Lantheus Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 29, 2022

Key Takeaways

  • Positive Sentiment: Lantheus reported a record Q1 2022 with $208.9 million in revenue (up 125.8% YoY) and $0.97 adjusted EPS, driven by rapidly increasing Polarifi sales and over 30,000 patients imaged in under one year.
  • Positive Sentiment: The company raised its full-year revenue guidance to $800 – 835 million and adjusted EPS to $2.90 – 3.15, reflecting the continued ramp of Polarifi and a $24 million contribution from its Novartis collaboration.
  • Positive Sentiment: Polarifi now has coverage for 90% of insured lives, contracts with all targeted academic prostate cancer centers, and is ordered by nearly 700 sites across 45 states, with the TAM for PSMA PET imaging increased to ~250,000 annual scans (~$1.1 billion).
  • Positive Sentiment: DEFINITY ultrasound agents saw steady sales growth despite early-quarter COVID-19 and staffing headwinds, and the February FDA approval of its on-campus manufacturing facility adds supply chain redundancy and supports future margin expansion.
  • Neutral Sentiment: Lantheus advanced strategic collaborations by supplying Polarifi for Novartis's PSMA therapeutic trials in exchange for clinical imaging data, and partnering with the PCCTC and GE Healthcare to develop AI-powered imaging biomarkers.
AI Generated. May Contain Errors.
Earnings Conference Call
Lantheus Q1 2022
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to the Lantus First Quarter 2022 Financial Results Conference Call. This is your operator for today's call. Please note that all lines have been placed on mute to prevent any background noise. This call is being recorded for replay purposes.

Operator

A replay of the webcast will be available in the Investor Relations section of the company's website approximately 2 hours after the completion of the call and will be archived for 30 days. I'll now turn the call over to your host for today's call, Mark Anarney, Senior Director of Investor Relations. Mark?

Speaker 1

Thank you, and good morning. Welcome to Lantheus' Q1 2022 financial results conference call. With me on today's call are Mary Anne Haino, our President and CEO Bob Marshall, our Chief Financial Officer and Paul Blanchfield, our Chief Commercial Officer. Mary Anne will begin the call with introductory remarks and then turn the call over to Paul to provide a commercial update. Bob will cover Our financial results and updated guidance.

Speaker 1

Marion will provide closing remarks and then we will open the call for Q and A. This morning, we issued a press release, which was furnished to the Securities and Exchange Commission under Form 8 ks reporting our Q1 2022 results. You can find the release in the Investors section of our website atlantheus.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 would like to remind you That our comments today during this call will include forward looking statements.

Speaker 1

Actual results may differ materially from those indicated by forward looking statements due to a variety of risks and uncertainties. In particular, the impact of hospital staffing levels and COVID-nineteen on our business results and outlook Continues to be a best estimate based on currently available information. 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 the call will include certain non GAAP financial measures.

Speaker 1

Reconciliation of these measures to the most directly comparable GAAP financial measures is also included on the Investors section of our website. With that, it's my pleasure to now turn the call over to Mary Anne.

Speaker 2

Thank you, Mark, and good morning to everyone joining us. I am pleased to say we have very positive news to share Lantheus reported a record quarter, led by rapidly increasing Polarify sales and solid DEFINITY performance. We continue to execute on our strategy to accelerate growth, position Lantheus as a category leader in the markets in which we compete and pursue our passion to find, fight and follow disease to deliver better patient outcomes. As the year continues, we are focused on Further establishing Polarifi as the PSMA PET imaging agent of choice in the USA prostate cancer community, Maintaining market leadership with our microbubble franchise executing strategic transactions in line with our portfolio objectives and delivering on our financial objectives, which we believe best enhance shareholder value. I'll now take a few minutes to update you on our progress.

Speaker 2

It has been an exciting and transformational time for prostate cancer care with advances in technology and new FDA approvals in both diagnostics and therapeutics. Paul will provide further details on the Polarifi launch to date in a few minutes, but I am thrilled that less than 1 year after we commenced our launch, More than 30,000 men have been imaged with Polari, including more than 20,000 in the Q1 of 2022 alone. This is a testament to the innovation of our PSMA targeted PET imaging agent and our efforts to transform patient management for the U. S. Prostate cancer community.

Speaker 2

Now, let me take a few minutes to highlight our recent strategic collaborations with PolariFi. First, In March, we announced a collaboration with Novartis to include PolariFi in their planned development programs for Pluvicto, Their recently approved PSMA targeted therapeutic for metastatic castration resistant prostate cancer. This collaboration builds on Polarifi's inclusion In their expanded access trial for Pablikto and directly aligns with our strategy to advance precision medicine in the treatment of cancer by enabling partners to use PolariFi in ongoing prostate cancer therapeutic trials. As part of the agreement with Novartis, we will supply Polari Fi for the selection of patients within their trials and Novartis in turn will provide Lantheus with all Polari Fi related clinical imaging data from these trials. During the quarter, we also entered into 2 strategic collaborations to advance our artificial intelligence or AI enabled imaging biomarkers for prostate cancer.

Speaker 2

In January, we announced a collaboration with the Prostate Cancer Clinical Trials Consortium or PCCTC, a premier multicenter clinical research organization that specializes in cutting edge prostate cancer research. The intent of the strategic collaboration is to integrate Lantheus' AI platform into early phase PCCTC studies to advance the discovery, development and validation of novel AI enabled biomarkers. And earlier this month, We expanded our collaboration with GE Healthcare to include AI enabled A Promise on their latest platform. As a leading supplier of medical technology equipment, GE Healthcare is an ideal partner to provide global access to this unique AI platform for prostate cancer. Turning to DEFINITY, our market leading ultrasound enhancing agent And our microbubble franchise, sales continued to grow despite widely reported hospital staffing challenges and record high COVID-nineteen levels early in the quarter.

Speaker 2

We are pleased to see that DEFINITY sales have steadily increased since mid January as COVID-nineteen cases and COVID related hospitalizations have subsided. With the FDA approval in February of our supplemental new drug application for our BEL RECA based manufacturing facility, We are now producing and distributing DEFINITY manufactured at our on campus facility in addition to continuing to source from our existing long term contract manufacturer. The investment in our on campus facility was strategically driven to ensure supply chain redundancy as well as to drive margin expansion over time. I'll speak briefly to AZEDRA before turning over to Paul. During the Q1, our team worked with nuclear medicine departments at academic centers of excellence in key markets across the U.

Speaker 2

S. And we are pleased that 2 additional centers of excellence have joined the network of centers now offering AZEDRA treatment. With the COVID-nineteen pandemic receding and hospital access improving, we are optimistic both physicians and patients will consider treatment with AZEDRA for pheochromocytoma and paraganglioma. Now, let me turn the call over to Paul for a commercial update on our key products.

Speaker 3

Thank you, Mary Anne, and good morning, everyone. During the Q1, our commercial teams continued to execute on our strategy, Namely to establish POLARIFI as the PSMA PET imaging agent of choice in the U. S. Prostate cancer community, Maintain market leadership with our microbubble franchise and deliver on our financial objectives. Beginning with the Polarifi launch, We accelerated our momentum with Polarifi sales of $92,800,000 compared to $35,400,000 in the 4th quarter.

Speaker 3

We also continue to invest in the brand across supply, contracting, market access and customer adoption. Our supply and capacity investments included the activation of 2 additional pet manufacturing facilities or PMS During the Q1, which further expanded our geographic footprint. We have also identified new PMS to supplement our network, Expand our footprint and provide redundancy and enhance capacity in existing geographies. As highlighted last quarter, we continue to expand our capacity at existing PMF sites by investing in additional synthesis boxes. These new boxes allowed us to increase our overall capacity and number of batches produced.

Speaker 3

We have also been able to improve our batch efficiency And overall batch size, while still selectively flying doses in advance of local PMF activation. Our broad manufacturing network and increased capacity along with F-eighteen's longer half life Allows us to efficiently and continually meet the needs of our customers. We believe this ability to meet customer demand When combined with Polarifi being the 1st and only commercially available PSMA PET imaging agent for almost 10 months Provides us a sustainable first mover advantage. Within market access, Both our pass through status with the Centers For Medicare and Medicaid Services or CMS and our HCPCS code went into effect January 1, 2022. We also continue to make considerable progress with commercial and Medicare Advantage plans as well as radiology benefit managers And now believe 90% of covered lives have access to both Polarifi indications, well ahead of what is typically seen at this point This is an important milestone for Polarifi, facilitating its placement in the prostate cancer workflow And ensuring that U.

Speaker 3

S. Prostate cancer patients have access to this game changing product. In addition, The Society For Nuclear Medicine and Molecular Imaging or SNMMI recently updated their appropriate use criteria, Noting that the PSMA PET imaging including Polarifi can be used for patient selection for PSMA targeted radioligand therapy. We believe this is an important step to ensure that healthcare professionals and patients will continue to have access to all approved PSMA PET imaging agents, including Polarifi. Our market access team continues to support our customers and payers on relevant coding, coverage and payment related questions.

Speaker 3

During the Q1, we also continued to execute on customer contracting. And I am pleased to announce we now have contracts in place With 100% of our targeted U. S. Academic institutions, which treat prostate cancer, as well as many community hospitals, Government Facilities and Freestanding Imaging Centers. These contracts combined with our demand generating activities have enabled us to expand the breadth and depth of customer adoption.

Speaker 3

We have seen significant growth In the hospital outpatient segment following pass through initiation with hospitals comprising 70% of year to date orders. Independent imaging centers and government facilities comprised 25% and 5% of year to date orders respectively. We also remain encouraged by the rate of repeat demand increasing quarter over quarter with over 95% of our customers having ordered multiple doses. As of the end of the Q1, almost 700 customers across 45 states and the District of Columbia Are actually ordering Polarifi on a regular basis. We believe this highlights the impact Polarifi is having on patient care and our ability to execute both in demand generation and supply fulfillment.

Speaker 3

We believe Polarifi AI will also have a positive impact on patient care and product sales, as it is designed to provide enhanced Consistency in quantitative analysis, precise anatomical context and can enable quantitative reporting. Collectively, these benefits potentially contribute to increased reader efficiency and reproducibility of PSMA PETCT image assessments. We are working with our partner SinterMed and have continued to introduce Clarify AI at key centers across the country. Finally, I want to provide an update on the total addressable market for PSMA PET imaging agents. The recent FDA approval of Novartis' Pluvicto creates a new addressable market for PSMA PET imaging in patient selection for PSMA targeted therapy.

Speaker 3

As a result, we updated the U. S. Total addressable market or TAM For all PSMA PET imaging to be around 250,000 annual scans, which is an increase of approximately 30,000 scans per year for this mCRPC patient population. The total market opportunity for PSMA PET Imaging is now approximately $1,100,000,000 Importantly, this TAM may continue to increase as medical practice evolves and as PSMA Therapeutics expand into new indications. We look forward to continuing to be the PSMA PET imaging agent of choice in this large and dynamic market.

Speaker 3

As you can see, we continue to execute against our launch priorities and to further establish Polarifi as the PSMA PET imaging of choice In the prostate cancer community and we believe we will hold this position even with the recent availability of competitive agents. Switching now to DEFINITY, the Q1 saw continued growth in year over year sales even amidst hospital staffing shortages And record COVID-nineteen levels in January. We saw steady improvement over the course of the quarter in both in person promotional activity And customer ordering as case counts and hospitalizations decreased. And we believe we have strong momentum coming into the 2nd quarter and remainder of the year. I will now turn the call over to Bob for a financial update.

Speaker 4

Thank you, Paul, and good morning, everyone. I will provide highlights of the Q1 financials focusing on adjusted results unless otherwise noted. Turning to the quarter. Revenue for the Q1 was $208,900,000 an increase of $116,400,000 or 125.8 over the prior year period. Earnings per share for the Q1 was $0.97 an increase of $0.92 over the prior year quarter.

Speaker 4

Before providing further details on these results, it is important to note that within these numbers are the impact of the Novartis agreement outlined in our 10 Q filed this morning. We recorded revenue of $24,000,000 and earnings per share of approximately $0.25 related to this agreement. Therefore, comparable underlying performance Our prior Q1 guidance is revenue of $184,900,000 and earnings per share of approximately $0.71 Turning now to the revenue details and beginning with Precision Diagnostics. Revenue of $86,200,000 were 1.5% higher from the prior year quarter. Sales of DEFINITY, net of rebates and allowances were $58,300,000 or 0.2 percent higher as compared to the prior year quarter and ahead of our previously Technolyte net revenue was $22,600,000 down 0.9% from the prior year quarter, Due primarily to the exited contract mid last year with an approximate $2,500,000 per quarter impact, offset in part by opportunistic sales in the quarter.

Speaker 4

Radiopharmaceutical oncology contributed $94,100,000 of sales, Up significantly due to the continued rapid ramp in sales of Polarifi as described by Paul. This result Also includes a sequentially higher contribution from AZEDRA, up 96.1% over the prior year, which benefited from deferred procedures from Q4 last year, as well as expanded sites of care. Lastly, strategic partnerships and other revenue was $28,600,000 Driven primarily by the Novartis agreement noted earlier, followed by the RELISTOR royalty. The Novartis agreement has been deemed licensing revenue In the quarter for accounting purposes and can be considered a one time event. Gross profit margin for the Q1 was 67%, An increase of approximately 16 70 basis points from the Q1 of 2021 on a similar basis.

Speaker 4

If we exclude the Novartis contribution, Gross profit margin would have been 62.7% or better by approximately 12.40 basis points From 50.3% in the prior year. The increase is due mainly to favorable product mix led by Polarifi and DEFINITY, offset in part by increased supply chain and logistics costs. Operating expenses as a percentage of revenue were 1497 basis points favorable from 40.5% in the prior year to 25.5%, excluding Novartis impact on revenue, driven primarily by operating leverage while investing for sustainable growth in both sales and marketing and R and D. Within G and A, The company has initiated investment in a new ERP platform to drive workflow efficiencies as we grow. Operating profit for the quarter Was $92,700,000 or an increase of $83,700,000 or 927.3 percent over the same period prior year.

Speaker 4

Total adjustments in the quarter totaled $33,800,000 before taxes. Of this amount $5,600,000 $8,300,000 of expense Is associated with non cash stock and incentive plans and acquired intangible amortization respectively. Also in the quarter, expensed $18,400,000 of net contingent liabilities, of which $18,500,000 is related to Clarify's CVRs or contingent value rights. The remainder is related to acquisition, integration and other non recurring expenses. Our effective tax rate was 26% in the quarter.

Speaker 4

The resulting reported net income for the Q1 was $43,000,000 $67,800,000 on an adjusted basis, An increase of $34,000,000 $64,500,000 respectively. GAAP fully diluted earnings per share were $0.61 $0.97 on an adjusted basis, An increase from the prior year of $0.48 and $0.92 respectively. As noted earlier, Excluding the approximate $0.25 impact of these figures due to the Novartis agreement, earnings would have been $0.36 and $0.71 on a GAAP and adjusted basis respectively. Now turning to cash flow. 1st quarter operating cash flow totaled $10,300,000 as compared to $9,800,000 in Q1 2021.

Speaker 4

Capital expenditures totaled $3,200,000 up slightly from the prior year quarter. Free cash flow, which we define as operating cash flow less capital expenditures was $7,100,000 a decrease of $200,000 from the prior year period. As we look forward to the balance of the year, We would expect to begin generating significant free cash flows as month over month ramping of Polari Fi accounts receivables mature into cash receipts. Cash and cash equivalents, net of restricted cash, now stand at $105,400,000 We continue to have access to our $200,000,000 undrawn bank revolver and are comfortable with our strong liquidity position. Turning now to our guidance for Q2 and the full year.

Speaker 4

We forecast revenues to be in a range of $200,000,000 to $215,000,000 for the Q2 of 2022, an increase of approximately 98% and 100 and We are updating our full year view to take into consideration actual Q1 performance as well as quarter end exit rates for Polarifi. Therefore, we now forecast full year revenue to be in a range of $800,000,000 to 835,000,000 from the prior year from the prior range of $685,000,000 to $710,000,000 This updated range includes not only Recognized revenue from Novartis of $24,000,000 recorded in the Q1, but also the continued adoption of Polarify, which we now model at $385,000,000 to $420,000,000 for the full year. Our increased estimates Clarify encompasses our expectations of consistent performance amidst competition as well as the continuation of progressive market penetration. Turning now to earnings, adjusted EPS should be in a range of $0.67 to $0.73 for the 2nd quarter. We are raising our full year adjusted Yes, to account for relative Q1 outperformance as well as the incremental contribution from higher Polarifi revenue expectations And the adjusted EPS impact of the Novartis agreement of approximately $0.25 We now expect adjusted EPS to be in a range of $2.90 to $3.15 per share versus the prior range of $1.95 to 2 $0.05 With that, let me turn the call back over to Mary Anne.

Speaker 2

Thank you, Bob. In closing, I'd like to leave you with a few key takeaways. First and notably, I would like to recognize the Q1 of 2022 was a record period for Lantheus for both revenue and earnings. That performance was driven primarily by Polarifi with its strong adoption by the medical community as a true innovation in the management of patients with prostate cancer. We are fully committed in our efforts to further solidify Clarify as the PSMA agent of choice with healthcare providers and the patients they serve.

Speaker 2

2nd, DEFINITY's steady recovery throughout the quarter and momentum moving forward Gives us confidence in the continued growth and contribution of our microbubble franchise. Finally, it is strategically important That we continue to advance our portfolio objectives and this was an active quarter for us with the progress made towards that objective. I look forward to sharing more information with you about these initiatives throughout the year. Before we open the call to questions, I'd like to take a moment to highlight 2 recent additions, 1 to the Lantheus Board and 1 to my leadership team. In March, We were thrilled to welcome Minnie Baylor Henry to the Lanthe's Board of Directors.

Speaker 2

Minnie has a stellar life science resume with regulatory affairs expertise. She's a proven business leader and will be a great add to the current complement of expertise represented by the directors on the Landius Board. Earlier this month, I added Doctor. John Claude Prevost to my leadership team as the Interim Chief Medical Officer. With more than 30 years of industry experience, Including previous positions at GE Healthcare, Pfizer, Bayer and Merck Serono, Jean Claude will play a critical role in helping execute our strategic vision to find, fight and follow disease to better deliver patient outcomes.

Speaker 2

With that, Bob, Paul and I are now ready to take your questions. Operator, please go ahead.

Operator

Thank you. Now first question coming from the line of Rich Newitter with Tuohy. Your line is open.

Speaker 5

Hi, thank you.

Speaker 6

Hi. Thank you guys and congrats. Fantastic quarter here.

Speaker 5

Maybe just

Speaker 6

to start off on the guidance, which increased significantly. I was hoping, Bob, Mary Anne, can Can you

Speaker 2

talk to us a little

Speaker 6

bit about your approach to how you arrive at that number? Why is roughly $400,000,000 at the midpoint, I suppose? Why is that the right number? And then specifically, if you could talk to kind of what would get you to the high end of the range? What factors would get you to the low end?

Speaker 6

Is there any contemplation of the expanded TAM and penetration into the therapeutic use That contemplated in this guidance range and how do we think about kind of the cadence through the year? My estimate gets it is about 300,000,000 Of, of polarifi revenue to spread between the remaining quarters, do we just evenly spread that out? How should we think about that? Thanks.

Speaker 2

So I'll start, Rich, and then Bob can get more detailed with numbers. But I think you've touched on some of it. This is a range. We're still in a launch. We're thrilled with what we're seeing and we're still monitoring and kind of getting our own feedback from the market as to how they're adopting to clarify.

Speaker 2

All signs are go. And so we continue to monitor that and that is what has led us to as you noted increase the TAM along with some of the market events, the approval of Plavicta was certainly A factor there, but the other factors are the events the anecdotal events we see in the market around the adoption of polarifi and the intent to use further. So I won't dive into the financial pool and tell you what to do with your model, but I'm not sure I would evenly spread that $300,000,000 over the next 3 quarters, but I'll let Bob jump in there.

Speaker 4

Good morning, Rich. So I guess my scripted remarks were somewhat purposeful in how I laid out The comments, 1, we continue to look at exit rates in terms of where we were month by month. This is a month by month ramp. Every month seems to be just that much better than the last. But we are sitting here at the end of April, there's still Many more months to go.

Speaker 4

So as we thought about going forward, I use the words that we encompassed Patience for consistent performance. So in other words, if we were to continue to because of competition that we're able to sort of continue to deliver What we've already managed to do, knowing that we will continue to add PMS throughout the balance of the year, That would get you toward the low end of the range. If you were to we see continued market penetration, so I. E. As we think through Qs 2, 3 and 4, yes, I mean the implications are that Q2 was higher than what was in Q1, just by the math.

Speaker 4

And then I would expect the second half to, as we said, either be consistent with the first half Or can continue to grow in the same fashion that we've seen thus far. The other thing from a full year perspective, which is not a polarifi thing, just Keep in mind that the full year number now takes into consideration that $24,000,000 from the Novartis agreement. So if you think through your model, that's a one time number, but that's embedded in that $800,000,000 to $835,000,000 number as well.

Speaker 6

Okay. But importantly, not embedded in the Polarifi number? No. Yes. Thanks for that.

Speaker 6

Very helpful color there. And I think, Mary Anne, you suggested that There was some incremental contribution post the Plavicto approval In that guide or you are assuming that you will have access to that market. Congratulations on The SMN excuse me, SMN I update there, but are you assuming some contribution And use in that part of the market?

Speaker 2

What I'm really comfortable saying, Rich, is that we're very comfortable that Ulrich and the other PSMA agents will holistically be included in consideration for PSMA targeted therapeutics. The SN as you note and as we noted in our remarks, the SN MMI guidelines have already come out with that and we expect NCCN to also update their guidelines Briefly, within a short period. And it's our we believe that the that both those set the guidelines as well as practice We'll consider the PSMA imaging agents holistically when considering patient selection for PSMA Target Therapeutics, but I did not meant to infer that our guide or our members specifically We increased the TAM, the total addressable market for consideration, but I wasn't trying to infer that we specifically included contribution from that And our updated numbers.

Speaker 6

Got it. And if I could just squeeze one more, any timing or updates on some of these Clinical collaboration efforts with Novartis that you highlighted upfront, anything that we can expect in 2022 or updates That would be helpful. Thank you.

Speaker 2

So those are all of those will fall under normally when we refer to clarify that we refer to PyL, because we try to differentiate clinical use versus commercial use. But those and as We mentioned, I'm not sure if the scripted remarks here, but we certainly have been transparent about that. At this point, POLARIFI is Well established for use in all late stage clinical PSMA targeted therapeutic trials that are being conducted in the market. And so that will be a source of Volume, but again, that is not really what's driving our revenue guide. Our revenue drives are being driven by the commercial uptake for Medical use.

Speaker 6

Thank you. Congrats. Thanks.

Speaker 7

And our

Operator

next question coming from the line of Danielle Antalffy with SVB Leerink. Your line is open.

Speaker 7

Hey, good morning, everyone. Thanks so much for taking the question. Shannon, I will echo Rich's sentiments. Congrats on another amazing quarter. I guess one question I have, is as we look ahead to the May 17 Analyst Day, not asking you to really front run, but Mary Anne, if there's any way you could preview what We should expect to be hearing, is it really about what we know is in the existing product portfolio?

Speaker 7

Or are we going to talk about What's next beyond the current polarifi indication? Any color on what we might hear on May 17? And then I have one follow-up.

Speaker 2

Sure. And good morning, Danielle. May 17 is going to be a very exciting day and it's our intent to really take the audience through Our rationale for isotopes or as we call them now radioligand therapies and really kind of help everyone understand how these Products whether it's diagnostically or therapeutically are truly being embraced now in life sciences and how as a company Landia's strategy is to be forefront in that. It's a really exciting time for healthcare. We've seen that now with we have our first approval with Novartis' approval of Pluvicto, that is the first of what will be and that's on therapeutic side.

Speaker 2

We have the approval of Plarify from last year, which I think really We believe the uptake of PolariBi speaks to the how welcome this innovation is in prostate cancer and there's more to come. So that's what we're hoping among other topics, that's what we're hoping the Investor Day will really help shed some light on for our analysts and for the investors who will share the day with us.

Speaker 7

That's great. And I guess just my follow-up was going to be on the TAM. Based on your guidance, you're going to be at somewhere around 35%, 40% penetrated, 40% of the $900,000,000 but obviously less of the $1,100,000,000 So What's next for Polari? I guess stay tuned for May 17.

Speaker 2

I would stay tuned and keep everything really eager to come.

Speaker 7

Okay, got it. And then I just have one DEFINITY question. I'm not sure if you guys have given this color in the past, but any way you can find, I know this is a tough But anyway you could quantify as best you can sort of what you do COVID impact is and has been on that Product and what we should be thinking for steady state growth once we're sort of once COVID more in the rearview mirror here. Thanks so much.

Speaker 4

Good morning. So I'll start and then I'll kick it over to Paul. So from a numbers perspective, the growth rate of 4.2 encompasses that early impact in the quarter. And in fact, it was maybe even slightly less like I said than we expected. My prior guidance was that it would be flat based on what we were seeing, but we saw some robust rebounding in volumes as we went through.

Speaker 4

And so of note, even though I didn't state it specifically, our view of DEFINITY for Full year remains intact in the sense that we would still be expecting what I think I had previously noted as high single digit, low double digit growth. And so what that then means is that as we go through Qs 2, 3 and 4, that we're going to be at robust rates To lift up from where we are here in Q1. So we remain very confident about its current trajectory. Paul?

Speaker 3

Thanks, Bob, and thanks, Danielle. As Bob mentioned, we did see steady improvement over the course of the quarter. If we look at COVID case counts and hospitalizations, we were at all time highs in January's, which impacted our ability to be in hospitals and physicians offices promoting and detailing the product. As we saw cases and hospitalizations reduce over the course of the quarter, we in turn saw increased promotional activity, meaning in person Activity, and we saw greater utilization, in our customer base. And we would expect that to continue, as counts Remain low and hospitalizations remain low.

Speaker 3

Naturally, we continue to monitoring the overall staffing situation, but we believe we have significant momentum coming into the 2nd quarter.

Operator

Thank you. And our next question coming from the line of Zach Weiner with Jefferies. Your line is open.

Speaker 8

Hey, good morning. Thanks for taking the question and congrats on another great quarter. Just on the competitive landscape for Clarifi, There's 2 other products coming to market in the second half. Can you just speak to how we should think about the second half of the year with these products coming to the market?

Speaker 2

So Zach, good morning. This is Marianne. I'll start and then we can turn over to Bob or Paul wherever we think the question goes best. We welcome competition As we've seen with the Sam, this is a large market. It's a growing market.

Speaker 2

There's still awareness to be built out there Around the availability of PSMA PET imaging patients. So for us, it's almost in that sense good news to have others out there helping us with creating that awareness. Having said that, we are absolutely confident that we will remain the leading PSMA PET imaging agent of choice and it's our intent to have that be clear not only to the market, but in the results that we continue to post with that. And I'll turn it over to Paul for additional comments there.

Speaker 3

Thanks, Mary Anne. Yes, I think I would echo what Mary Anne said, right? We've been thrilled to be the 1st commercially available PSMA imaging agent for almost 10 months. We remain focused on execution of POLARIFI and we've always contemplated that we would have competition. We do think that given that PSMA PET imaging is a relatively new modality for U.

Speaker 3

S. Prostate cancer patients having additional voice out in the marketplace to raise awareness is a good thing to enhance the market and to raise awareness. The recent two competitive approvals represent the 3rd and the 4th gallium based PSMA PET imaging agent And we remain confident that is the only F-eighteen approved isotope, for PSMA PET imaging with a significant distribution and scale advantage That better match marketplace dynamics that we're going to be able to continue to lead going forward. So we welcome the continued interest. We're also incredibly excited about expanding therapeutic options and in turn diagnostic opportunities and continue to remain confident that we can remain the PSMA PET

Speaker 8

That's helpful. One more just on the PMS sites. I know you ended last year with 80% of the country covered and I think you're moving away from talking about that number. But is the comment now that The percentage of the country that is covered will that growth will slow, but the more high density population areas, You will continue to add additional cyclotrons to drive increased batch usage. Is that the thought?

Speaker 3

Yes. So I can take that. So we will continue to add PMF coverage to expand our geographic coverage. That said, right, we already have the vast majority of the U. S.

Speaker 3

Covered as I think I highlighted. POLARIFI patients have and continue to be treated And 45 patients in addition to the District of Columbia. And so we have a significant distribution network that already covers there. I think when combined with our market access progress where 90% of covered lives have access to Polarify, We remain focused on continuing to add new customers and we do that on a regular basis, but ensuring that we also increase the breadth And depth of the penetration going forward. So I think it's right to say that we will add capacity, we will add redundancy, And we will continue to focus on adding and supporting new customers and using Polarify.

Speaker 8

Okay. That's really helpful. And if I could sneak one more in just on can you give some comments on Polarifi and the OUS landscape and what that timeline potentially looks like? Know it's through a partnership, but

Speaker 2

So Zach, it is through a partnership. Kurion is our partner in the EU, which is the other major medical Mark here for PSMA Imaging Agents. I can't offer specific timelines because I can't speak for the company. I can say they are Phase 3 With the product and I can say it's confident that their intent is to bring it to market in the EU. There is appreciation In the EU for PSMA based pet imaging agents and in fact as folks may remember from our comments before launch, The guidelines in Europe actually reflected before the guidelines in the U.

Speaker 2

S, the guidelines in Europe reflected the preference for PSMA based PET imaging agents over Other modalities as the preferred modalities to use in the diagnosis and management of prostate cancer patients. So We'll look we support our partners. We'll look forward to that, but I can't offer specific timelines for them.

Speaker 8

Thanks for taking the questions and congrats on the quarter.

Speaker 2

Thank you.

Operator

And our next question coming from the line of Larry Solow with CJS Securities. Your line is open.

Speaker 5

Great. Thanks. And let me echo my congratulations. I guess the first question I have is just a little quick follow-up on PyL, Competitive landscape, I don't know how well you can answer this question, but do you feel like you're taking most of Your market share gains today from Exxumint, the other pet imaging agent or are you also Perhaps taking some share or from more traditional CAT scans, ultrasounds and doesn't seem like the Gallium base are having much I don't know if you've really been on the market, you even know a couple have been approved. But I guess my second part of that question is, As we look out, competition maybe will have to come from the F-eighteen side.

Speaker 5

What is the sort of nearest competition on Floridian-eighteen Thanks, Jason.

Speaker 2

Larry, good morning. It's Mary Anne. Just so it's clear for everyone, when we talk about the TAM and we talk about Those, whether we're talking about scans or patients, that is across all modalities. So that is inclusive of historically what modalities have been used to image prostate cancer patients. When we look at the success that we've had with PolariFi, I think it's fair to say That polarifi has been used instead of all of those modalities.

Speaker 2

Now to what specific extent For each of them, I can't quantify. But if you look at just uptake and the intent of physicians, I think it's fair to say That if you compare to the other modalities that had been previously used to image prostate cancer, it's Clarifi has Taking share of how we wanted to kind of describe it from all of them.

Speaker 8

Okay. I think

Speaker 3

if I were just to expand

Speaker 2

on Yes. Paul wants to add a comment there.

Speaker 3

I think we think of this as Taking share from previous non PSMA modalities, specifically in the recurrent population, right? And so I think we're taking share from all of those modalities as well as Non PSMA PET imaging that you referenced. But I think importantly, the metastatic indication is a new indication, for The marketplace within pet imaging that we received last May, and so this has been about taking share, but it's most importantly about expanding the marketplace. And as you can see, the total addressable market continues to increase. As the PSMA agent of choice, We continue to take share as well as to build the marketplace to stress the advantages of this important modality and Polarify specifically.

Speaker 5

Got it. And how about my second part of that sort of long winded question was, it does seem like F-eighteen is superior, so perhaps the gallium based This was the supply issues, the sort of, at least in the near term, seem to be on the back burner there. But perhaps another F-eighteen for the year and compete better with you guys. Can you just have a brief sort of You know, outlook on when some of those when that competition could potentially enter the market?

Speaker 2

Sure. And your comments are well noted there, Larry. There is another that we are aware of another F-eighteen based product under development. To our knowledge, it's still in its Phase 3 program. After which it completes, it will require submission to the FDA.

Speaker 2

We would not anticipate It would be offered priority review since that was is for the novel entrance into a category, which is what we were offered. So From a timeline perspective, I don't think we anticipated all that we would see that agent anytime in 2022 at least.

Speaker 5

Okay. I have a question for Bob. Just on the guidance And not to split hairs because obviously great outlook and all. But just on the Q2 guidance specifically, if we just compare sequentially, If you sort of strip out the strategic $24,000,000 that you mentioned from Novartis, you kind of did like I think $1.84 you said. So I'll say $1.85 $0.70 just to use round numbers.

Speaker 5

And Your guidance next quarter is like midpoint is what $2.07 So is there any reason Looks like margin going down a little bit. Is there higher cost or anything? Or how should I kind of decide for that?

Speaker 4

No, that's a great question, Larry. It's actually slightly higher costs in the OpEx aspect of things. So one, we're letting Paul have Funds to we mentioned the collaboration that we have that those expenses start to really kind of be in Q2. Our ERP investments that is more ramping here in Q2 as well. So I think the gross margin number that we provided Is sustainable.

Speaker 4

And so as you think as you go forward from modeling, then that You should see that drop through continuing, particularly as we see DEFINITY and Polarifi, both continuing to grow according to our expectations. But We'll have slightly higher levels of investment and that was purposeful and we thought that was important to help Continue to drive the growth during the year, but also to set ourselves up for technology advancements that we think can drive more workflow efficiencies for the company longer term.

Speaker 5

Absolutely. Okay. Yes, it sounds like discretionary investments to drive future growth. It makes 100% sense. Just last question, any update on DEFINITY in terms of the room temperature or the in house manufacturing?

Speaker 5

I know you, I think sold a little bit of both. And I don't expect you to give quarterly updates every quarter, but anything you can mention on those 2?

Speaker 2

So as I offered in my remarks, Larry, we now are shipping from our on campus facilities. So our supply chain for DEFINITY, I'll say original formulation, is now sourced both from our Billerica facility as well as from our long standing contract manufacturer. From an RT perspective, as I've noted somewhat continuously, it's not our intent to break out The 2 formulations and offer information on specifics to the 2. Our offering is out to our customers for choice of formulation. We are continuing to execute that with our customers.

Speaker 2

And as I said, we'll leave it to their choice. I don't anticipate at any point in the future, we will be offering detailed information on the split of use of those products in the marketplace.

Speaker 5

Understood. Fair enough. Okay, great. Thanks. I appreciate all the color.

Speaker 2

You're welcome, Larry. And

Operator

we have a follow-up question from Rich Newitter with Truist. Your line is open.

Speaker 6

Hi. Thanks for taking the follow-up. I just wanted to ask on pricing for Polarify. Is that all coming in as expected or can you comment there at all? And then also just on sorry, just on us both right now, Just on legislation that I believe is sitting in Congress right now, the KIND Act for potentially amending or modifying Buying transitional pass through for radio pharmaceuticals.

Speaker 6

Any updates or views on prospects for that kind of moving through and when? Thanks. So

Speaker 2

I will say pricing is where we expect it to be. As you know, we don't speak to pricing specifically, but I will I am okay with sharing that Where we expect it to be on the FIND Act. I like referring to the FIND Act, which it certainly would be, but it's The actual name is the Findac. It continues to move forward. We continue to add support.

Speaker 2

We work with our accuracy to add support and we continue to see progress there. Anupol, if you want to add any additional comments on specifics with that?

Speaker 3

Yes. No, thanks for the question. This is an active source of involvement For our government affairs organization, as you may be aware, the FIND Act has now been introduced on the floor of both House and the Senate with significant bipartisan support and sponsorship. And so we are hopeful that this will become law In the coming months or year, and then that would have a notable impact on the pass through dynamics to ensure that CMS continues to reimburse for Innovative Radiopharmaceuticals going forward.

Speaker 4

Thanks. Actually, if

Speaker 1

I could just follow-up on that, Paul.

Speaker 6

So let's just say it goes through And transitional pass through is done away with. What are the mechanics of what that does and how that impacts price And what it does for you and the market?

Speaker 3

Sure. No, it's a great question. We are going to be talking more about this on Investor Day, but let me provide Some more information here. 1st and foremost, I think it's important to understand that pass through as a payment dynamic only applies To traditional Medicare payment in the hospital outpatient segment. And so that really is a minority of the patient population That is being treated for prostate cancer.

Speaker 3

When you think about the number of commercial payers, when you think about alternative sites of care, whether they're government facilities or whether they are And when you also note the increasing share that Medicare Advantage is having and we've seen that rise and expect in the coming years to be Almost 50%. So the patient population that actually in their site of care and through their insurers is a minority. It's around a quarter of the population and so I don't want to overstate the importance. But what I do think is important is if the FIND Act is passed, Then at the end of the 36 month or 3 year, if you will, clock, then there is not a payment adjustment. This does not impact coverage in any way.

Speaker 3

This is strictly a Medicare hospital outpatient payment from CMS for traditional Medicare That would impact payments to hospitals. And so I'm not going to speak about the specific financials of a hospital system, but The passage of the FIND Act could positively influence their desire to continue to use novel radiopharmaceuticals even after pass through and in the current construct.

Speaker 6

Okay. Thanks.

Operator

I am showing no further questions in queue. I'll turn the call back to Maryann for any closing remarks.

Speaker 2

Yes. Thank you, everyone, for joining us on today's call. I would like to remind you that we will be webcasting our inaugural Investor Day on May 17, where members of the Lantheus management team, including myself, as well as

Powered by Quartr