Q3 2024 Lantheus Holdings Inc Earnings Call
Speaker Change: Good morning. Welcome to the Lantia Sturt Quarter, 2024 Conference call. All lines have been placed on mute. This call is being recorded and a rebound would be available in the best section of the company's website approximately two hours at the completion of the call. And we'll be our car quietly Sturt Day.
Speaker Change: I'm Anthony Call over to Mark Kinarney by President of Investor Nations Mark.
Mark Kinarney: Thank you. Good morning. With me today, Brian Markison, our CEO, Paul Blanchfield, our president, Bob Marshall, our CFO, Jeff Humphrey, our Chief Medical Officer, and Amanda Morgan, our Chief Commercial Officer.
Mark Kinarney: We will begin with prepared remarks and then open the call for Q&A.
Mark Kinarney: This morning we issued a press release which was furnished to the SEC under Form 8K reporting our third quarter 2024 results. The release and today's slide presentation are in the investor section of our website.
Mark Kinarney: Any comments made could include forward looking statements. Actual results may differ materially from these statements due to a variety of risks and uncertainties which are detailed in our SEC filings.
Mark Kinarney: Discussions will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in the investor section of our website. I will now turn the call over to our CEO, Brian.
Brian Markison: Thank you, Mark, and good morning, everyone.
Brian Markison: Lanthius is the leading radiopharmaceutical focused company with market-leading commercial products and a growing radiopharmaceutical pipeline targeting areas of significant unmet need.
Brian Markison: In the third quarter we continue to enhance our leadership and create long-term sustainable growth through operational excellence, financial discipline, and prudent capital deployment.
Brian Markison: Polarify, our PSMA PET imaging agent, delivered solid performance and remains on track to reach blockbuster status in 2024.
Brian Markison: and DFINITY, our ultrasound enhancing agent, grew double digits year over year.
Brian Markison: The continued success of these flagship diagnostic agents enables us to invest both organically and inorganically in our pipeline to extend our radio pharmaceutical leadership and create long-term value for shareholders.
Brian Markison: Before we move on to review of the quarter, I'd like to commend CMS for its landmark decision to pay separately for specialized diagnostic radiopharmaceuticals beginning January 1, 2025.
Brian Markison: Under the Hospital's Outpatient Prospective Payment System or OPPS rule, this is a significant win for patient access.
Brian Markison: and will ensure specialized diagnostic radiopharmaceuticals, including Polarify, are accessible for Medicare fee-for-service patients going forward.
Brian Markison: while also supporting long-term innovation in the field, including potentially MK6240 and NAV4694, our late-stage diagnostic product candidates for Alzheimer's disease.
Brian Markison: With that, I'll now turn the call over to Paul to provide an operational update. Thank you, Brian. I'm pleased today to share progress on our commercial portfolio and pipeline.
Brian Markison: Polarify sustained its clear market leadership as the number one PSMA pet imaging agent and remains on track to grow mid 20% year-over-year in 2024 and reach blockbuster status with more than 1 billion dollars in sales.
Brian Markison: Net sales for the quarter were approximately $260 million, up 20% year-over-year, and down 5% sequentially. Year-over-year growth was driven by increasing volumes, offset slightly by net price as we secured strategic partnerships.
Brian Markison: Sequentially, the overwhelming majority of our existing accounts grew along with the PSMA pet market.
Brian Markison: The sequential revenue decline was driven by traditional third quarter seasonality, the net price impact of our recently secured strategic partnerships, as well as intentional tradeoffs largely due to product availability.
Brian Markison: We continue to secure strategic partnerships with hospitals and freestanding imaging centers and believe our ability to maintain a price premium versus that of our competition reflects the commercial and clinical value that Polarify provides to our customers.
Brian Markison: We believe we are well positioned to continue as the clear market leader in PSMA PET imaging and sustain Polarify as a billion-dollar franchise in 2025.
Speaker Change: As Brian mentioned, we are very pleased with CMS's updated rule, recognizing the value and need for broad access to innovative diagnostic radiopharmaceuticals, including Polarify.
Speaker Change: The rule provides separate payment for diagnostic radiopharmaceuticals with per-day costs greater than $630, following the expiry of transitional pass-through payment status.
Brian Markison: This represents significant progress for the field of diagnostic radiopharmaceuticals and most importantly, sustained patient access.
Brian Markison: When implemented on January 1, 2025, CMS will maintain separate payment for Polarify for the approximately 20% of patients with traditional Medicare fee-for-service insurance coverage who are treated in the hospital outpatient setting.
Brian Markison: Polarify's calendar year 2025 payment rate is found in Addendum B and is the same as its current payment rate.
Brian Markison: Note that this is in addition to the PET-CT procedural payment.
Brian Markison: We will be working with our customers to ensure they understand the final rule and recognize the value that Polarify does and will continue to offer to the prostate cancer community.
Brian Markison: Thank you.
Speaker Change: In our cardiology franchise, DFINITY delivered third quarter net sales of $77 million, increasing 14% year over year. This was slightly higher than expected as competitors' supply challenges led to higher market share that was in addition to high single digit year over year market growth.
Brian Markison: DFINITY's long-term success remains driven by its proven clinical and commercial value, long-standing track record of clinical application, and our ongoing operational excellence.
Brian Markison: We are also pleased by the FDA's approval of Flurcado, also known by its generic name, Flupiridaz, which we out-licensed to GE Healthcare in 2017.
Brian Markison: Flercato is an F-18 radio tracer approved for enhanced diagnosis of coronary artery disease. GE Healthcare has global commercialization rights and will lead the U.S. launch. Lantheus will receive royalties based on commercial milestones.
Brian Markison: We are also excited about MK6240 and NAV4694, our next-generation late-stage tau and beta amyloid radio diagnostics, and believe they can play a meaningful role in the diagnosis, staging, and monitoring of Alzheimer's disease.
Brian Markison: We expect these agents to be differentiated due to their high affinity and low off-target binding, potentially allowing for clearer images and earlier detection of disease.
Brian Markison: MK6240 is a tau PET tracer for Alzheimer's disease currently utilized in 119 ongoing academic and industry-sponsored clinical trials.
Brian Markison: The dynamic range of MK6240 may represent an advantage for longitudinal assessments of tau progression or treatment response, in which detecting small changes can be critical.
Brian Markison: Tau pathology is closely linked to symptom severity, rate of decline, and development of declines in visiospatial and language functions.
Brian Markison: NAV4694 has low nonspecific white matter binding and high sensitivity, which suggests it could be useful for early detection of beta amyloid accumulation.
Brian Markison: We believe earlier detection may aid in the identification of those Alzheimer's patients most likely to realize a therapeutic benefit.
Brian Markison: Like MK6-240, NAV4694 is currently being used in both academic and industry-sponsored studies.
Brian Markison: The National Institute on Aging and the Alzheimer's Association continues to update their guidelines as new therapeutic agents are approved and recently recommended both amyloid and tau PET imaging for diagnosis, staging, and treatment monitoring.
Brian Markison: Based on current analysts' forecast of therapeutic uptake and inferred scan volumes, we believe the U.S. market for Alzheimer's radio diagnostics has the potential to reach $1.5 billion by the end of the decade and $2.5 billion by the mid-2030s.
Brian Markison: We expect to submit NDAs for MK-6240 in 2025 and NAV-4694 in 2026.
Brian Markison: and are excited to lever our commercial and operational excellence and growing neurological expertise to generate and meet the increasing demand for amyloid and tau PET imaging.
Speaker Change: Now, I'll turn it back to Brian to discuss the rest of our pipeline.
Brian Markison: Thanks Paul. Our pipeline is focused on assets that have the potential to deliver compelling new approaches for the diagnosis and treatment of disease areas with significant unmet need.
Brian Markison: Paul covered our neurology program, so I'll discuss our oncology product candidates.
Speaker Change: Within our prostate cancer portfolio, PNT2002 is our investigational PSMA targeted radiotherapeutic for the treatment of patients with metastatic castrate resistant prostate cancer.
Speaker Change: We recently completed the second interim analysis for the Phase III Registrational SPLASH Study. The analysis was performed at 75% of protocol pre-specified overall survival or OS events.
Brian Markison: The results for both radiographic progression-free survival, or RPFS, and OS have not materially changed from the interim analysis that was performed at 46% of pre-specified OS events.
Brian Markison: We continue to review the data and perform additional subset analyses with our partner Eli Lilly that may be compelling to the FDA in preparation for an interaction on our path forward.
Speaker Change: As a reminder, the SPLASH study met its primary endpoint of RPFS, which was a meaningful and statistically significant improvement for the PNT2002 arm versus alternate RP or hormone therapy.
Speaker Change: The O.S. results and hazard ratio in the ITT population remain confounded by the overwhelming number of patients who crossed over to receive PNT2002.
Speaker Change: Thank you for watching. I'm Mark Kinarney. I'll see you next time.
Speaker Change: At the recent ESMO meeting, Dr. Oliver Sartor, Lead SPLASH Investigator and Director of Radiopharmaceutical Trials, and Professor of Medical Oncology at the Mayo Clinic, highlighted potential benefits of PNT2002 hormone therapy switch.
Speaker Change: He discussed Polk-Hock analyses and confidence intervals that were adjusted for the crossover population, noting the meaningful benefit from pre-NT2002 compared to the control arm.
Speaker Change: We have been focused on enhancing our pipeline by adding additional late-stage and early-stage assets that have the potential to address high unmet medical needs.
Speaker Change: We continue to work with our partners.
Speaker Change: on our other clinical radiopharmaceutical programs.
Speaker Change: These include LNTH-2401 and LNTH-2402, our RM2 novel theranostic pair targeting gastrin-releasing peptide receptor, or GRPR, for prostate, breast, and other cancers, and LNTH-2403.
Speaker Change: our LLRC-15 targeted radiotherapeutic for the treatment of osteosarcoma and other solid tumors.
Speaker Change: I'm particularly excited about these new oncology radiotherapy product candidates because they represent best-in-class constructs aimed at validated targets and have the potential to make a meaningful addition to the treatment options available for patients.
Speaker Change: I will now turn the call over to Bob. Thank you, Brian. I will provide highlights of the third quarter 2024 financials, focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted.
Bob Marshall: Turning to the details, consolidated net revenue for the third quarter was $378.7 million, an increase of 18.4%.
Bob Marshall: Radiopharmaceutical Oncology contributed $259.8 million of sales, a turnover to Polarify, which was up 20.6%. The result is consistent with seasonal trends as well as the realization of our strategic partnership efforts amidst a competitive environment, as Paul discussed earlier.
Bob Marshall: Precision Diagnostic Revenue of $103.7 million was 7.7% higher. Highlights include sales of DFINITY at $77 million, 14.3% higher, along with Technolite revenue of $20.5 million.
Bob Marshall: down 12% due to opportunistic sales in the prior year quarter, not repeated in this year's third quarter, but rather in the second.
Bob Marshall: Lastly, Strategic Partnerships and Other Revenue was $15.3 million, up 108.3%, with the Relestore royalty stream completely annualized out of the result.
Bob Marshall: Investigational usage of MK-6240 and NAV-4694 contributed $10 million and $2.3 million respectively.
Speaker Change: And lastly, we recognize a milestone associated with an outlicensed asset from Progenix.
Speaker Change: Gross profit margin for the third quarter was 68.2%, an increase of 109 basis points.
Speaker Change: The overall product mix on year-over-year strength of Polarify and DFINITY was offset in part by higher contracted material freight and overhead costs.
Speaker Change: Operating expenses at 24.6% of net revenue were 111 basis points higher than the prior year rate with a focus on increased R&D investment in support of our early and late stage assets.
Speaker Change: Sales and marketing efforts concentrated on Polarified Brand Strategy, Market Research, and Patient Advocacy.
Speaker Change: ERP cost of ownership and optimization projects were the primary investment drivers for G&A.
Speaker Change: Operating profit for the quarter was 165.1 million, an increase of 18.3 percent. Net other income of 5.1 million is a result of nearly 10 million of interest income offset in part by interest expense on our existing debt.
Speaker Change: Total adjustments in the quarter were six million of gain before taxes. Of this amount, $20.4 and $11.9 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization, respectively.
Speaker Change: $37.3 million of net unrealized gain is tied to our equity investments in prospective and radio farm Theranostics with the remainder relating to acquisition, integration, and other non-recurring expenses.
Speaker Change: Our effective tax rate was 27.1%, the resulting GAAP reported net income for the third quarter was $131 million and $124.1 million on an adjusted basis.
Speaker Change: is an increase of 20.4 percent.
Speaker Change: The weighted average fully diluted share count outstanding was 73.1 million shares, slightly lower than previously guided.
Speaker Change: Gapfully diluted earnings per share for the third quarter were $1.79 and $1.70 on an adjusted basis, an increase of 15.6%.
Speaker Change: Now turning to cash flow, third quarter operating cash flow total $175.1 million.
Speaker Change: $58.3 million over prior year. Capital expenditures totaled $15.8 million, essentially flat with the prior year. Free cash flow, which we've defined as operating cash flow less capital expenditures, was $159.3 million, an increase of $57.1 million over the prior year.
Speaker Change: During the quarter, the company invested $47 million to acquire RM2 from Light Monoculars, as well as to in-license preclinical assets TRUP2 and LRCC15 from Radiopharm Theranostics, and we made the tech transfer milestone payment related to the NAV4694 asset.
Speaker Change: Concurrently, we invested $5 million in common shares of Radio Farm. Taken together, cash and cash equivalents, net of restricted cash now stands at $866.4 million.
Speaker Change: We also have access to our $350 million undrawn bank revolver, adding to our strong liquidity position.
Speaker Change: We'd like to note that the company's 2027 575 million convertible debt was reclassified to current liability as of September 30
Speaker Change: As the company's stock price remained above the 130% of the conversion price threshold,
Speaker Change: for more than 20 of the last 30 business days in accordance with the bond's terms and conditions.
Speaker Change: The reclass will distort the period of working capital statistics. As I have noted, the company has more than sufficient liquidity and access to capital to manage the reclassification implication.
Speaker Change: Turning now to
Speaker Change: revenue and adjusted EPS guidance for the full year. We are narrowing our view of revenue to be in a range of 1.51 to 1.52 billion from the prior range of 1.5 to 1.52 billion.
Speaker Change: We continue to expect Polarify to grow mid-20% over 2023, as has been the case over the last couple of quarters.
Speaker Change: We are also narrowing our view of fully diluted adjusted earnings per share, which should now be in a range of $6.65 to $6.70 from the prior range of $6.60 to $6.70.
Speaker Change: Thank you for watching. I'm Mark Kinarney. I'll see you next time.
Speaker Change: This guide reflects timing differences between Q3 and Q4 within our operating expense lines.
Speaker Change: It also considers near-term financial impacts from organizational changes we took late last month to retool the company for future growth. This action will create an approximately two-cent benefit in Q4 that we would expect to reverse in 2025 as we hire new talent with the skills and capabilities that align with our strategic direction.
Speaker Change: As has been the case all year, this estimate does not include any incremental investment for P&T 202, nor any further business development that might be completed this year. With that, let me turn the call back over to Brian.
Brian Markison: Thank you, Bob.
Brian Markison: As the leading radiopharmaceutical-focused company, Lantheus has accomplished a lot and has an amazing future.
Brian Markison: We have levered the strength of our SPECT and DFINITY franchises, and successfully launched Polarify to become the first pet radiopharmaceutical diagnostic blockbuster.
Brian Markison: With the success of our commercial products as a foundational engine, we have invested in our emerging R&D pipeline, expanding it to include new, innovative product candidates including radiotherapeutics and Alzheimer's radiodiagnostics.
Brian Markison: We will continue to pursue thoughtful business development and M&A and intelligently deploy our capital.
Brian Markison: I'm proud to report that since the beginning of 2024, Lantheus commercial products have made a positive difference in the lives of over 5.2 million patients and their families.
Brian Markison: Lanthius remains at the forefront of radiopharmaceutical innovation and is positioned to deliver sustainable long-term growth and continued success in our endeavor to find, fight, and follow disease to deliver better patient outcomes.
Brian Markison: We look forward to delivering on these commitments.
Brian Markison: Operator, we're now ready to take questions. You can proceed.
Speaker Change: Thank you.
Speaker Change: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, simply press star 1 1 again. As a reminder, we ask that you please limit yourself to one question. If you have additional questions, you may re-enter the queue. Please stand by while we compile your Q&A roster.
Brian Markison: Now first question, coming from the line of Rhianna Ruiz with Living Partners, your line is now open.
Speaker Change: Hi, good morning everyone
Rhianna Ruiz: So a quick one for me, could you talk a bit more about the factors behind Polarify's 3Q revenues? I appreciate that there was a bit of a seasonality impact and was also curious if there were some changes or new strategic partnerships that might have come online and could you help us think about how this should flow into the rest of the year?
Speaker Change: Thanks, Rowena. So, as we mentioned on the call, Polarify grew 20% year over year in the third quarter, and it does remain on track to grow mid-20% in 2024 and reach blockbuster status in line with our prior guidance, and really being the first ever pet imaging agent to reach blockbuster status.
Brian Markison: We did expect Q3 and Q4 polarify revenue splits to favor Q4 on an absolute dollar basis. That's driven by the third quarter seasonality, not only from
Brian Markison: you know, physician vacation schedules, but also
Brian Markison: to significant holidays of July 4th and Labor Day during the quarter.
Brian Markison: In the quarter for Polarify sequentially, the overwhelming majority of our accounts did grow on an absolute basis in line with the broader market.
Brian Markison: The sequential decline was really driven by one, traditional third quarter seasonality with third quarter usually being the lightest sequential growth driver of the year.
Brian Markison: Also, the net price impact of our recently secured strategic partnerships, this has been an effort that we've been underway since the beginning of the year. It continues to ramp throughout the year, and we certainly saw a
Brian Markison: impact to net price and really net price compression from third quarter versus second quarter which drove the majority of the sequential decline.
Brian Markison: And then lastly, we did make some intentional tradeoffs.
Brian Markison: largely due to product availability. And there were a handful accounts where we chose not to match a lower price from the competition, where price at these transactional customers was more important than quality. And so we expect going forward, which I think is the focus, that we are going to...
Brian Markison: remain the PSMA PET imaging agent of choice, the number one in the market, that we are incredibly well positioned to grow revenues sequentially in the fourth quarter and to sustain a billion-dollar franchise for Polarify going forward.
Speaker Change: Thank you.
Speaker Change: Thank you
Speaker Change: And our next question, coming from the line of Anthony Petroni with the Demisoho Group, your line is now open.
Anthony Petroni: Maybe, Paul, just to clear up some of the comments on the final...
Anthony Petroni: rates for 2025. You said they're largely in line. I know there was some confusion out there between
Anthony Petroni: mean unit cost in ASP, but addendum B seems pretty clear that the reimbursement rate for Polarify will remain steady in 2025.
Anthony Petroni: So just to parse out that in a little bit more detail and then maybe just quickly I'll sneak it in just the implied 4Q guide Is a little bit light. So just maybe talk through the bridge between the first nine months
Anthony Petroni: and the 2024 guide by the Step Down Sequentially. Thanks again, congratulations.
Speaker Change: Thanks, Anthony. So maybe I'll take the CMS question, and then I'll let Bob answer the four QPs.
Speaker Change: So as we mentioned in the prepared remarks, and I think as you noted, we're incredibly pleased with the actions that CMS announced on Friday evening, recognizing the value that innovative radiopharmaceutical diagnostics can have on patient care, and the importance of ensuring consistent access.
Brian Markison: CMS did note that they would be paying separately for radiopharm diagnostics above
Brian Markison: a 630-day arithmetic mean cost, which really just allows for some lower-priced products to remain bundled, and then the more innovative
Brian Markison: products to be separately paid recognizing that pet radiopharmaceutical diagnostics as well as some spec are not interchangeable and they need to be paid separately.
Brian Markison: Now, what we saw coming out of CMS on Friday is that the final 2025 calendar year payment rate for Polarify very much matches and is effectively the same as its existing payment rate for Medicare fee-for-service patients in the hospital outpatient setting.
Brian Markison: payment rates.
Brian Markison: and what CMS was going to use. I think CMS specifically highlighted seven agents that we note, six pet, one spec.
Brian Markison: that had a material improvement in the payment rate in the final rules versus that of the draft rules in July. And the commonality for the vast majority of those are those are agents that have recently lost pass-through.
Brian Markison: or are expected to lose pass-through within the next 12 to 15 months.
Brian Markison: and so...
Brian Markison: Those agents are already reporting their true costs to CMS.
Brian Markison: and therefore we believe that CMS put in place
Brian Markison: the payments that they did to support sustained access for those innovative radiopharmaceuticals And we think this sets us up well for continued growth in the overall market and for Polarify to continue to lead
Bob Marshall: I'll turn it over to Bob on some of the 4Q guide questions. All right. Hey. Good morning, Anthony. So from a revenue perspective...
Bob Marshall: You've got to take it by the different pieces. So if you stop and think about Polarify first and foremost, as Paul has noted multiple times in his prepared remarks.
Brian Markison: on track for mid 20% for the full year. And we do expect from a net and gross basis, Polarify would be both sequentially and year over year improved moving from Q3 into Q4. From a...
Bob Marshall: From a pure dollar perspective, we had always thought that Q4 would be greater than Q1.
Bob Marshall: Definity looks to be sort of 10%-ish for the year, but that and the spec business, as Paul noted, there are some competitive dynamics.
Bob Marshall: with other competitors having supply issues, we don't forecast those kinds of things to necessarily continue because we don't control that part of the business.
Bob Marshall: So from from that perspective, I do think that there could be some opportunity for over performance in both of those But at the same time again, we don't we don't forecast for for those type elements
Bob Marshall: As far as EPS goes, yes, absolutely it is a step down from Q3 into Q4.
Brian Markison: predicated on the fact that, as I had noted,
Brian Markison: even on the prior call, that we would expect R&D expenses to increase from Q3 to Q4, and that is really the biggest step up in OpEx between the two quarters, and hence the step down in projected earnings.
Speaker Change: Richard Newitor with Jewish Security Ceylon is now open.
Richard Newitor: Hi, thanks for taking the questions or a question
Richard Newitor: Just sticking on Polarify, kind of a two-part single question, sorry, you said you maintain confidence that, you know, you can see Polarify sustaining as a $1 billion franchise in 2025.
Richard Newitor: You know, you use the word sustain, not grow, and you provided commentary just now that it sounds like your assumption is that the pricing in the hospital-patient Medicare setting is not going to be all that different than what it's been.
Speaker Change: Do you have direct dialogue with CMS that gives you that level of confidence to know that this is going to be?
Richard Newitor: Unchanged pricing at a market level in 2025. Just what's your degree of confidence there, or is that something that you're assuming but it could be interesting? Thank you.
Speaker Change: Yes, thanks for mixing up the questions like that. I'm not sure which one we want to answer first, but...
Speaker Change: Why don't we start with Polarify, and I think Paul was pretty clear. We do anticipate Polarify growth next year. We're referring to volume growth specifically. Paul, do you want to just add on to that?
Speaker Change: No, Rich, I think...
Paul Blanchfield: You know, we're confident we're going to sustain, as I said, a billion-dollar franchise. We're still just wrapping up the third quarter.
Speaker Change: Based on the roll-in of our strategic partnerships, we have seen a net price compression in the third quarter based on securing those long-term partnerships. We would expect those to normalize over the course of 2025 and effectively be reflected in the comparables, and so they will still have an impact as they roll in on an annualized basis. But from a volume perspective, we expect the market to continue to grow.
Paul Blanchfield: the addressable market currently $2 billion as we look to additionally approve radiotherapeutics, as we look to increasing incidence and prevalence and the continued adoption of PSMA PET over more conventional imaging. We think that market can continue to grow. At this point, we're still just at the end of the third quarter. It remains a dynamic environment.
Paul Blanchfield: and so that's what we're comfortable saying today, but we remain very positive on the overall market, recognizing that these strategic partnerships are secured and roll in, that there is a transitory impact on net price.
Speaker Change: on the CMS side of things.
Speaker Change: Thank you. Bye.
Speaker Change: I think we have engaged with CMS in the past, we will continue to reach out to them. Based on...
Speaker Change: What we've seen, as well as potential alternatives, we feel like Polarify is in a very good position for 2025, as are a number of other innovative radiopharmaceutical diagnostics.
Speaker Change: Naturally, CMS always reserves the right to make adjustments should they need to.
Speaker Change: But I think in our conversations with relevant stakeholders in the marketplace,
Speaker Change: We believe that
Speaker Change: They clearly understand that innovative radiopharmaceutical diagnostics should need to be paid separately, and if we look in the broadest brushes, we're talking about potentially 20% of patients that has
Speaker Change: declined over time as Medicare Advantage continues to gain share over Medicare fee-for-service, and so even if we were to see some minor changes, we still think we are in a very good position.
Speaker Change: Thank you. Bye.
Speaker Change: I think I would also note that CMS made it very clear that they're open to paying on ASP going forward. That was in both their proposed rule as well as in the final rule. Unfortunately, there are a number of agents that don't or have not reported ASP because it is not required. Polarify, as well as many other agents have, under pass-through, we will continue to report ASP. We feel there's a very clear path forward for Polarify to retain separate payments and to be paid for those Medicare fee-for-service patients in the hospital outpatient setting at a rate that does not disadvantage Polarify relative to other PSMA pet agents.
Speaker Change: Thank you.
Speaker Change: Thank you. And our next question coming from the line of...
Speaker Change: Matt Taylor with Jefferies. Your line is now open.
Matt Taylor: Thanks for taking the question. Just as a follow-up, I wanted to see if we could pin down on the final addendum there. The unit price is $615. Is that the price that you understand you're going to get now? And as far as the strategic contracting goes, obviously you gave up some price to lock up these.
Matt Taylor: partners longer term. Can you talk about your ability to adjust pricing within those contracts if you are going to get this this better price in the future?
Speaker Change: Yeah, I'll take the last question. And to be fair, we really don't lock up anything. We're engaged in a partnership with our key customers.
Matt Taylor: to help them grow the business while we grow alongside them. And we're not going to comment on the details in those partnerships because that's obviously competitive intelligence that we just don't want to share. With regard to the pricing, Paul,
Paul Blanchfield: Matt, you're reading addendum B correctly on the proposed price. Naturally, we look at the average millicuries used per dose to come out to a proposed or final, in this case, final payment rate for 2025.
Paul Blanchfield: It's an issue at all. It's a far smaller issue than we were, say, at the beginning of the year before CMS came out, with these rules to recognize the value that innovative radiopharmaceuticals bring.
Speaker Change: And as noted, there are a number of agents where the payment rate materially increased from the proposed rules to the final rules, and the common thread appears to be
Speaker Change: recently having lost TPT or about to be losing TPT which is consistent with reporting ASP.
Speaker Change: Thank you. And our next question coming from the line of Larry Seller with CJS Securities. Your line is now open.
Larry Seller: Great. Good morning. Just on this pricing issue, can you just maybe just give us a little more color on how much of the price or the strategic partnerships were implemented this quarter? Just like a rough idea, was there a significant material amount of them or was there a lot more that still have not?
Speaker Change: rolled in yet, or is this kind of a good basis?
Speaker Change: to annualize what that impact was based on what happened this quarter.
Larry Seller: And the second question is just on, it sounds like you're a little bit hesitant to give guidance for next year, and I fully understand that, but do you still expect Polarified to grow on a multi-year basis, both volume and less impact from price to continue to grow it on a revenue basis? Thanks.
Speaker Change: Thank you. Thank you.
Speaker Change: So, appreciate the question there. I think we're incredibly positive, if I look at the long term first, about the growth in the PSMA PET imaging market. We've highlighted an addressable market that's currently around two billion dollars and could grow to three billion dollars by the end of the decade.
Speaker Change: And those are based, as I mentioned earlier, on incidence prevalence, the continued adoption of radiotherapeutics, as well as continued adoption of PSMA-PET versus
Speaker Change: conventional imaging. On the, you know, specific pricing piece, I think we're very pleased with the progress that we've made as the market leader. These are very positive conversations with key customers.
Speaker Change: We kicked this off, as we've highlighted in the past, last year. It really gained steam throughout the course of this year.
Speaker Change: We will see continued impact as we get deeper into the year, with Q4 still partnerships being signed, and the full annualization of a full quarter's worth, and so I think we're really going to see this normalize throughout the first half of next year, with the second half of 25 really being a kind of
Speaker Change: go forward net price compression solidified, given that these are
Speaker Change: full-year, multi-year contracts in nature. And so we're really in the phasing period where, you know, the biggest driver of sequential performance was really the rollout of these.
Speaker Change: And so we feel very positive that this is a transitory impact that then overall the market will continue to grow, Polarify will continue to lead and grow, and this is a very sustainable franchise going forward.
Speaker Change: Thank you.
Speaker Change: Thank you. And our next question coming from the line of...
Speaker Change: Tara Bancroft with T.D. Cowan. Your line is now open.
Tara Bancroft: Hi, good morning, and thanks for taking the questions.
Tara Bancroft: So, I'm going to deviate a little bit from the pricing questions, but I'm curious to hear more on the Alzheimer's diagnostic.
Speaker Change: Pipeline. So can you tell us how these assets...
Speaker Change: other pipeline. You know, what's your thinking on that and and on the market for these and we potentially hear a little bit more about these in 2025.
Speaker Change: Yeah, and thank you for taking us off the pricing track. That's a relief, I guess, because I don't know how many times we could say the same thing.
Speaker Change: With our Alzheimer's portfolio, we're, I think, really excited about these assets with MK6240 and NAV because
Speaker Change: They appear to be best-in-class assets where they have really great detection rates de minimis off-target
Speaker Change: And, you know, I think they're in a very advanced phase 3 development right now. So Jeff, do you want to comment a little bit more? Yeah. Thank you. I mean, these are exciting compounds. They're second generation. They have a high degree of sensitivity and low off-target binding, as mentioned in the comments.
Speaker Change: I think you were asking the question about
Speaker Change: Serologic Markers for Tau versus MK6240 Imaging. The big difference being that you can see the anatomy with the PET imaging and that correlates
Speaker Change: with issues such as symptom severity, the rate of decline, and that's important information. And as mentioned in the comments,
Speaker Change: The Alzheimer's Association has recommended imaging of tau and beta amyloid for the diagnosis staging and in some cases monitoring of treatment for Alzheimer's disease. So we're pretty excited about this portfolio.
Speaker Change: Obvious, but these are both F 18 agents that would lever the same commercial and production infrastructure that we've established with Polaris high and so we really like the position and the opportunity to continue to grow with the overall therapeutic market for the support of both diagnosis staging and monitors which create cigna.
Speaker Change: Difficult scanned potential per individual patient.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of.
Speaker Change: John <unk> with B Riley your line is open.
John: Good morning, Thank you for taking our questions maybe asking the question differently right. So for the CMS reimbursement and great operators, we felt that the amusing NASA to broke out the lower reimbursement rate.
Speaker Change: However in this latest update actually went up so how should we think about this acquisition and what that could mean to Chinese undertakes.
Speaker Change: There is a change from the <unk> theme.
Speaker Change: To ASP asset thank you.
Speaker Change: Jan one I appreciate I know theres a lot of considerations in the marketplace. So understand there there is some confusion in the differences with what CMS has come out with.
Speaker Change: What we've seen and I don't mean to just reiterate but what I think we've seen as CMS came out with their calendar year 2025 rules.
Speaker Change: Which is different just to note for some other CMS payment mechanisms whereby they adjust quarterly this is a calendar year final rate naturally they reserve the right to make adjustments, but there is commonality amongst some of the material adjustments they have made.
Speaker Change: We continue to report Asps for Polaris High we have been doing so since launch we will continue to do so going forward and so while its little early to determine exactly what payment rates would be for 2026 based on the right. We have as well as CMS is openness to paying on Asps once.
Speaker Change: That becomes more ubiquitous in the radiopharmaceutical diagnostics space.
John: We believe that that could be sustainable we will continue to report asps.
John: If CMS.
John: Just as they have said they would be open to there.
John: There are payment mechanisms to be more based on asps versus <unk> Polaris <unk> would be set up to again have their payment rates reflect the true current cost to hospitals.
John: Naturally we will be working as part of the broader coalition to ensure that all innovative radiopharmaceutical diagnostics continued to report asps to further support Cms's intent to move there that's just not possible at this time given.
John: Not everyone reports ASB.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Speaker Change: Kim <unk> with Brookline capital Partners markets. Your line is now open.
Kim <unk>: Great. Thank you.
Speaker Change: I'm going to ask you about P&C 2002, and this is going to be a hypothetical question, but.
Speaker Change: CMS wants you to go to 100% of events in the trial or are we looking at roughly a six month timeframe.
Speaker Change: Nine month timeframe.
Speaker Change: <unk>.
Speaker Change: What should we expect as well.
Speaker Change: You have to go that route.
Speaker Change: Yes, I think.
Speaker Change: Youre, referring to the SBA.
John: And.
John: It's possible that the agency would like to see the completion of the study.
John: If you look at the rate of.
John: Ported.
John: OS events from us and our partner, it's not unreasonable to think that this will continue into the first quarter. However.
John: Clearly we don't control.
John: The final OS events, which could keep the trial open for a bit longer so I really prefer not to speculate too much on that.
John: And I think look we're going to confer with our partner Lilly as I mentioned and also.
John: Reach out to the agency to get a better understanding of our clear path forward.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Justin <unk> with Jones trading your line is now open.
Speaker Change: Alright, Thanks for taking my question sticking with <unk> zero two I'm wondering if you can provide any commentary on the planned subset analysis analyses and related to this what outcomes do you think would push lanthier to stick with the Lilly agreement versus stepping away.
Speaker Change: Yes, we have a lot to unpack here and I think we did mention that we are looking at subset analyses I think.
Speaker Change: If you look back at the recent ESMO meeting and Dr. <unk> presentation.
Speaker Change: He clearly pointed out a few analyses that were post hoc.
Speaker Change: Where we adjusted for the OS crossover rate and actually there is quite positive findings there that support.
Speaker Change: The effect of <unk> in this population.
Speaker Change: I think we've got a ways to go to unpack the data.
Speaker Change: And I think with Jeff you can comment on this a bit further if you'd like but.
Speaker Change: We continue to unpack the data we continue to work with Lilly.
Speaker Change: We'll meet with the agency and will determine the path forward from there, but look we've really I think looking back have already satisfied that this is a safe and effective product.
Speaker Change: I think the thing to keep in mind is that the high degree of crossover from the hormonal therapy switch arm to 'twenty two is completely confounded the overall survival events, so and the statistics behind the ITT population. So.
Speaker Change: It is a bit of a conundrum I think.
Speaker Change: All of us that have designed trials like this and conducted them that have similar high crossover rates.
Speaker Change: We're dealing with this issue at the same time, so Jeff do you want to yes, I would just add that it's very clear. This trial met its primary endpoint it has.
Speaker Change: Benefits on the quality of life endpoints and Oliver Sartor was very positive about the study when he presented at ESMO I think the field has been positive as well.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of.
Speaker Change: Anderson with William Blair. Your line is now open.
Speaker Change: Great. Thanks for taking our question.
Anderson: We're curious about the one $5 billion to $5 billion Tam for the Alzheimer's market.
Speaker Change: Yes, thanks for providing that.
Speaker Change: That guidance.
Speaker Change: Maybe talk about kind of the number of scans dynamic thats baked into this assumption.
Speaker Change: And what's currently kind of the average.
Speaker Change: Scans per patient and how will that grow in your view into the next decade.
Speaker Change: Along with that how will the dialogue with payers just to ensure.
Speaker Change: Then that there is actually a benefit to patients as you kind of use these agents to attracted disease progression on a longitudinal basis. Thank you.
Speaker Change: Andy Thanks for the questions I think very spot on.
Speaker Change: We are.
Speaker Change: When we look at the specifics around our addressable market.
Speaker Change: Assumptions.
Speaker Change: Or really grounded in what the broader consensus is around therapeutic uptake and so.
Speaker Change: I may have mentioned I may not I think we see expectations that based on just the currently approved disease modifying therapies for Alzheimer's that we could see 500000 patients on therapy by the end of the decade.
Speaker Change: We are still in the early stages of this market to understand exactly how many scans per patient we're going to see on a diagnosis on a staging and on a monitoring basis, but quick math the list price for neurological and <unk>.
Speaker Change: Case, both Tau and beta amyloid is approximately $3000 per scan on the market give or take and so with the potential of 500000 and $3000 per scan youre looking at about $1 5 billion now naturally some patients will receive more scans and indeed, not every patient that will get scanned will go.
Speaker Change: On therapy, there's going to be some selection there I don't think we're at a point to say, it's one point X at this point in time, given we're still at the early stages of this market growth and the adoption of the therapeutics, but suffice it to say the benefits of a scan can be tremendous one it needs the lai.
Speaker Change: <unk> for what we've seen is recently approved therapeutic agents.
Speaker Change: Two when we look at the payer dynamic and I think that's very astute. If you look at our scan at potentially $3000 as a one off event plus a procedure costs relative to the price of these therapeutics, which appears to be in the 30% to $35000 range.
Speaker Change: Ensuring that with 6 million Americans, who are suffering from Alzheimer's disease or advanced dementia that the right patients get on therapy at the right time and that we monitor as a health care system their progression and ensuring they continue to respond a pet image is a fantastic insurance.
Speaker Change: <unk> when payers are looking at potentially tens of billions of dollars of therapeutic expense to ensure that they are getting the best patients on treatment at the right time, and so similar to how we've seen the adoption.
Speaker Change: Semey, Pat because it can truly make an impact on what patients deserve and while the diagnostic market is very large and we are very pleased to be playing in this.
Speaker Change: Therapeutic market is even larger and more expensive from a payer perspective, and so we think there will be a considerable value proposition for these agents to help inform care and potentially even save the healthcare system money in the long term.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of.
Speaker Change: And with <unk> with Redburn Atlantic Your line is now open.
Speaker Change: Thank you very much.
Speaker Change: Follow up a little bit also on.
Speaker Change: If you could give any color on how we should be thinking about the royalties from clarity now that that has launched and any early color.
Speaker Change: That you have on that that would be helpful.
Speaker Change: And also you highlighted obviously the approval of <unk>.
Speaker Change: Called out.
Speaker Change: How.
Speaker Change: Would you be thinking about the ability.
Speaker Change: To grow that business given.
Speaker Change: Also the supply communications.
Speaker Change: Two good questions on our partnerships.
Speaker Change: We are incredibly pleased with the approvals of <unk> in Europe and in multiple markets they've naturally in Europe. It is a slower ramp than in the U S. Just given local regulatory approvals and pricing dynamics curiam continues to commercialize that market I think as we said in the past.
Speaker Change: Overall, we're incredibly excited about the potential for Polaris <unk> slash Macquarie to be a global brand and to be discussed at medical Congresses.
Speaker Change: Around the World I think from a financial perspective, the relevant impact is minimal in the near term as they continued to ramp and so we do factor those into our results, but they have a minimal role to date.
Speaker Change: We are optimistic that that could grow over time, but it won't necessarily be a material driver of <unk> performance on the floor Kadow piece GE has the global.
Speaker Change: The commercialization commercialization rights.
Speaker Change: We join and work with them on a joint steering Committee.
Speaker Change: Naturally the market opportunity is sizable given number of MPI studies overall.
Speaker Change: Ill defer specific questions to GE.
Speaker Change: They are the commercial lead of that agent.
Speaker Change: But cardiac imaging is a large market inspect it is a sizable market and pet with rubidium. There are benefits of that agent that GE will certainly be talking about overall.
Speaker Change: Overall, we're excited for another pet imaging agent that is innovative to come to the marketplace and we will continue to receive relevant milestones.
Speaker Change: Tiered double digit royalties in the U S as well as mid single digit royalties on sales outside of the U S.
Speaker Change: Thank you ladies and gentlemen, there are no further questions in queue at this time.
Speaker Change: Your participation in today's conference. This concludes the program you may now disconnect and have a wonderful day.
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