Q1 2021 Lantheus Holdings Inc Earnings Call
We recorded for replay purposes, a replay of the webcast 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 brokered Cds.
I'll now turn the call over to your host for today, Mr. Mark do you know any senior director of Investor Relations Mark.
Thank you and good morning, welcome to Olathe is holdings first quarter 2021 financial results Conference call.
With me on todays call are Mary Anne Heino, our president and CEO and Bob Marshall, Our Chief Financial Officer.
Mary I will begin with some introductory remarks, and a business update and then Bob will cover our financial results Maryann will conclude the call with closing remarks, and then we'll open the call for Q&A.
Yeah.
This morning, we issued a press release.
Which was furnished to the Securities and Exchange Commission under form 8-K reporting our first quarter 2021 results you can find the release in the investors section of our website at <unk> Dot com.
For those of you not on the webcast you can find the slide presentation in the investors section of our website under the presentations tab.
Before we get started I'd like to remind you that our comments. During this call will include forward looking statements.
Actual results may differ materially from those indicated by forward looking statements due to a variety of risks and uncertainties.
In particular, the continuing impact of COVID-19 on our business results and outlook is our best estimate based on the information available as of today's date.
Please note that we assume no obligation to update these forward looking statements, except as required by applicable law, even if actual results or future expectations change materially.
Please refer to our SEC filings for a detailed discussion of these risks and uncertainties.
Also discussions during this call will include certain non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures is also included in the investors section of our website.
With that it is my pleasure to now turn the call over to Mary Anne.
Thank you Mark I hope this finds everyone healthy and vaccinated or well on their way to being so.
During the first quarter, we continued to successfully execute against our financial and operational strategies, while keeping the safety of land. These employees a top priority and I am pleased to update you on our progress today.
As we approach the one year Mark of our acquisition of <unk> I am proud of what our team has accomplished you may recall after announcing the transaction we established a fully dedicated team to oversee the integration effort to achieve identified strategic and financial goals.
Execution against these milestones is well advanced and we have been able to significantly invest in our business while overachieving on the targeted run rate savings I cannot be more excited about what the future is that we are creating for this company.
While Bob will provide more detail later I want to bring your attention to a change in our reporting segments that begins with this quarter.
Moving forward, we're changing our reporting segments from U S and international to a single reporting segment.
Under that single segment will be grouping our reported revenue into three categories. The first is precision diagnosed diagnostics. The second just radiopharmaceutical oncology and the third is strategic partnerships and other things.
Better aligns with our corporate strategy and our current product portfolio and pipeline.
Construction of my comments to be consistent with this new format.
In the first category precision diagnostics I will be discussing the following products the affinity technically and Dana I'll start with the affinity.
If you recall during the fourth quarter 2020, we noted that while results in October and November were in line with our expectations. We did see volume decline in non urgent echocardiography procedures in late December in those geographic regions that experienced a resurgence of COVID-19 infections and related hospitalizations.
Starting in early February we began to see recovery, albeit with regional differences across the country.
With steadily increasing availability of vaccines to broader segments of the population, we believe health care professionals and patients are becoming more comfortable and administering and receiving in person care.
And with that we believe Echocardiographer utilization will continue to return to pre COVID-19 volumes.
Throughout the pandemic, we've engaged affinity customers through digital technology, including virtual training programs as direct promotional access to hospitals has been restricted in fact, we've conducted a record number of virtual programs in the past year.
Virtual engagement continues hospitals are now, allowing in person visits for our sales professionals in some areas.
Well in person activities are highly geographically dependent and still limited we are encouraged by the trend and more importantly, the opportunity to engage with our customers in person.
Experience gained over the last year with different forms of different digital engagement will inform the full promotional mix of our approach to the echocardiography market going forward.
We are committed to the Echocardiographer specialty and believe these investments complemented by a return to normalized echocardiographer levels and utilization dynamics will drive affinity revenue growth for the balance of 2021 and beyond.
Finally regarding definitive our in house manufacturing facility project remains on track, we expect to submit the supplemental new drug application or NDA. Later this year with an FDA action date anticipated by year end.
During the first quarter, we successfully manufactured batches of definitive that will be commercially salable upon FDA approval.
Turning to capital light the product performed well in Q1, and we continue to see demand build back towards pre COVID-19 levels.
While the business posted flat revenues on a sequential basis. The recent fourth quarter of 2020 included about $1 $9 million of opportunistic generator sales to an stowe, which did not repeat to the same magnitude in the first quarter.
While international Transportation logistics for inbound molybdenum 99, or moly supply remain complex. We are hopeful that international flight patterns will return to more normal levels, which were minimized our need to support custom logistics from moly delivery.
Our xenon business. However continues to be negatively impacted by limited utilization of in hospital respiratory inhalation procedures as a result of COVID-19 transmission concerns.
As we said previously we anticipate aerosol based studies of with xenon as one may continued to be impacted while hospitals maintained precautionary protocols to prevent possible COVID-19 transmission by patients who may be infected when undergoing aerosol based procedures.
Switching now to discuss our radiopharmaceutical oncology products and product candidates I will give an update on the following his edra P. Bio and 10 95, beginning with the zone.
In March we announced that updated biochemical tumor marker data from our pivotal phase II trial of etc were presented at the endocrine Society's 2021 annual meeting Endo 2021 in.
In the trial, a desert demonstrated reduction in hyper secreting tumor markers and a majority of patients with advanced pheochromocytoma and power Ganglioma tuners or P. P. G L.
In addition, the overall tumor biomarker response correlated significantly with both the primary and secondary endpoint responses in the study on.
Scoring the clinical utility and relevance of this important biochemical marker to evaluate response to therapy and reinforcing the therapeutic benefit of etc. In patients with these life threatening tumors.
As a reminder is that true is the first and only FDA approved treatment option for patients with advanced or metastatic P. P. G L.
During the quarter, we introduced new marketing initiatives to increase awareness of the disease and treatment options amongst the referring physicians. We also developed a new medical affairs plan to facilitate peer to peer education. While also working with centers of excellence to expand availability of this treatment option for patients.
To ensure ongoing adequate product supply we've increased the manufacturing staff at our Somerset facility.
We are also constructing an additional manufacturing suite to provide redundancy for a degree of manufacturing as well as increased overall future capacity of our iodine based products.
It will take some time to complete the qualification and obtain FDA approval of the suite. We believe that some of these activities will result in ensuring adequate manufacturing capacity for the increased demand, we anticipate for et cetera. During the balance of the year and moving forward.
Turning now to our product pipeline I will discuss the product candidates highlighted here.
Beginning with P y L.
<unk> is the lead candidate in our prostate cancer portfolio.
And as a prostate specific membrane antigen or PSNH targeted pet imaging agent for prostate cancer.
<unk> enables clinicians to visualize both bone and soft tissue metastases in patients with locally advanced recurrent <unk> metastatic prostate cancer.
The FDA accepted our new drug application from <unk> and assigned priority reviewed to the NDA with an action date of May 28 2021.
In March we announced the publication of the results of both pivotal studies for <unk> the.
The Osprey phase two three styles results were published in the journal of Urology and the Congress Phase III trial results have been published in the journal of clinical cancer Research.
We believe these data demonstrated <unk> clinical benefit and that <unk> has the potential to play an important role in transforming the management of men with high risk recurrent <unk> metastatic prostate cancer. We are pleased our studies were published in these prestigious journals.
We'll go from <unk> action date and potential launch later this month, we're very busy with commercial preparation activities over the last several months, we have focused our efforts on scaling up our commercial medical and manufacturing capabilities and support a few I L. We've.
We've added significant talent throughout our organization, including our commercial medical supply chain quality and technical departments to help facilitate a successful product launch on the commercial front, we've been pleased with our ability to recruit professionals with strong backgrounds in urology and nuclear medicine to enhance our sales effort our senior converge.
Leaders are in place as our salespeople and medical science liaisons in key markets against the hiring plan that matches, our anticipated launch timing.
For our medical team in early April we announced the addition of two top tier talent, Dr. Bela Dennis and Dr. Irene It says linker, Dr. Dennis a board certified Urologist and Doctor cause Lingo Board certified in radiology diagnostics, both come with extensive experience in both clinical practice and industry and we are.
Thrilled to have them supporting both <unk> and the entire Landsea medical teams.
Our timeline supports launching P. Bio as soon as we receive FDA approval. We are working on site preparedness and activation with our pet manufacturing facility or Pms partners to ensure nationwide product availability by the end of the year.
This timing aligns with the expected approval of our pass through application with the center for Medicare and Medicaid services or CMS for Medicare coverage in the hospital outpatient setting.
We are also engaging with key payers for appropriate appropriate reimbursement for patients with commercial insurance also optimize initial adoption of <unk> by clinicians.
The voice of the patient is critical and prostate cancer and our work with advocacy groups to build awareness of <unk> pet imaging continues most notably our outreach includes working with organizations such as the prostate cancer Foundation and zero at the end of prostate cancer as well as a number of veterans groups.
We are greatly encouraged by the interest we've seen from the health care and patient communities in recognition of this novel imaging agent.
Moving to 10, 95, or $1 31 P. S. <unk> targeted product candidate for the treatment of metastatic castrate resistant prostate cancer or M. C. RPC in October 2020, we resumed patient enrollment in our phase two arrow trial.
I am pleased to report that we now have 24 active clinical sites across the U S and Canada and patient enrollment is progressing well.
The Arrow trial is designed to evaluate the safety and efficacy of I 131095, radiotherapy in combination with <unk> and <unk>.
As compared to <unk> alone and chemotherapy naive patients with PSNH avid NCR P. C who have progressed on abiraterone patient enrollment is progressing as planned and we are on target with our time milestones for this trial.
Now I will discuss our progress in our strategic partnerships and other spaces.
In late March we acquired the exclusive worldwide rights to develop manufacture and commercialize MTI, one 309 and innovative pet oncology imaging agent from Noria Therapeutics, Inc.
<unk> hundred nine targets fibroblast activation protein or FAP.
Target with potential broad imaging average applicability and targeting implications for precision oncology.
<unk> is over expressed in the tumor micro environment, specifically in tumor associated fibroblasts, which are believed to modulate tumor progression and immune response.
Already a focus of significant research by academics and the pharmaceutical industry.
That biomarker has the potential to address unmet medical needs and to impact the clinical management of stroma dense tumors, such as breast colon lung and pancreatic cancer as well as having broad potential to inform diagnosis and staging to guide patient selection for therapy and to monitor response to treatment.
Across multiple tumor types.
Upon completion of the Phase one study, which we believe will start later this year and <unk> 309 will be integrated into Atlanta is this portfolio of imaging Biomarkers and will be included as part of our offering to academic centers and pharmaceutical companies for use in oncology drug development programs.
Under this agreement with Noria Llambias also has the option to acquire the therapeutic rights of this agent. We are enthusiastic about this cutting edge oncology agent while realizing it is early in its development.
This partnership is another example of Lantus is commitment to advancing innovative imaging biomarker solutions that find fight and follow cancer.
And our Microbubble franchise last week, we announced a strategic collaboration which will use our microbubble with Allegheny Health network or agent ultrasound ultrasound assisted non viral gene transfer technology for the development other proposed treatment to zero Estonia.
Xerostomia, a lack of saliva production, leading to dry mouth has a variety of causes including radiotherapy and chemotherapy in certain diseases.
It's also a common side effect of ionizing radiation used to treat head and neck cancer.
Thousands of cancer patients suffer from radiation induced xerostomia, which can cause severe oral and dental issues.
Once xerostomia begins it is a permanent condition, we're excited to support H N and its efforts to progress this innovative development program.
Finally yesterday, we announced we received CE mark clearance for a promise.
CE Mark.
I didn't give a promise approval in Europe, a milestone in the path to potential U S approval.
Promise is an artificial intelligence based medical device software that is used in conjunction with individual reader interpretation and enables health care professionals and researchers to locate to detect and quantify disease and whole body PSNH Pet T T.
Our goal is to seek approval for a promised in the U S and to add this to the portfolio of offerings, we bring to the prostate cancer treating community.
With that I will conclude my update on key commercial and strategic programs and turn the call over to Bob Bob.
Thank you Mary Ann and good morning, everyone I will provide highlights of the first quarter financials, focusing on adjusted results unless otherwise noted.
Before I begin I would like to talk about several reporting changes, we are making in our disclosures to better reflect our businesses going forward.
We are evolving our segment reporting to a single reporting segment, you'll recall that we previously had two segments U S and international and the sale of our last International Radio Pharmacy operation in January of this year previously disclosed at our Puerto Rico operation.
Together with our acquisition of.
<unk> last year were factors in prompting our segment analysis.
Our conclusion reflects the company's focus on both the performance of the business and resource allocation to be on a consolidated worldwide basis, you will see this reflected in our 10-Q to be filed today in.
In addition to the new revenue category as noted by Mary Anne We will now present rebates and allowances within each relevant grouping and individual product as appropriate you can find within the Investor Relations section of our website under supplemental financial information are lifting of each product within its respective revenue group, Inc. As well as historic gross and net.
Revenue from both the affinity and technically to aid with evaluating growth rates going forward.
Turning to the quarter revenue for the first quarter was $92 $5 million, an increase of 2% over the prior year quarter. The comparison that included run rate revenues from our Puerto Rico operations now divested.
Beginning with precision diagnostics revenue of $85 $8 million were two 9% lower from the prior year quarter sales with affinity net of rebates and allowances for 56 million six 6% higher as compared to the prior year quarter driven by sequentially higher volumes.
Calculate net revenue was $22 8 million net up 0.1% from the prior year quarter.
Within other precision diagnostics as you know on its performance has continued at similar levels to previous sequential three quarters.
Radiopharmaceutical oncology contributed $1 5 million of sales down 23, 8%.
From the prior year quarter due mainly to the loss of revenue tied to the divestiture of the Puerto Rico operation in comparison in the future. In addition to exaggerate and quadrant, assuming approval by the FDA <unk> will reside within this revenue categories Lastly, strategic partnerships and other revenue was $5 $3 million.
Driven primarily by the Relistor royalty.
Gross profit margin for the first quarter was 53% a decrease of 89 basis points from the first quarter of 2020 on a similar basis.
The decrease is due mainly to product mix and expanded manufacturing footprint and acquired from <unk> on a year over year comparable basis, as well as increased moly distribution and logistics costs due to the COVID-19 pandemic.
Operating expenses were 1314 basis points unfavorable to the prior year at 45% of net revenue driven primarily by the continued utilization of expenses from <unk> offset in part by synergy achievement. Additionally, as noted by Mary and we have made good progress in our <unk> commercialization.
Eridanus efforts.
Along with ongoing patient enrollment in the 10 95 Aero study.
Together.
Fences were slightly favorable to our expectations, while hitting our intended quarterly objectives.
Operating profit for the quarter was $9 million or a decrease of 58, 2% over the same period prior year.
Total adjustments in the quarter total to seven 8 million gain before taxes of this amount $3 three and $4 7 million of expense is associated with non cash stock and incentive plans and acquired intangible amortization, respectively. Also in the quarter, we recorded $15 3 million of gain.
On the sale of our Puerto Rico operations as well as a gain of 900000, an extinguishment of debt. The remainder is related to acquisition integration and other nonrecurring expenses, our effective tax rate was 49, 7% in the quarter as has been the case in prior periods. Our tax rate includes certain entries to it.
For uncertain tax positions for which we are indemnified and doesn't have a direct correlation with profit before tax.
The resulting reported net income from the first quarter was $9 million and $3 3 million on an adjusted basis, a decrease of 76, 9% GAAP fully diluted earnings per share were <unk> 13 and.
<unk> on an adjusted basis, a decrease from the prior year at 86, 3%.
Now turning to cash flow first quarter operating cash flow totaled $9 $8 million as compared to $9 4 million in Q1 2020 cap.
Capital expenditures totaled $2 5 million down slightly from the prior year quarter free cash flow, which we defined as operating cash flow less capital expenditures was $7 $3 million, an increase of <unk> 6 million over the prior year period.
Also at the end of the quarter, we utilized $30 9 million of cash to pay off the relistor royalty backed loan in full in doing so we've reduced our overall net leverage ratio using our bank facility covenants to two five times, achieving one of our initial view goals ahead of schedule.
Cash and cash equivalents net of restricted cash now stands at $68 $9 million.
We continue to have access to our $200 million Undrawn bank revolver and our cash.
Comparable with our strong liquidity position.
Turning now to guidance for Q2, and the full year, we forecast revenue to be in a range of <unk> 93 to 97 million from the second quarter of 2021, an increase of 41% and 47% over the second quarter of 2020, respectively. We are updating our full year.
View to take into consideration actual Q1 performance relative to our initial views of revenue impacts stemming from the COVID-19 uncertainty, which had informed at the lower end of our original range. Therefore, we will now forecast.
Full year revenue to be in a range of $3 $90 million to $400 million from our prior range of $3 $85 million to $400 million.
Regarding adjusted earnings per share, we continue to invest in commercial readiness for <unk>. Additionally, enrollment in our phase II Arrow study with 295 has been studying is expected to continue at its current pace.
As such Q2 carrying expense burden slightly higher than actuals in Q1, but in line with prior guidance on.
Average.
Taken together adjusted EPS should be in a range of $3 six.
Excuse me adjusted to be in a range of three to six.
For the second quarter, we are raising our full year adjusted EPS to account for relative Q1 outperformance and interest savings from our fully repaid relistor royalty backed loan offset in part by incremental investments to advance our pipeline assets.
Now expect adjusted EPS to be in a range of 36 to 41 per share versus the prior range of 34% to 39 sites with that let me turn the call back over to Mary Anne.
Bob.
The balance of 2021 will be a pivotal period from lanthier ingested.
In just a few short weeks, we may have the opportunity to bring a truly important product to market that will have an impact on the lives of prostate cancer patients.
Reaching this important milestone would not be possible without the work of everyone Atlantis and their dedication to the clinicians and patients we serve.
Before I open the call to questions I would like to express my sincere thanks to all of its employees and to the patients customers and shareholders, who trust us to serve you.
With that Bob and I are now ready to take your questions. Operator. Please go ahead.
Ladies and gentlemen, if you have a question at this time since your profit sorry.
Number one key on your Touchtone telephone if your question has been answered or you wish to remove yourself from the queue. Please press the turnkey when roaming free.
And our first question comes from the line of feature of U.
SDB Leerink your line is open.
Hi, rich.
Hi, good morning, and thanks for taking my questions. Congrats on the progress you made during the quarter.
Maybe.
Just a couple here just start on on the <unk>.
T y L. Just given that that's true.
Exciting and an important focus for you guys coming up here.
Can you on understanding that the FDA has just been a little more predictable lately I'm just wondering if there's any.
Anything you can offer us and and what Youre seeing with respect to their interest or their inspections of your Uh huh.
Pet manufacturing facilities and are on.
I think generally tracking.
On time as far as you can tell for the <unk> to do so at the end of May here.
So obviously since we're now within three weeks of our action date, we're kind of constrained on the comments, we can offer but I you know.
I will say we are on track with all our milestones with the F. D. A I'll also note the Pms, our third party partners there will be individual manufacturers of other products that we do not own them. We obviously work very close with them to ensure that they are on track with their own milestones and especially as regards to any potential FDA inspection.
But I would I can confirm that we remain on track with all our milestones related to our FDA submission and review.
Got it and just.
Based on the way we're modeling T Y out you know, we don't really model any any material revenue until 2022, we feel like we've built in some cushion I think the street scene.
Seems to me on bottling similarly.
If there were some delays here can you just talk.
<unk>.
So how you feel about the commercialization timelines that you kind of lay.
Played out in the past relative if there were to be some.
On delays here.
The pass through our submission and what it would take for you to build out a commercial infrastructure.
On kind of meet some of those targets, even if there were a delay but a few months.
So rich there's actually three different timelines at run concurrently and what we spoke to today as we feel we have them very strongly aligned the first is our own internal commercial preparedness and as I mentioned, we are ready.
Willing and very capable and and and eager to launch this product as soon as it's FDA approved and that comes from commercial build out of all of our internal functions. So you heard me speak to quality sales medical technical manufacturing. So that's been something that we've been on top of for several months now and as I mentioned, we are also very pleased with our hiring progress there.
Really attracting great talent to the organization. The second is the day.
On timeline for CMS, Tasmania, CNS pass through let's all remember this only applies to reimbursement for the procedure in the C. In Medicare patients in the hospital outpatient setting and CNS does have some.
Some timelines that are related to when you can submit the application and when the application can be approved they accept applications on the last month of each quarter and they approve applications in a timely fashion on the first month of the subsequent quarters. So if you submit day on September on a quarter you would then expect approval.
By January of that subsequent quarter, although there have been exceptions, where CMS has accepted the application after the last month of the quarter and in some cases has approved before the first day of the first subsequent quarter, but the way that we've lined up our our timeframe here is assuming that we have approval on may 28, which is our action.
Date and that that allows us then because of some of the other inclusion items of the application we would anticipate submitting our application on September one and having pass through approval for January 1st the third time line that runs along that that is availability of the product out in the market among the TNF network and this is the.
The other opportunity to build out your networks that essentially you have broad availability across the United States on the analogy that I am encouraged to use although it's not one that's totally familiar to me is football cities and when you say that if you had good pms coverage and what are the current football season, the United States that would represent.
And broad availability to the treatment centers that are close to there and represent broad availability across the prostate cancer.
Patient population and that is about and total about 31, I'm I'm, sorry that I don't know this 31 or so teams and in those I guess in some other cities, it's actually more than one P, which I find amazing, but from hats off to them.
So we are aligning that we anticipate that we could have that type of coverage build out by the end of the year, which then aligns with.
With our pass through application approval and gives us all of that time beforehand with our commercial preparedness to go out drive awareness and also to work on commercial insurance availability, which is also very important for some of the major commercial insurers. So I hope that answers your question.
Yeah, no definitely definitely does.
And maybe just to switch or Youre clearly breaking out.
From a segment reporting standpoint, the partnerships that you have in there are many.
Some really interesting ones more recently that were announced I'm just curious how do we think about the contribution from some of these.
You were recently announced.
Initiatives are it seems like Relistor is the probably the.
The main the main contributor right now in that segment, but when.
When can we start to think about contribution from some of these newer areas.
So.
Right on spot there with Relistor being a very kind of called out and very noticeable contributor right now because that's an ongoing royalty stream. The other is a very strategic in nature and you'll continue to hear me talk about how we are working with our pharma services team to really keep our eye on and ahead of what is emerging as far as technology, Inc.
Targets are in the fields that we're interested in and a lot of the partnerships. You see are signing are somewhat I would say.
Mutually valuable partnerships, both ways and that we're providing what is a very very valuable service, which will have revenue associated but not revenue that was really significant.
But more importantly, we're providing a service of needed almost manufacturing capacity and availability for the biomarkers into clinical trials and into academic centers and in exchange, we get early insight into the progress and performance of these biomarkers and as you heard with me with the with the newly announcement we get.
First right of refusal for what could be a very important therapeutic target.
We're very excited Theyre going forward, which obviously then any revenue associated especially with that therapeutic target would be down the road.
Thank you very much.
Okay.
And our next question comes from the lineup Anthony Petrone of Jefferies. Your line is open.
Thanks, and I hope everyone's doing well congrats on a strong start to the year here and Marianne hopefully this year.
Is your first year as a big fan of football on Sundays and that's true.
Sure Draft picks on on next year's go around but maybe to start with the core business on on that.
Entity.
And you touched on ECG volumes or just kind of wondering just to kind of splash through the comments, where you said your volumes are versus pre COVID-19 levels. It sounds like they are approaching normal levels, but perhaps are not not quite there yet so maybe just to quantify that a bit in and is there any backlog to speak of as we.
Think of the semi volumes just as we said.
That's the current.
Phase of the pandemic.
And then I'll have a couple of follow ups on P. While on one on technology.
Sure welcome Nancy can say that on I'll be sitting on the cash on Sundays, because I'm not really a center, but I'll try to learn a little bit more about this American sport of football that everyone loves so much.
Two echocardiographer I'm happy to share some insights with you, but I need to caveat. It by saying that these are drawn from market research and from survey data and so they need to be accepted as added and therefore acceptant is trending and not absolute data point, we do not have access to actual claims databases and so that's why.
I caveat my my.
On my comments that way, but we are seeing at this time, we are seeing activity that suggests that the volume of echocardiographer procedures in the United States has returned to what we were at pre COVID-19, and if you remember back to that time with my comments that the market of approximately 35 million procedures.
On an annual basis, it's been growing at a few low percentage points you can call. It like two to three percentage points on an annual basis and so that is something that most recently and you heard in our comments that we that.
We did that really begin to see that at the end of first quarter that is something that we believe is true about the marketplace and theres still has recovered to be had because echocardiographer procedures are used in many different ways and I'm not I'm not sure that there that all those different ways are back up to full on volume and while you say that is one of the many ways.
It is as part of our regular <unk>.
Physical and so different patients depending on their age category and their risk factors as part of their physical cardiac workup might include an echo exam in that echo exam might have arrested stress on our part to it I'm not sure that that level of procedures is truly back yet, but it's coming.
To your other question about comments from the field. We are also seeing hearing comments from derma on market research about echocardiographer suites, having to deal with backlog and this is you know again from and we talked about this through the pandemic what would constitute backlog during of Echocardiographer procedures, but we are hearing some comments about.
And it comes back to us around scheduling and around needing to extend hours into weekends and the like so I'm all good signs of what I referenced in my comments, which is that I think we're getting to a point with vaccination levels and with hospital protocols and other wonderful protocols that hospitals are able to put in place that caregivers and care seekers on.
Both more open to and willing to have that interaction happen in person and I think that's a great thing for the for the larger health care environment.
That's helpful background, maybe shift gears, a little bit to <unk> a couple here.
First of all when you just kind of thinking about the entirety of the sales effort just sort of head count where it is today and.
Whereas it sort of going once it's fully staff that would be the first question and then Mary Ann you mentioned reimbursement and ensure that sort of that goes into pricing and so anything that you can share just on your expected.
Levels of reimbursement, whether that's Medicare and private and how that translates to pricing going forward and then one last one I could squeeze in for Bob would just be as we look at the new reporting structure and sort of think about new products coming into the fold specifically within the.
Radiopharmaceutical oncology segment, how should we think about the progression of gross margin.
Going forward, perhaps over the next several years. Thanks again.
You're very welcome.
With respect to hiring and more importantly, a hiring levels.
What I would say about that is you.
We have now we will have we have one company who are in the market that's been targeting pet imaging for prostate cancer, we have ourselves entering the market and there's a third company fairly close behind us and while I wont speak to relative size I will very confidently say that we will be.
As the largest or very much competing for the voice that we will bring into the market across both commercial and medical with the prostate cancer treating community. We feel it's very important because this is a new class P. SMA based pet imaging agents on a new class and anytime you introduce a new class there.
There is an obligation and we feel that is a commitment to educate and to bring awareness to what the different aspects and value are of the agent you bring to the market. So we're very very committed to that from an it from.
Insurance and coverage perspective, you heard me speak to <unk>.
From CMS will cover very specifically would pass through outpatient coverage, but then there's also some other classes of patient coverage would have to do with ambulatory.
Sensors, and the language kind of come along with that I guess the other big group is the commercially insured group and included among the commercially insured group are also those patients to our CMS eligible, but Medicare advantage covered so they are a very important group for us and.
As you can appreciate prior to any launch. This is work that starts long before launch and continues long after.
And for some of these ensure groups there their policy is such that they will really not entertain U.
As a product for coverage until after you were approved you can imagine what their dockets would look like if they allowed presentations from every product that was under evaluation by the FDA. So it is a process Anthony and we anticipate that total coverage will build over time I will do say that in the before cut.
<unk> is in place every insurer has a process by which you can ask a prior authorization, where special clearance of special approval for a procedure and with something and I would say novel as PSA made based pet imaging, we would anticipate that that would be the case and that.
Is we believe a great way to build data are.
Data set around the value of these procedures and the ability to really use this type of imaging as a ability to change patient management for patients and therefore described and demonstrate the value of this type of imaging.
So good morning, Anthony your question around gross margin progression.
So you know as I look at the different categories. You did ask specifically about the radiopharmaceutical oncology, but even as I look at precision diagnostics, which.
As I reflect on the products in there it's largely the legacy land theater business, which also has.
Gross margin expansion opportunity in the sense of our on campus manufacturing.
As an opportunity as well as as we recover through the COVID-19 impacts on gross margin.
Those will abate as we go through the year on so there is still opportunity to go there.
With regard to radiopharmaceutical oncology when we set out along this journey in terms of.
And looking to add strategic.
Assets to the portfolio, we did so with a sort of on our own internal mandate to find assets that would be margin accretive. So as as is the case with what is P y L and et cetera, while initially they're going to be at a gross level gross margin level is probably on par with.
The company averages quickly with scale.
These products will be.
Be appreciative, it will accrete to our company average.
And we have every confidence that and doing as we.
Drive volume, we will certainly be able to achieve the one hundreds of basis points of margin expansion that we fully expect within sort of the near to medium term so from that perspective on.
We're very.
Focused on driving that kind of level of profitability and ultimately free cash flow strategic partnerships and other of.
Our royalty stream is 100% gross margin so there's.
There's not much more you can say that that's a very highly accretive although much smaller fit of the overall business, but it is additive, but again I do I do have.
Sort of on an eye on ramping our gross margin.
And profitability over the next years.
Sorry, Anthony.
On your question and I, probably won't know, but other than to say that.
Neither Bob or I will ever speak specifically to pricing of the products. It's just something that we've taken the stand that we do not do.
Of course of course, well. Thank you very much I'll hop back in queue. Thank you.
Okay.
Again, ladies and gentlemen, if you have a question at this time simply press Star then the number one key on your Touchtone telephone.
Our next question comes from the line of Larry Solow CJS.
C. J S Securities Your line is open.
Greg Good morning, and thanks for taking my questions just a couple I'll piggyback on on Anthony's question there on just on <unk>.
I'm getting head count could you maybe.
I'm sure you won't be other quantified exactly but in terms of the build out on infra.
Structural costs and whatnot I assume.
The R&D phase its probably going to sort of bleed more into the manufacturing side of it but just in terms of your sales force in terms of dollar range.
We still need a.
A significant jump up I know you've been investing in that but should we expect over the next two or three quarters, if all goes well with commercialization.
You'll have to invest significantly more.
Marketing dollars in sales dollars, how should we look at that.
Several quarters several years wherever you want to discuss it.
Good morning, Larry This is Mary now I'll start and then I'm going to pass to Bob for actual numbers, but I'll just put some context on my comments, where I said that we intended to be competitive with voice and with our presence in this in the specialty or to the especially I do intend that to be true. However, let me also share that luckily.
Is a fairly efficient way to do this with this voice this community and when you're talking about pet imaging you can focus on pet imaging centers, which is where the all of these studies flow through and where all of the orders for these studies come through and then from a demand creation the source of demand into itself.
Unlike some markets that are very broad or have a very diffused I'd say demand.
Outreach. This is a very efficient and very concentrated market and that's reflected in some of the investment profile and I'll, let Bob explained.
So Larry from my prior if you recall back in February I had said that.
We would expect sort of opex to sort of be in that $48 million range per quarter, which is which is still still.
I would point you at that sort of level. So when I look at the numbers.
Even.
The first quarter, which if I look over year over year, it's about a $12 $5 million increase on.
And overall spend what's important to think about though is that the addition of <unk> was running at a run rate per quarter of about $21 million or so.
<unk> of Opex of what we've been able to do is invest in the business.
We have made significant progress, but do so in a way debt.
We.
We're actually able to do this within the achieved synergies and drive.
What will ultimately be good leverage in the P&L.
As that product takes off so.
I would still point you to the numbers that I had.
That's what I was trying to get debt when my comment around saying, while we may have been slightly favorable some of that has to do with a little bit of phasing within the quarter based on initial indications, but as we move into Q.
Q2, specifically on.
That's what I was saying you would sort of go back just from what I was talking about as our average run rate.
And the remaining portions of the year could it be slightly higher than that I think that all depends on on.
Timing of things, but certainly it would be not materially different than what I had sort of outlined from a dollars perspective.
Okay, and then sticking to that theme and I know you'd sort of gave some from high level sort of gross margin targets.
On a consolidated pro forma basis, when you announced the projects acquisition.
Coming up on now I guess.
18 months ago pumps go on top.
Obviously theres been a lot of noise COVID-19 big Big noise, there, but has anything significantly changed in terms of your sort of accretion timelines and whatnot.
Now obviously.
Some things on the delay a little bit but.
In terms of course on the acquisition, but has anything really materially moved to the right.
I would say.
One it's been only 12 months.
And ill turn it over to it feels like 18.
But but no I mean are one of the things that happened to your debt was have somewhat fortunate in the sense that P. While and its and its ability to get to where it is today it wasn't impacted but from a COVID-19 perspective on <unk>.
The studies were completed prior to the shutdown.
And then it was able to be submitted.
Within.
A very short window of when we had expected and then with priority review, it's actually going to be able to hit in the timeline that will help us actually hit. These numbers you are referring to the fact that I had said, we would expand by 800 basis points on.
And I'll go back from my comments on even from Anthony's question.
We still feel that that's extremely achievable.
Particularly if you go back and look at 2019 as sort of maybe you're on a true base because when I look at gross margin progression over the last.
Four quarters prior to this one we hit 50 again and again.
Kind of have to go back to <unk>.
Q1 of <unk>.
Last year, when we were at 51, one so.
On the pre COVID-19 numbers I think that's sort of your baseline from which I would have you think about that margin expansion and it certainly is achievable.
And as is our ability to.
Hit the other financial metrics, because it's not just about gross margin its about driving a leveraged P&L and delivering on EBITDA.
EBITDA.
And cash flow, but you know.
More importantly, quite honestly it has to be more to do with a sustainable top line growth rate.
That we think can be very healthy over the next number of years.
Okay, Great and then just last question on on the on definitive.
<unk> production.
It sounds like things are progressing well there.
Can you maybe discuss sort of the longer term outlook I assume you'll dual source for some time through but.
Do inevitably you think you could bring the majority of that in house.
Any thoughts on how that could improve benefit margin.
So obviously, Larry Theres a benefit margin.
<unk> for us going forward based on mix of how we source the affinity but the strategy here originally and you haven't been with us long enough to know, but several years back we struggled with the security the security from just the total capacity perspective of our definitive supply so our in house project Sir.
<unk> are very important.
Benefit of redundancy for us and so we would anticipate continuing to maintain do supply. So that we have that redundancy now to ratio and to take advantage of what is obviously it would be a better margin on the product Cogs margin from utilizing larger ratio from our in house manufacturing.
Plant, that's something that we've absolutely point to in the future nuclear Bob speaking to that as we move forward over the quarters, how that will come into play, but big on milestone for us this quarter. The pad that has we produced we produce on the commercial process.
<unk> done so they sit and having seen it it can be used for saleable as salable merchandise once our plant is approved.
Great I appreciate the color. Thanks, so much.
Take care of Larry.
And then once again, if you would like to ask a question or if you have additional comments. Please press star then the number one key on your attached on telephone.
And we are showing no further questions at this time, ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect and have a wonderful day.
Uh huh.
[music].
Yeah.
[music].
[music].
[music].
[music].