theranostics pipeline. As you'll be familiar, we have a key focus in urological oncology with the positive cancer and needle cancer program, in particular. We'll also talk a little bit later on our call, and we'll talk a little bit later on about our progress in glioblastoma as well. And I think what's exciting to note for 2023 is that not just the commercialization of our diagnostics pipeline, but there's a lot of clinical activity and readouts around the therapeutic pipeline as well.

So I think really excited to be able to report that progress as it takes place over the course of the year. The next slide, please. So this is a kind of a snapshot, I think, of really what 2022 looks like from the [resi] perspective in the U.S. Our first quarter, was really a partial quarter, we had a first dose delivered around mid-April. So really only 6 weeks in that quarter. And that was a pre-reimbursement quarter as well. So really, the Q3 of last year, calendar Q3 was the launch point for that program from a reimbursement perspective.

We had a great launch quarter, followed by a very healthy Q4, which we previously reported on. And we see no abatement of this trajectory over the next few quarters. It's clear that the prostate cancer market is much bigger than we all anticipated. We expect to see these growth rates largely continue. And we certainly see strong growth demand across both our existing customer base on new customers as well. So this is a market that's evolving really rapidly. Of course, we all associate PSMA with prostate cancer, but there's potential and other indications as well. So I think this is really an exciting time for PSMA and Illuccix is a well-respected product that's getting great customer traction.

Next slide, please. So from a kind of commercial trajectory perspective, when we launched the Illuccix program, we really focused on our core differentiation, which is scheduling, flexibility and availability. The nuclear pharmacy model is a model that's unique to Illuccix, and it's one that we think offers our customers a lot of benefits. And again, to reiterate, it's really around that service delivery and flexibility, as is a mission-critical activity and with the nuclear medicine product, the melting ice cube. So it's always about that critical delivery nexus between manufacturing and the customer. And I think our business model really provides a strong advantage for us.

We are focused on growing our pharmacy footprint. We're now at well over 190 nuclear pharmacies. That means roughly 2 out of 3 commercial nuclear pharmacies in the United States that are dispensing the Illuccix product. This gives us an enormous amount of coverage, both in the major metropolitan areas as well as in secondary markets. And we have plenty of capacity in that network to continue to grow and make availability products. We are having customers that are expanding their imaging hours. So they're going in the weekend. We're providing stat doses on a regular basis where our competition fails to deliver to a customer. And so we really feel, again, that this business model is giving a lot of flexibility to customers, and this is increasingly recognized in our dose demand.

If you move on to the next slide. We're going to get Colin to talk a bit more about this, but I think one of the things that I'm really excited to present to you is that when we launched Illuccix , we focused very much on guideline equivalency. Part of that rationale for that was the regulatory process that we undertook for the product, but also because we think the guidelines matter and when coming out of the gates with Illuccix, it was convenient for us to focus on guideline equivalency and new service differentiation as our platform. Now what we've been able to see over the last 12 to 18 months, a lot of new data is timeout where's a lot of great research being done, both led by our key opinion leaders and others. And now we're in the fortunate position where we're really able to focus on clinical differentiation as well.

And being able to present that clean and clear marketing message that Illuccix is a strong product that's got significant clinical advantages over our competition will be part of the story. But part of it is that we've invested heavily in our sales and marketing team. I think we've really upgraded our commercial infrastructure. We transitioned from a start-up company to kind of grown up company and really replumbed our commercial team and I think that the quality of the people that we have now in sales and marketing and also on the clinical support side of things, is just very, very strong. And that's one of the key weapons that we have going into 2023. So maybe, Colin, I'll hand over to you on the clinical content.

Sure. Thanks, Chris. We've also expanded the medical team, of course. And some of the feedback that I've been getting from them is the importance of having true positives and are being able to identify through positives out in the field. This was put to me in context last week at the ASCO GU Congressman. I had oncologists coming to me saying, they've been referred to patients who they had clinical results on F-based products and that they really wanted to see, understand what the result was before putting this patient on a course of therapy that could be a metastatic course of therapy versus potentially a curative therapy. So that is very important in terms of that clinical difference and seeing some critical results with F-based products in terms of the positivity.

And if we can go to the next slide. What I want to do is just remind everyone of the importance in terms of the clinical impact that Illuccix has on patients. Here's an example of a patient at initial staging with a load leasing score of around 6 coming in, but still having a scan that's identifying that they have metastatic disease. And so really being able to change the therapy accordingly. And just listening to urologists and oncologists talking about this really is making a difference in terms of being able to understand the extent of disease earlier. We see the same in the next slide with a biochemical current patient. And of course, this tool, Illuccix imaging- PSMA imaging is really becoming standard of care for patients throughout their pathway and we'll be looking as we continue the year to validate new indications, looking at areas where we can improve the care of patients, both in early prostate cancer and throughout their prostate cancer journey.

Thank you, Colin. I mean I think it's very clear. It's very fair to say that when you think in your mind about the life cycle of a prostate cancer patients, they often depict onsets of undulations of PSA score from early detection or initial detection all the way out to advanced disease. And we're really only treating that first hill. We're only really addressing that first opportunity. And so I think there's plenty of scope for us to continue to grow this market and grow the opportunity to the benefit of patients. So I think it's about time. Moving on to the next slide and maybe just as again a segue back to Colin. There are a number of specific objectives that we have this year as a company, and I'll summarize those at the end of this update.

But the 2 next frontiers for the business are clearly the approval for the renal cancer program, for which we just had a very exciting ASCO and I'm not going to steal Colin's thunder, I'll even take that one, but we've had an amazing response to the data that we've received out of the ZIRCON trial. And I think I speak on behalf of all of the Telix team that was finally great to get that study done with all of the challenges that we had during COVID and we finally get to the end of that study and to have such a stellar result, which is very gratifying. And so now from a company perspective, our main focus is here is that BLA submission to be in a position to do real commercial launch in the early part of next year, certainly initially in the United States and then eventually in other territories as well.

We also have a second product this year that we are getting towards an approval for, which is TLX101. It's our brain imaging product, PEP. This is a standard of care, modality in a lot of countries, but it doesn't yet have commercial availability in the United States. It's the companion diagnostic to our therapy program. And we think that this has a nice potential revenue stream to layer on top of prostate cancer and needle cancer. And so the team we scaled up the regulatory and clinical and quality teams to be able to really now address these 2 additional regulatory filings this year, and we're making great progress towards getting those filings in place. Colin, maybe just on to the next slide. You want to have just a quick recap of ASCO and the results outcomes?

Sure thing. Thanks, Chris. Look, I mean, ASCO GU is very exciting for me. It was as a company, our first big oral presentation of data at a major oncology congress and hopefully, the first of many going forward. I'm sure many of you heard the meeting with Brian Schucker or listened to the results directly. And just were like me were first impressed with the very high sensitivity and specificity that we saw in this study. The other thing, of course, was the very consistent results between readers. And we see as well in the small masses, the ones that are seen most preeminently, those less than 4 centimeters, very consistent results with the overall results. And in an analysis we've done is in the less than 2 centimeters as well. Again, very consistent in this. And this is the area that we see the most often in clinic.

And ASCO GU was fantastic as a company to see all these people coming to us coming to our view to talk about the clinical utility of this product and excited by the clinical utility of how this is going to be able to change their management in practice. And whether it's a small mass being able to understand that it is clear cell renal cancer or not or a larger mass, to be able to characterize that clear cell renal cancer and really understand the extent of disease. And you heard earlier about the PSMA sensitivity and specificity. Well, the sensitivity here really matches it out of the park, honestly, in terms of being able to identify a patient who is truly positive for clear cell renal cancer or contradictory truly negative for clear cell renal cancer and then following an alternative management strategy.

If we go to the next slide. It's just a couple of case studies. These are important because this really does exemplify the clinical utility of this product. Now if like me, you're over 50, 40% of you have a renal assist. If you were to have imaging, this will be found. Now a lot of the cysts are very simple cysts and can be diagnosed on normal imaging, but some that are more complex. This is where our imaging is going to have a major difference and a major impact on patient management. And if we go to the next slide, as I mentioned, those less than 2 centimeter masses.

Well, this is less than 1 centimeter mass or a 1 centimeter mass that was identified on imaging. Now this would normally be a management dilemma for the urologist. We can see that what would they do, perhaps the biopsy, but a biopsy is only going to have a certain accuracy in this population with this size and mass. It's not without complications. Here, we can see that it was a positive image and it was clearly a clear cell renal cancer on histology from a partial nephrectomy later. So really making management decisions and being able to help patients understand whether they have clear cell renal cancer or not and characterize the extent of that clear cell renal cancer.

Now just moving on to 101 CDx and brain imaging. Now we've seen how accurate and better management, better diagnosis in prostate cancer. We're understanding how better diagnosis with clear cell real cancer can help patient management overall. Here as well as in glioblastoma glioma as a whole, we understand using amino acid-based imaging throughout Europe is currently standard practice in the U.S. It can only be done under an IND in certain institutions. And where is it particularly valuable Well, yes, in newly diagnosed patients to understand clear margins, the extent of disease. This will also give us a bit of an understanding of the grade of disease be able to guide biopsies, for example.

The real benefit compared to existing structural imaging is in those patients who have recurrence or not and really being able to differentiate between that pseudo progression, which could be information or necrosis that is very difficult to tell on MRI imaging and absolute true progression and therefore, again, really making management changes. Just want to change tack and talk about prostate cancer program on the next slide and give you a progress update there. Here, we can see some images from the SELECT study that continues to recruit strongly.

And I think you can see a patient here with low and with high tumor burden, how the activity with a much lower dose of lutetium than a small molecule, how that activity with an antibody stays and is retained in the tumor for a long period of time. We also have in the early biochemical recurrence setting, the TARGET study up and running, and we're scaling up the manufacturing right now so that we can begin the prostate global. We've just modified the trial design slightly, not to keep with the same number of patients but to give us an interim analysis opportunity so that we can communicate that readout earlier. So we're making good progress on this program moving forward with prostate.

Very quickly, I'd love to move on to TLX101 on the next slide. Excellent. Thank you. Now we have the readout of the original Phase I of the IPAX study with those 10 patients hitting an overall survival of 13.1 months in that recurrent setting, which is pretty good, but I'm not here to make any claims about a Phase I study other than we saw good tolerability to move on. Now with TLX101, we know that we have potential synergistic activity with external radiation, which is used most commonly worldwide in that early treatment setting in patients who've had surgery in the newly diagnosed having going on to have a strict protocol with radiation and temzolimide. So that's the area where we want to study in the follow-on Phase I, the IPAX-2 study, and that is the sites opened up now, and we'll be recruiting our first patient very soon into that study.

We also have to complement that the IPAX-L in the recurrent setting an investigator-initiated study in Austria. So in addition, we'll be -- we've submitted for the IND in China to progress TLX101 there as well. So really excited by this program, a potential impact in an area which really doesn't have a true new standard of care is coming in and there's a lot of interest as well. I think this is probably an area where I get a lot of e-mails for investigators asking when can we move this forward, when can they get to join in these studies. So handing back to you after that slide, Chris.

Thanks, Colin. I think look, the all of the programs are progressing really nicely. And as Colin has eluded, we'll have many opportunities over the course of this year for clinical data points and updates on those programs and hopefully leading to good data, and also with the plan to enroll the interim readout across that global this year as well, we would expect at some stage towards the back end of next year to have some interim data on the ProstACT GLOBAL study as well. So I think it was fair to say that we're firing on all cylinders and getting these programs in ahead I just want to make a little bit of a comment. Kyahn mentioned in the opening comments about manufacturing.

This is an area where we continue to focus a lot. We've got great partners and a really critical part of our commercial strategy is, of course, to tap into the network of isotope supply chain and drug product manufacturing partners that are out there and growing as the field matures. But really, any company that reports to commercialize radiopharmaceutical really has to have a clear strategy and game plan for managing the supply chain. And this past 12 months, we made some really important progress. First of all, not to supplant key partners and vendors that we need, but we now have some in-house process development capability on sensitive projects, particularly we're collaborating with a pharma partner, and we'd like to keep a little bit more of a lid on what we're doing. Also, so that was part of the driver for acquiring the optimal tracers platform.

We also made amazing progress in the last 12 months at our South Brussels or what we used to refer to as the Senet site. We stopped calling it Senet. It's now the new where it was. I would call it South Brussels. But basically, that site is now largely built out. We're just about ready to go into the commissioning phase, and I expect around May or June of this year that, that site will be active from a regulatory perspective.

We've been granted the radiation license for the site now. And so that's just a very key asset for the company and underpins our ability to deliver product in Europe. So a very exciting progress. In fact, if you go to the next slide, I think there's a little bit of a… a little bit of a picture there. But this is a sort of a jewel in the 2x Crown. And as I said, really underpins our ability not just to deliver a product in Europe but to do some really next-generation R&D. We don't really like to be a fundamental research company. That's why Kyahn referred to R&I research and innovation. And we'd like to take things that are clinically fairly well established and take them to commercialization. That's really the company's strategy from a product pipeline perspective but Alpha Therapies with things like actinium and acetine, this is a big future frontier.

And the vast majority of people dabbling in the Alpha Therapy space don't have a place to actually do the work. The research environment and the equipment and the facilities that you need to really do scale-up work with Alpha doesn't exist clinically on the planet right now. And I think that the infrastructure that we've built in Senet, the very South Brussels to kind of very stealthily get into that space is going to be a great asset for the company going forward. Just a lot of interest in that capability.

Moving on to the next slide, please. So maybe just on the topic of research and innovation, as we call it, R&I, just to kind of, again, deemphasize the fact that we don't like to do a lot of fundamental research. We like to take ideas that have some clinical merit and commercialize them and scale them up. We have 5 research areas that you're going to see really manifest themselves over the next 12 months into an interesting new opportunities for the company. We've got clinical trials running in combination with immuno-oncology, where we believe that we'll be able to show that targeted radiation is really a fundamental platform technology for immuno-oncology.

And our goal and Collins team goal is to demonstrate that we can improve complete response rates for immunotherapy patients by doing good patient selection and doing good targeting radiation. We've got, as I mentioned, with respect to the South Brussels facilities. We've got a very active R&D program and we targeted alpha. We've also acquired pipeline around understanding the tumor microenvironment, and you're going to see more of that. That's really how to use noninvasive methods to really understand how that tumor works and what are the mechanisms that are likely to elicit a response. We have a healthy program in AI. I think this is an area where more and more attention is being given in our field. clearly, to make the imaging results have impact on the therapeutic deployment, we have to connect those dots and AI and image analysis and machine learning are a key way of achieving that objective.

And then unsurprisingly, if you look at the Illuccix label, particularly the high-risk patient prior to prostatectomy. If you look at the outcome of the ZIRCON study, which is really a preoperative interrogation of the disease, surgery and particularly the urologist as a surgical stakeholder is something that we have more and more of a focus on. And so we're starting to ask really interesting questions about how do we bring radiopharmaceuticals into the operating deal? How do we make it possible to do better interoperative guidance, whether that's either radiation or florescence.

And we have a pretty exciting R&D program, including with some partner companies we're actively interrogating this question in clinical trials and in clinical development. So it's a really exciting potential area to develop the depth of relationship, particularly with neurology. Moving on to the next slide, please. So one of the things that you may have noticed when we gave our JPMorgan presentation earlier this year, beginning of this year, for the first time, what we've done is we bifurcated what's our core pipeline.

This is really the assets where we believe we have the clinical data to support commercialization and then now really to start to showcase what our research pipeline is. And I don't think that there's a good understanding of just the depth of R&D pipeline that we have. What's exciting is, by the end of this year, we are going to have clinical data in all of these programs.

By the end of this year, we -- I mean, some of them are clinically active already. But what we really are going to understand by the end of 2023 is today, we've got those 4 key asset areas in the core pipeline. That's essentially the Telix commercial pipeline and let's say, 2025. And what this slide represents is what's the Telix pipeline look like in 2028 to 2029. And I think it's great that we have the ability to take that long-term view of how we're going to be legal in this field, how we're going to life cycle manage our products. And that's really what this R&D pipeline gives us. And we'll be very judicious, of course, on how we expand this pipeline. We've got a lot on. I think some investors would say, well, maybe we have even a little bit too much on. So when you do expand the pipeline, we'll be very cautious about the merits of doing so, but it's great to have that future pipeline for the business.

Next slide, please. So just as a little showcase example and then I'm going to hand it over to Darren to go into the finances, but I think this is a kind of a capstone in this presentation, one of the exciting clinical trials are just about to launch for us is called the STARLITE trial. And it's based on the work that we've been doing for the last approximately 2 years with Merck, Darmstadt on DNA damage response inhibitors in combination with targeted radiation. We now are starting to really understand how to use this combination. Now there's a bunch of combos in our pipeline, which are exciting as immuno-oncology ones. Obviously, there's energy deprivation combination and prostate cancer. But we -- when we look at 250 program, when you look at carbonic and hybrids 9 as a target, and we see that as a multi-cancer pan-cancer target.

And then we look at the ability to give ultra-low-dose radiation in combination with the DNA damage response and hit, you really start to see why Telix is so committed to an antibody-based approach. What we are able to do is deliver very, very efficiently radiation with tumor, very low-dose radiation. So we have no major toxicity concerns and the ability to combine that with a DNA damage response inhibitor for efficacy is just is really exciting. So what you can see in this graph here is this would be a subtherapeutic dose of radiation. So when you align it up with DNA damage response inhibitor is obviously in animal models, but we were excited to see whether or not the same feed can be achieved in humans. And we think this is really a transformative pathway for targeted radiation. I don't know, Colin, if you want to add anything before I transition off this slide, but it's probably one of our most exciting R&D program.

Yes. Look, I really like to integrate our products with existing and new oncology paradigm in terms of the treatment. I think that's important for our future. And whether we can show the immune priming effect in the STARLITE studies or a combination with potential other agents like PARP inhibitors or this DNA damage response inhibitor is going to be really important. And just to highlight what you said but delivering lower levels of radiation to the tumor and you saw from the earlier select slide, how long that radiation actually stays and lives in that tumor.

Exactly Yes. And so just -- maybe just around the slide off and then hand over to Darren. What you actually have here in this graph is a pretty cool thing. You inject the targeted radiation. And as Colin said, it sits there, residualized in the tumor. It sits there for a couple of weeks. And so instead of the traditional approach where you send a patient in every day or every other day, you get fractionated radiotherapy, what you're doing is that you're giving them one shot of radiation and then giving them an oral drug. And they're taking that oral drug every day for 14 days in order to achieve for 28 days in order to achieve that fractionated radiation effect. So this is really a game changer in the way you think about delivering and fractionating and sensitizing the patient to radiation.

And again, because with carbonic and hydrates 9s, pan-cancer utility, it really is a multi-cancer almost a very large proportion of late-stage cancers who have a core prognosis or carbonic and hydro 9 express and we see this is something that's potentially able to solve and address a lot of unmet medical needs. So we've got to do more clinical research to prove it, but it looks really, really interesting. All right. Well, that's enough from a clinical and the R&D snapshot. I just wanted to give you a sense of really where the company is thinking from an innovation perspective. Darren, do you want to take the leads then on running through the financial ballots?

Yes, sure, Chris. As you've already heard today, 2022 has been a successful year for Telix, both in operational and in financial terms. Looking back in following the U.S. FDA approval of Illuccix late last year of '21. Telix commenced 2022 by raising $175 million to fund its commercial launch of Illuccix and the continued funding of our promising portfolio of diagnostic and therapeutic assets. in April 22, Illuccix successfully launched title launched Illuccix in the U.S. becoming a commercial phase organization. On the 1st of January, Illuccix transitional pass-through payment status became effective, improving Telix's ability to progressively grow sales through the second half of the year. This, plus our continued build-out of our pharma-- radiopharmaceutical network across America has resulted in a 20x increase in Telix's global revenues to $160 million, driven mainly out of the U.S., which achieved $150 million. I'll get you to turn to the next slide, please. Great.

To build a sustainable business, sustainable commercial business that has the capability and capacity to support a rapid growth that Illuccix has achieved, Telix is needed to invest in its commercial infrastructure ahead of the curve. In the first half of the year, Telix invested in its sales and marketing capability, it's manufacturing capacity and established a supply chain and distribution network before it could even sell a dose. This had the obvious impact on our expenditure as a percentage of sales during that period, as you can see in that graph on the bottom. However, as we look at the second half of the year, sales growing month-on-month, you lose commercial business, return sales, return on sales and has improved it significantly. Thus you can induce you would as saw in our Q4 results when we presented them permitted Telix to move to a cash-neutral perspective at the end of 2022. As a result, we're now in a position where we can fund our current research and development pipeline program out of our own generated funds.

Turn to the next page, thanks. In this income statement summary, clearly, this shows the transition the business has made from '21 to '22 that it's gone from being a biotech investing a promising portfolio of diagnostic and therapeutic assets to a commercial phase business supported by continuing growth of Illuccix revenue and the ambitious investment strategy. This strategy includes growing the Illuccix transfers, investing in bringing late-stage diagnostic products to market for both renal and brain cancer and investing in the comparison companion therapeutic assets such as in the prostate clinical studies. This requires Telix to invest in its people, infrastructure and R&D program.

Interestingly, and that can be seen in that half-on-half comparison on the abbreviated P&L, the continued growth of our Illuccix revenue is driving improvement in our bottom line, even as we actively invest in the future of Telix. Continued revenue growth and active management of our expenditure as a percentage of sales has permitted Telix to improve its second half performance by $42 million over the first half of the year. Turning to slide -- the next slide, Slide 28. This improvement in the P&L is also been a progressive improvement in Telix's operational cash flow to a cash-neutral positive position in the final quarter of 2022.

This places Telix in a sound financial position for the start of 2023 with a healthy cash balance of $116 million, down management of our working capital as reflected in the cash flow, an outlook of continued revenue growth in controlling operating expenditure as a percentage of revenue, thus improving the margins of this Illuccix transit and resulting in the commercial business that will support Telix's investment into its late-stage diagnostic and therapeutic assets. I'll pass back to Chris to take you through the focus for the year ahead.

Thanks, Darren. Much appreciated. And I think just to summarize, the mission that we had when we raised our capital last year was to make that commercial transition that we've clearly demonstrated that. It can factor in the R&D tax credit that we give you get this year as I said, was a part year in terms of R&D expenditure. Of course, we invested on the commercial team, and we continue to do that. But I think it's from a financial trajectory perspective, it's a very encouraging place to be. And as I said, we don't see no abatement in our opportunity for Illuccix then to have the follow-on revenue streams that we anticipate over the next 12 to 18 months. It's a really strong place for the company to be.

So just very good outcome for 2022. So just to wrap up, and then I'll let Kyahn sort of close out the session, but we have to recap, we have 4 major focus areas. And I hope when you read our annual report, which really summarizes all of the activity in 2022. You can see that we've laid down the groundwork for these 4 focus areas. Clearly, we will continue to grow Illuccix. We have indication and label expansion plans for Illuccix. We see lots of opportunities. Illuccix, if you look at our pipeline, we have a very deep commitment a prostate cancer imaging for the long term. It's going to be a multiyear, a decade commitment to protecting and we really think that we have the best pipeline to offer and to be part of defining standard that, that continues to be a key area. And then by the way, we invest about 20% of our R&D in Illuccix. So R&D is not just about Blue Sky pipeline expansion therapy programs, but it's about making sure that we are building all the debts that we possibly can in the Illuccix.

And then clearly, we've got 2 more drug approvals to file this year. Obviously, focus in the U.S. market, but we are a globally active company. We continue to run clinical activity globally for these assets and to a large extent, particularly for the 2 program, that is something that we intend to roll out globally. So good year ahead. We scaled up our regulatory and quality and clinical teams to be able to deliver on that. And that's a really exciting activity to work on. All goes well. According to plan early next year, we'll have more than one product generating revenue for the company, which is super exciting.

And particularly given that the renal cancer product is the same customer call point, we're out talking of the same referral physicians and Illuccix. That means that SG&A investment that we have in our U.S. sales force was something that we get to kind of double down on from a product efficiency perspective. And then last of all, I certainly get a lot of feedback from shareholders and investors that the sympathy for the supply chain and distribution realities of coming out of COVID, but we are as impatient as everybody else is to have prospect global fully operationalized, but we made tremendous progress last year in laying the manufacturing and distribution framework for that. And I'm really excited to have those trials. We have 2 of the 3 trials, obviously, fully operationalized, but to be able to recruit U.S. and some European patients into that study with across that global study is going to be a big milestone for the company and I think one that's as anticipated by the company as it is by shareholders.

So again, great progress made last year. And Colin's team will deliver the fruits of that labor this year in terms of clinical activity. So yes, big activities. I think for the average company, any one of those thoughts would be something that would command plenty of effort and attention. But we've got a big year ahead and we're excited to keep you abreast of our progress at the opening All right. Last slide, please. So Kyahn, maybe if you want to summarize and wrap up.

Yes. Look, just closing remarks. We've taken you through the 4 key focus areas for the 2023, but there's a lot of additional catalysts and milestones as you can see mapped out here. So we look forward to keeping you informed as we progress. I will now open up the call to question and are, take questions from the phone first and then go through with webcast.

(Operator Instructions) Our first question comes from David Stanton at Jefferies.

One on time lines and then a couple for Darren, if I may. So time lines for the European Illuccix submission, please. When should we expect sales in Europe -- reimbursed sales in Europe for that product, please?

So we are getting ready right now. We have a package ready for resubmission. We're just getting ready to submit. The expectation is that we will still do that by the end of this quarter as we previously guided. We will not be able to give clear firm time lines yet on what the approval looks like because it depends a little bit on some nuances of that resubmission process. But obviously, as soon as we have that information to share, we will. We would expect to have at least a positive opinion by the end of the year. So I think this year is really about that resubmission process and '24 is likely to be the revenue consequences of that regulatory process.

Understood. And questions for Darren, please. Gross margins improved through the year. Can you give us an idea of what you're expecting for gross margin percentage for Illuccix in F '23 and beyond, please?

As you know, David, we don't normally give guidance on where the numbers are going. But we have spoken kind of generally in regards to gross margin. I think Chris and I have an active debate about gross margin and where it's headed. So we -- as an organization, we believe there is an opportunity to move that up to -- in that range of 65% to 70%. So -- but obviously, there's a couple of key issues within the market dynamics, it's going to influence where that finally falls.

So as you know, gross margin is not just about cost and operations side, it's also taking what's happened in the market in regards to pricing. So -- so we kind of see that there are opportunities within our cost structure where we can actually make some changes, but that's more tweaking that cost of goods, and that's where we'll see some of that uplift coming through. Some of the downside pressures will be on as the market moves towards fully penetrated, we should see -- we believe that there will be some active kind of negotiations with some of the larger groups within the market, such as the GPOs, which could put some price pressure on it. But obviously, that is in trade-off for larger volumes or share of that market. So those 2 things together will then determine where the end -- where it finally ends.

Yes. I mean, if I could just chime in on 2 comments. I think, first of all, as Darren exactly says we are optimizing our manufacturing cost of growth and that does function that does scale as a function of volumes. So there's a few points of optimization there. You have to remember that part of that gross margin bucket right now includes our active investment in sales and marketing functions through our network, right? So it's not reasonable to just treat it really as a cost of goods. It's actually an investment in growing our market share. So I think at the moment, from a company perspective, we're sitting on roughly 65% growth mark 64% to 63% gross margin as a highly cash-generative business. And I think we're comfortable with our important over the next few years that we'll continue to have that cash in the business.

Understood. And final one for me, if I may. Any ideas about what should we be thinking for R&D spend for F '23 as well, please?

We haven't given guidance, but there's no particular reason for our R&D expenditure to accelerate. So it's obviously always a little bit chunky because we've got clinical trials and manufacturing activity that's going to be there. There shouldn't be any sticker shock on R&D for '23 and it will be funded through earnings and will not be funded to a capital increase.

Your next question comes from Steve Wheen at Jarden.

Chris, I was just wondering, you mentioned just picking up on a comment on the growth rates and the sustainability of those growth rates. Could you clarify what the growth rates are you're referring to what across which base are you talking like the consecutive improvement in growth?

Well, I was just pointing out that we have had 2 quarters of sales post reimbursement. And we don't -- we don't see any reason for that sort of nice linearity of sales profiles to not continue. We've seen lots of headroom left in the market. There are some clear white space market segments. We are capturing market share from our competition. And so I think that we should continue to see good quarter-on-quarter sales. That said, we've also been very transparent in our view that by sort of Q4 of this year, we should see a largely penetrated market.

And I think what's going to happen over the next kind of 9 months is the transition from acquiring individual accounts to much more of a group IDN type of purposing environment. And so we are also viewing our sales and marketing that business to address that. And frankly, Steve, we think that we have a strong advantage there. We have excellent nuclear pharmacy network partners that command a very significant share of that market, right, the GPO IDN market already for other products. And so I think we're really well positioned to move the needle on that as a commercial strategy for the business. Does that make sense?

Yes. That makes sense. And then just as part of that, I just wondered what your sort of visibility is as to what Novartis has been up to since they've been able to achieve reimbursement. Certainly, from channel checks, it doesn't look like the -- they've been making too much inroads, particularly with regard to the diagnostic, but just curious as to what your observations have been of them in the marketplace.

I think we've talked about this a lot, both privately and publicly. I think that the most important -- I mean, I'm not the CEO of Novartis, so I can't speak for what their strategy is. But what it appears to be, and I think it's a reasonable statement is that we're very much focused on delivering therapeutic outcomes to their patients. That's -- it's a topic that's garnered a lot of attention, and it certainly reinforces the importance of core of supply chain and distribution. But I think it's fair to say the whole industry is gunning for Novartis to be successful.

And the flip side to that is for or could it go to be successful ubiquitous PSMA aging has to be there. And so it's pretty clear that Novartis is taking a every patient's scan is a win for Novartis kind of approach. And the fact that Novartis is not particularly emphasizing a commercial diagnostic business and is supporting us and Lantheus and potentially others to make sure that no matter where you live, no matter what your social demographic is, you have access to PSMA imaging. I think that really kind of speaks to their focus in their strategy.

Yes, understood. Last one for me, just for Colin, if I may. With regards to the ProstACT trial and the early readout, are there implications for introducing that early readout in terms of confidence levels of the final data? Is it -- I'm just curious as to what the implications are and the benefits of being able to have that early readout. Is that more about a go or no go decision to continue? Or is it how good -- what's the decision tree around that data readout?

Yes. Look, thanks for that. With the study, as it's currently designed with round about 400, just under 400 patients, we know to see the difference in radiographic progression-free survival. We want to see that that's pretty overpowered. So I think really the question says that if we do this, will it affect the overall power of the study? No, of course, not that we will keep with the same sample size, and this will give us an opportunity to have even more confidence in the data going forward as well as being able to communicate that.

Yes. I mean I think if I don't mind me adding into that, Steve. I there's a clinical value in terms of understanding at that time where does our asset performance lie in the spectrum of potential products that are going to follow on behind (inaudible) We said we have a very compelling value proposition in terms of the dosing schedule in terms of what we expect out of patient efficacy in terms of what we expect. I think it's become very obvious that supply chain utilization is key, right? We're having challenges right now in getting the TLX doses out to market at the volume and scale that's required. So we can potentially with our product multiply the number of patients by 6 or 7 that you can get out of the supply chain. So I think that's a really important consideration. I think the market is starting to understand that whenever you talk about radiopharmaceuticals that supply chain question needs to be buttoned down and well understood.

But I think what it also does is aside from that clinical confidence, it gives us that data point that we really need to commence -- to really consummate those partnering discussions that we have. We have a -- this field has a ton of interest. I think it's fair to say that the top 20 global biopharmaceutical companies are all looking at radiopharma as the next frontier area. And we need to have that interim readout to show where we stand in the path when it comes to partnering. And with the imaging indications, we have no different. Diagnostic imaging is a very compact market. You can probably 60 KOLs that matter. Distributing the product is not that challenging. It's still a large volume product, but from a sales and marketing perspective is very compact. Clearly, when the time comes for us to push out a therapeutic prostate cancer product, that's going to require a go-to-market partner. And so we need that data point. And so there's a commercial rationale for it as well as a clinical one. Does that make sense?

I just have a couple of questions from the webcast. So the first is just asking for an update on the European regulatory filing for Illuccix. Just on the -- just a question on the European filing for Illuccix.

So yes, we are on track to file at the end of next month.

And the final question we have is with TLX250 for therapy, what's the likely time line for the readout of the STARLITE studies? And what happens beyond that? Do you go into Phase III? And the second question here on that same subject is given your comments on the Merck collaboration and expanding the scope of imaging of CA9 express tumors with STARBURST, long term, do you see the therapy going the same way?

Well, Colin, maybe you want to tackle the second one because that's right up your alley with STARBURST and then maybe I'll answer the first one from a commercial perspective.

Yes. Sorry. Kyahn just cut out in the middle of that STARBURST. Could you repeat that one?

So the question is, given your comments on the Merck collaboration, you're expanding the scope of imaging of CA9 and express tumors with STARBURST. Long term, do you see the therapy going the same way?

Right. Yes. So of course, as you know, CA9 is expressed in a number of other tumors, head in that cancer, esophageal cancer, to name but a few, including a number of rare cancers as well in which there's really unmet medical needs. So the opportunity with the STARBURST study is looking at a widespread across all of these indications and others where the literature shows us that the histology has a high rate with CA9 expression. Also looking at, of course, those tumors that have very limited treatment options going forward. So the STARBURST will certainly give us an indication of potential for CA9, as a target. Of course, like in ZIRCON, we will be seeing the antibody going to that area or not. So I'm very excited about that and looking forward to seeing our first images coming out in the next month or so.

I think the great thing about a paranostic strategies, you always use the imaging to scout for therapeutic opportunities. And I think that's what we're going to be doing there. And then the Merck work. And by the way, other combinations that we are also working on with other drug franchisees really about looking about -- looking at how do we build kind of get into that therapeutic pipeline longer term. The whole goal of the company is to run therapeutic studies where we're integrating rather integrating the standard of care instead of doing a head-to-head study, which don't necessarily pave the way for commercial success. I think that's really about aligning the clinical and commercial strategy in an effective way.

And just to add to the first part of that, the STARLITE studies were designed to give us continuous data points, the open-label trials, so we can report on them. They give us the ability to generate papers and case studies and understand the science. It's really not -- they're really studies. They're not really trials designed to elucidate a specific endpoint. What I think will happen is by the end of this year, we'll have a good understanding of how targeted radiation and immunotherapy in renal cancer really does work.

And then that will enable us in combination with what we're doing on the STARBURST study to really then map out what is a pivotal trial strategy for that asset. So I think the trials that we have emotionally this year are really there to for that pivotal trial design and to give us the best shot at getting an accelerated pathway for the 250 program. But you're going to see by the end of this year, our therapy programs are really going to be moving to the next level. And the investment that we made in 2022 is going to pay the way for that. Are there any other questions coming through on the webcast.

Yes. We just have one final one, which is which will staff costs continue to accelerate as the business Illuccix into multiple streams in calendar year '23?

Well, I can answer that or Darren can. But I mean, in short, we are continuing to grow the business, but the growth is a function of revenue. So yes, we are internationally expanding Illuccix sales. We are also -- we've done, I think, a really great upgrade to our sales and marketing team. We've we triaged our sales team as a function of commercial performance, and we brought on new marketing firepower, which is really, again, part of that growth in maturation. I think 2022 was sort of an ugly teenager year for the company.

And when you're in a hyper growth environment, people have a short duration of contribution to make, and then we rapidly outgrow. I think we're at the stage now where we have a commercial team that's a good, solid, steady state commercial team that we can incrementally build on as we need it. As Colin mentioned before, we have invested in clinical and regulatory resources got a lot of clinical trials running. Again, that's a modest increase, but it's still nonetheless an increase. But I don't think you're going to see any -- 2022 was a dramatic growth year for the company. And 2023 is a much more modest ramp up, and it's a ramp-up that's a function of commercial success in that shell. Darren, do you want to add anything to that?

No, I think that's a good overview, Chris. Obviously, from an organizational perspective, given that there is that growth going on within the commercial business, fits where the focus will be making sure that we have an appropriate size team to make the most of the opportunity there with Illuccix and then also the coming products that we see coming through from a diagnostic perspective. The other areas of the business around the programs and more head office will probably be a lot later on in a growth perspective. Obviously, just filling gaps that may appear. So overall, what that provides us is an opportunity to leverage the P&L. Sales growth will definitely outstrip our expense growth and including that of employment costs.

Definitely. Well, I think looking at the question less that seems to be it for today. So Kyahn, do you want to wrap up?

Yes. Thank you. So we will make a playback of this available and seeing some of you over the coming week at various briefings. But I think as we summed up 2022 has been a pretty outstanding year and I think 2023 even more in stores. So we look forward to keeping you abreast of our progress across the diagnostic and the therapeutics and the other business development. Thank you so much for listening today.

Thanks for your time.

Thank you. That concludes our conference call today, and thank you for participating. You may now disconnect.