Lantheus Holdings, Inc.

Good morning. Welcome to the Lanthews Third Quarter 2023 Financial Results Conference Call. This is your operator for today's call. Please note that all lines have been placed in mute to prevent any background noise. This call is being recorded for replay purposes. A replay of the webcast will be available in the Investors section of the company's website approximately two hours after the completion of the call. and will be archived for at least 30 days. I will now turn the call over to your host for today, Mark Kinarni, Vice President of Investor Relations. Mark?

Thank you. Good morning and welcome to today's call. With me are Marian Haino, our CEO, Paul Blanchfield, our President, and Bob Marshall, our Chief Financial Officer. Marian will begin the call with introductory remarks and then turn the call over to Paul to provide a strategic and operational update. Bob will cover our financial results and provide updated guidance. Marianne will provide closing remarks, and then we will open the call for Q&A. This morning, we issued a press release, which was furnished to the Securities and Exchange Commission under Form 8K, reporting our third quarter 2023 results. The release and today's slide presentation are in the Investors section of our website at lantheus.com. I would like to remind you that any comments made during our call today could include forward-looking statements. Actual results may differ materially from these statements due to a variety of risks and uncertainties. Please note that we assume no obligation to update our commentary or any forward-looking statements except as required by applicable law, even if actual results or future expectations change materially. Please refer to our FCC filings for a detailed discussion of these risks and uncertainties. Discussions during the call will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is also included on the investor section of our website. It is my pleasure to now turn the call over to our CEO, Marianne.

Thank you, Mark, and good morning to everyone. This was another terrific quarter for Lantheus. We reported revenue of $319.9 million, up 33.7% year over year, and progressed our internal R&D and our business development efforts to expand our pipeline. I am proud to report we have impacted the lives of more than 4.7 million patients year to date. We believe our market-leading position in PSMA imaging and our advancing pipeline, combined with our unique capabilities, will continue to support our position as the leading radiopharmaceutical-focused company. Polarify is the clear market leader in PSMA PET imaging. Growth during the quarter was driven by brand preference for Polarify due to its clinical and commercial value proposition. We believe Polarify offers the best combination with our proprietary PSMA-targeted ligand and the F18 isotope. Turning to the total market opportunity, we estimate the current addressable market for the PSMA PET imaging agents to be 1.6 billion and believe this market potential will grow to more than 3 billion by 2028. As such, we remain encouraged by the current and future growth potential of Polarify. PNT2002, our investigational PSMA-targeted radiotherapeutic asset, represents another significant opportunity for growth within our prostate cancer franchise. PNT2002 is designed to treat patients with metastatic castrate-resistant prostate cancer, or MCRPC, who have progressed following treatment with an androgen receptor pathway inhibitor, or ARPI. We are excited about the progress we have made with our partner, Point Biopharma, and look forward to the top-line data from the phase three splash trial in fourth quarter 2023. As we consider the radiopharmaceutical landscape, We view the proposed acquisition of POINT by Eli Lilly as further validation of the opportunity we see for PNT2002 and PNT2003 and the increasing role of radiopharmaceuticals in life sciences. In addition to prostate cancer, we have a number of exciting assets, including PNT2003, our late-stage radiotherapeutic product candidate for neuroendocrine tumors. Another asset is MK6240. our investigational tau imaging agent, intended to assist the diagnosis and staging of Alzheimer's disease patients, which was recently granted fast-track designation by the FDA. And finally, our fibroblast activation protein, or FAP, targeted pet diagnostic imaging agent, is being clinically investigated in multiple tumor types. To supplement our ongoing R&D efforts, we will continue to leverage our significant radiopharmaceutical expertise and resources to target business development opportunities. With that, I'll now turn the call over to Paul.

Thank you, Mary Ann, and good morning, everyone. During the third quarter, Polarify delivered sales of 215.4 million, representing almost 50% year-over-year growth. We attribute this strong performance to the prostate cancer community's recognition of Polarify's clinical and commercial value. Year-over-year growth was driven by existing accounts, new accounts, and additional PMF activations. Sequentially, growth was again driven by our existing accounts, offset by seasonal trends consistent with those reported across the healthcare sector, as well as greater holiday impact and one less selling day. This resulted in relatively consistent weekly dose demand in June, July, and August, followed by more robust growth in September, which carried over to October. We expect Polarify, which has been used in more than 250,000 scans since launch, to maintain its position as the number one ordered PSMA PET imaging agent because of three main clinical attributes. First, Polarify delivers reliable diagnostic performance with accurate detection rates without a high false positive rate. Second, our robust pivotal clinical data shows change in intended management in patients with biochemically recurrent prostate cancer. Third, Polarify demonstrated consistently high reader agreement and reliability in our pivotal trial. We also believe the adoption and utilization of Polarify are further supported by our commercial value proposition, including Polarify is the number one ordered PSMA PET imaging agent in the U.S. and is a proven diagnostic backed by real-world experience, including in over 250,000 scans across 47 states. Widespread availability, with Polarify being the only PSMA PET imaging agent that is available through a diverse, multi-partner F18 network, which ensures convenient and reliable supply. and broad market access, with more than 90% of covered lives having access to PSMA PET with Polarify. For these reasons, we believe Polarify will continue to be the clear market leader in PSMA PET imaging. We are encouraged by the recent developments in the reimbursement landscape. In July, the Centers for Medicare and Medicaid Services, or CMS, put forth several proposals for comment regarding possible changes, including separate payment for diagnostic radiopharmaceuticals. Lantheus, along with numerous industry organizations, submitted comments, and we expect CMS to publish final 2024 regulations shortly. Simultaneously, we continue to collaborate with industry and advocacy organizations to pass the FIND Act to ensure all prostate cancer patients continue to have access to innovative radiopharmaceuticals, including Polarify. Regardless of the outcome of the CMS regulations and status of the FIND Act, we are confident in Polarify's future growth prospects. We see a significant growth opportunity for PSMA PET imaging. While we believe the current addressable market remains about 350,000 scans, or $1.6 billion, we have updated our estimates for the total addressable market to be approximately 600,000 scans. or more than $3 billion by 2028. To realize this potential, we anticipate radioligand therapeutics will move into earlier lines of therapy, including both pre-chemo MCRPC and hormone sensitive prostate cancer, which would increase the need for PSMA PET imaging for both patient selection and monitoring. Additionally, We expect to see increased adoption of PSMA PET imaging in the intermediate favorable patient population as physicians realize its clinical benefits and additional data is generated. Finally, we expect the incidence and prevalence of prostate cancer to grow approximately 2% to 3% per year. Due to these factors, we believe there is significant opportunity for Polarify to grow in both the near and long term. Switching to our micro bubble business, DFINITY maintained its strong momentum with third quarter sales of 67.3 million, up almost 11% year over year. We expect increasing procedure volumes and our promotional efforts to enable sustainable growth. We continue to work closely with our partner, Point Biopharma, to progress PNT2002 clinical and regulatory, manufacturing, and commercial readiness work streams, including establishing an expanded access program, otherwise known as a compassionate use program. We look forward to top-line splash study data in the fourth quarter of 2023. We have also seen positive developments for MK6240, our clinical stage PET tau imaging agent intended to assist the diagnosis of Alzheimer's disease. During the third quarter, we signed agreements with four prominent pharmaceutical companies to provide MK6240 as a biomarker. With these additional agreements, MK6240 is now being used in more than 90 active clinical trials. We believe that tau imaging has the potential to play an important role in patient staging, selection, and monitoring for future treatments and could be a surrogate endpoint for treatment efficacy.

I will now turn the call over to Bob. Thank you, Paul, and good morning. I will provide highlights of the third quarter financials, focusing on adjusted results unless otherwise noted. Revenue for the third quarter was $319.9 million, an increase of $80.7 million, or 33.7% over the prior year period. Earnings per share for the third quarter were $1.47, an increase of $0.48, or 48% over the prior year. Turning now to the details, beginning with radiopharmaceutical oncology. The category contributed revenue of $216.3 million, up 49.5% year over year, with Polarify at $215.4 million, with consistent sequential quarterly growth when adjusting for seasonal and holiday impacts, and one fewer billing day in the quarter, as was noted by Paul. Precision diagnostics recorded revenue of $96.3 million, up 8.2% from the prior year quarter, Sales of DFINITY were $67.3 million, 10.9% higher as compared to the prior year quarter. Technolite revenue was $23.3 million, up 5.3% from the prior year due mainly to opportunistic sales. Lastly, strategic partnerships and other revenue was $7.3 million, driven primarily by milestone and dose revenue from MK6240 within Pharma Solutions. As a reminder, we sold our rights to the Relastore licensed intangible assets associated with net sales royalties mid-year and don't expect to be recording any further revenue, with the exception of any potential future milestone payments. Gross profit margin for the third quarter was 67.2%, an increase of 100 basis points over the third quarter of 2022 on a similar basis. As has been the case in recent quarters, the increase is due mainly to favorable volume and product mix led by a polarifying affinity, partially offset by the margin headwind of 93 basis points attributable to the Relastore royalty asset sale. Operating expenses were 10 basis points unfavorable from the prior year at 23.5% of net revenue and 19.2 million higher on an absolute dollar basis, which is in line with previously guided expense levels. Commercial investment continues to focus on driving Polarify branding awareness and adoption alongside ramping efforts to prepare for the launch of P&T 2002, inclusive of market research and overall commercialization readiness. G&A expense increases year-over-year relate to our ERP implementation, which remains on track, as well as investments in cyber compliance, enterprise risk management analysis, and employee engagement. Adjusted operating profit for the quarter was $139.5 million, an increase of 36.5% over the same period prior year. Total adjustments in the quarter totaled $24.6 million before taxes. Of this amount, $14 and $11.7 million of expense are associated with non-cash stock and incentive plans and acquired intangible amortization, respectively. Also in the quarter, we recorded a gain of $51.8 million on the sale of the Relastore royalty asset within other income and expenses. The remainder is related to acquisition and other non-recurring expenses. Our effective tax rate was 23.8% in the quarter. The resulting reported net income for the third quarter was $132.0 million and net income of $103.1 million on an adjusted basis, an increase of 45.9% over the prior year quarter. GAAP fully diluted earnings per share were $1.88 and earnings of $1.47 on an adjusted basis, an increase of 48% over the prior year quarter. Now turning to cash flow, third quarter operating cash flow was $116.7 million as compared to $93.6 million in Q3 2022. Capital expenditures totaled $14.6 million in line with expectations. Free cash flow, which we define as operating cash flow less capital expenditures, was $102.1 million, an increase of $14.6 million over the prior year period. During the quarter, the company received net proceeds from the Relastore royalty asset sale in the amount of $97.8 million, which has been recorded in net cash flows from investing activities. Cash and cash equivalents, net of restricted cash, now stand at $614.1 million. We continue to have access to our $350 million undrawn bank revolver and are very comfortable with our strong liquidity position. Turning now to our updated guidance for the full year, we are tightening our full-year revenue estimate to be in a range of $1.255 to $1.27 billion from the prior range of $1.245 to $1.27 billion. In doing so, we are lifting the lower end of our prior Polarify revenue range to $840 to $860 million from $835 to $860 million. As was the case last year, excuse me, as was the case last quarter, we expect Affinity to continue its momentum and also expect MK6240 to contribute $15 to $20 million of revenue rather than the prior guidance of $15 million. Turning now to earnings, adjusted EPS will be in a range of $5.80 to $5.85 versus the prior range of $5.60 to $5.70. With that, let me turn the call back over to Marianne.

Thank you, Bob. Our third quarter results were driven by the commercial growth of our market-leading products. We believe our differentiated capabilities, commitment to innovation and excellence, and our significant capital resources position Lantius to remain the leading radiopharmaceutical-focused company as we work to find, fight, and follow disease to deliver better patient outcomes. With that, Bob, Paul, and I are now ready to take your questions. Operator, please go ahead.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And just a reminder, we need to limit the questions to one per person. After asking the question, feel free to re-enter the queue, and please stand by while we compile the Q&A roster. For your next question, for the first question, it comes from the line of Rowena Ruiz from Learing. Rowena, your line is open. Please ask your question.

Great. Morning, everyone. So among the assumptions going into your new future total addressable market assumption of over $3 billion, I was curious, what are the largest drivers in terms of how many scans would be added to build up to the 600K scans I think you mentioned on the call? And just how are you considering new PSMA PET competition in there along with your strategies for Polarify growth going forward?

Sure. Happy to take it, Rowana. Good morning. Thank you for the question. So, yes, we raised – we have a current addressable market, as you noted, of about $350,000, and that's the estimate of this year, which equates to about $1.6 billion. We've heard your and investors' feedback to think about what the future potential could be, and so we've highlighted today the total addressable market, which we would estimate by 2028 to be about 600,000 scams. On the investor presentation this morning, you'll see the largest driver of growth there is the expansion of radioligand therapy into earlier lines of treatment, effectively from the post-chemo setting or third line into second line and first line, otherwise known as pre-chemo, as well as the metastatic hormone-sensitive prostate cancer group. And therefore, that would increase from potential 30,000 scans for patient selection and monitoring to approximately 210,000 scans. It's a relatively consistent number of scans per patient, but more patients would be eligible for radioligand therapy, and so that's naturally the largest driver of the expectation by 2028 based on our belief of radioligand therapeutic approvals in the coming years, including potentially PNT2002. The second biggest driver would be in the recurrent setting, and this is really driven by by overall incidence and prevalence as men continue to live longer, as well as a slight uptick in the number of scans per patient over their lifetime assumptions. And then finally, the initial staging for suspected metastases, which is some incidence increases over time, which we expect to be about 2% to 3% per year. But there, there's also an assumption that we see greater penetration into the intermediate favorable population. And so that's really where we're looking out to 2028 to say this has the potential to have a $3 billion market in that timeframe, which overall makes us incredibly excited about the future of PSMA PET imaging and Polarify in particular. And we believe with our continued commercial and clinical value proposition that we highlighted today and that we continue to promote in the marketplace, that we can and will be the market leader for many years to come.

And, Rowana, many of the comments that Paul just shared are outlined on slide nine of the deck that we used with this call, which will be also on our website if you want to refer back for more of those data points.

Thank you. And for your next question, it comes from the line of Richard Uiter from Truist Securities. Richard, your line is open. Please ask your question.

Hi. Thanks for taking the questions. Congrats on a solid quarter. And thanks for the increased detail on the addressable TAM. So I guess you highlighted a lot of expanders there to go from 1.6 to 3 billion over time, but not all of these obviously are going to be accessible, Paul, as you just pointed out overnight. So I guess just, you know, the question I have is, as we look at 24, you know, is there enough runway with the 1.6 billion TAMs and the initial TAM expanders at the front end of that 23 to 28 timeframe to grow Polarify next year. I think the consensus is looking for high single-digit growth, about 940 million. I'm just looking to see if, you know, is that a reasonable starting point, and can we expect, you know, growth next year in Polarify? Thanks.

So, Rich, first of all, I appreciate the question. Today, we're naturally talking about the third quarter, and in due course, we will be talking about 2024. I think we're incredibly pleased with Polarify's growth launch to date. We grew year over year, as I mentioned, almost 50% of what we're able to do. The current addressable market is about $1.6 billion, but overall, we still see continued growth potential in both the near and the long term for us to be able to to see continued growth. And indeed, we do expect to see continued growth of Polarified next year and for multiple years to come, but we haven't put an exact number on that. We will naturally provide guidance as we do every year when we report our fourth quarter earnings in February of next year.

And the one point that I would add, Rich, is, and you heard in answering Arana's question, You heard Paul say, we still have a very conservative estimate as to number of scans per patient. A lot of what we've outlined for growth is really just based on new patient populations coming into the pool for consideration. But certainly, as physicians continue to appreciate the clinical utility of using PSMA PET imaging, especially with Polarify, we would expect also to see the number of scans per patient grow.

Thank you. Please stand by for your next question.

And for your next question, it comes from the line of Matt Taylor from Jefferies. Matt, your line is open. Please ask your question.

Hi, thanks for taking the question. Good morning. So this could be for any of you, I guess, but I did want to touch on a point. You mentioned the Lilly deal is validation. And I saw in the presentation you were talking about doing some investments in market research and launch readiness. So I guess maybe you could just illustrate for us what you're doing to get ready for it and any reads that you have from seeing the Povicto data a couple weeks ago and what that could mean for pointing your opportunity there.

So, Rich, I'm going to start, and then I'm going to turn over to Paul, because what I'd like to, I'll say, declare right now is that we will follow the same model for P&T 2002 that we did with Polarify, and that is the testament to how ready we were for that market, how we entered that market, how we reacted or related with all the stakeholders in the market. We really see that as having been very successful in creating a wonderful market model that can be replicated and with PNT2002. And in some ways it will be easier because at this point now we're already familiar with largely the entire audience, certainly with the channel. And so we will leverage all those relationships as we prepare for that launch. Before I turn over to Paul, he can make some more comments on our commercial readiness, I will speak to the PSMA for data in saying that we're glad to see data on these types of products being reported. Now, certainly there will be more data analysis by Novartis, and we are eagerly awaiting the our own readout of the splash data, which will be fourth quarter 2023. But we think both these modalities show great promise for the treatment.

And then I'll have a couple of follow-ups.

Can everyone hear me? We believe that there's strong therapeutic promise. For these products, we'll wait to see the exact data and to also, of course, analyze our own splash data in fourth quarter 2023. And with that, I'll turn it over to Paul to finish out comments about our commercial readiness for PNT2002.

Thanks, Marianne, and thanks for the question, Matt. So as highlighted today, we continue to work with POINT across clinical and regulatory, across manufacturing, as well as commercial readiness. And so we are working closely, indeed, daily with our colleagues from POINT to ensure that we are ready for a best-in-class launch of P&P 2002. That will naturally include a number of traditional work. It's understanding the market, it's patient mapping, it is effectively market research to understand this. I would also note that while we're focused on the commercial side of things, bringing a radiopharmaceutical to market is also reliant on a fully integrated supply chain. And so understanding and working with our customers to be able to get them ready to be able to treat with potentially another lutetium product is also in the mix. And so we've got a number of activities there that have kicked off in 2023, and we would expect to continue into 2024 and beyond.

All right, thank you.

And for your next question, it comes from the line of Anthony Piccioni from Mizuho Group. Anthony, your line is open. Please ask your question.

Hi, thank you for the question. Congratulations on the quarter. Maybe just one on P&T02, the opportunity there you saw is polarified, but just wondering if you could provide an outlook on P&T02. versus the expectations and the market sizing that Novartis has out there. Thanks.

So, again, I'm going to turn it over to Paul to offer commentary, but I would point you to slide number nine in the deck that we just released, because that does speak to, as one of the categories, those patients who are being candidates for radioligand therapy.

Thanks for the question, Anthony. So as we've highlighted recently, and Bob and I actually discussed this at an investor conference in September, we had previously said that the market potential for P&T 2002 in the U.S. is approximately $3.5 billion. That was a number that we put out effectively last year when we announced the point collaboration. What we've since said is while we have not formally updated that number, we have highlighted that we think the potential is overall for radioligand therapy and MCRPC patients could be substantially bigger. What we've seen with Plobicto year-to-date, public would say they would be approximately doing $1 billion in sales in their first full year on the market, even with supply challenges where they were not able to add new patients. Indeed, in their, I believe their recent earnings call, they noted that they are now actively adding new patients. And so for a product in the post-chemo setting to do potentially a billion dollars in its first full year on the market without full supply demonstrates that we think there is significant opportunity in this, not to mention it's only an effectively third line or post-chemo. And so when we expand PSMA therapeutics to pre- as well as post-chemo, we think this is a substantial opportunity that ourselves and our partners point to. are incredibly excited about, and we look forward to sharing top-line data for the SPLASH trial in the fourth quarter of 2023.

That's helpful. And one quick follow-up would be just synergies. If we assume Polarify and PNTO2 is under the same umbrella, just maybe a little bit on how go-to-market would play out. It looks to us that PNTO2, if approved, would be basically synergistic to the existing Polarify Salesforce. And would you contemplate maybe bundling those two solutions? Thanks again.

So thanks for the question, Anthony. I think there's naturally benefits of having a franchise that includes a PSMA therapeutic as well as a PSMA diagnostic, recognizing that in order to be eligible for a PSMA therapeutic, you do need to be scanned with a PSMA diagnostic. And so I think we do have, certainly I would call this synergies or advantages because of that robust market position. And indeed, we believe that was one of the reasons why it was a natural fit for Point and Lantheus to work together Last fall when we announced our collaboration agreement, and so there are certainly advantages to having both if you will under One franchise to be able to have conversations with customers that said we also recognize that there are distinct needs of a therapeutic versus a diagnostic and therefore we're going to continue to invest to be able to support a therapeutic and ensure that we maximize the potential and for PNT2002, as well as Polarify, recognizing there are all some comparable call points, specifically for urology, as well as potentially medical oncology. But we're going to ensure that we invest adequately to support the launch of PNT2002 and the significant market potential that it brings.

Thank you, and please stand by for your next question. Your next question comes from the line of Andy Shea for William Blair. Andy, your line is open. Please ask your question.

So, great thanks for taking my question and congratulations on continued execution. I want to ask about data coming out of as though and the regulatory dynamics. It seems like Novartis has to wait until 2024 to make a submission decision due to the apparent detriment on overall survival with a hazard ratio of 1.16. And when you look at the internal pipeline, does that open a door for PMT-2002 to potentially leapfrog Novartis as the first filer in the pre-chemo setting?

So it's impossible at this point to estimate what the regulatory filing timelines will be for both products. As we've noted, I think very repeatedly, we are eagerly awaiting the splash data readout in fourth quarter 2023. And that will really form all of our strategy. What I will say is I think that there is a, you know, a willing and open attitude at the FDA to bring these modalities to market. And I think that is something that both we and Novartis are also focused on making these treatments available and accessible To patients and we're very confident where and as I say again We're looking forward to seeing the splash data once we have it We'll be able to compare it more fully to the PSMA for Data and to have that inform our regulatory strategy and what we would see as the regulatory timeline for both these products One moment for the next question and for the next question It comes from the line of Justin Walsh from Jones trading Justin your line is open.

Please ask your question Hi, thanks for taking the question It might be a little early to get a solid answer on this, but I'm wondering if you can help contextualize how you view the size of the potential mid- to long-term market for an asset like NK6240.

That is really a great question and one that is top of mind for us. We look at what's happening in Alzheimer's disease and the progress of the therapeutic candidates there And then also the scientific communities, I would say, analysis and consideration of amyloid versus tau imaging and what it infers about patients and where they are in their staging and where they are in their clinical timeline. And for many reasons of what are really emerging data, we see great potential for tau imaging agents in their role in helping to not only diagnose but more importantly stage patients Alzheimer's patients. And while I'm not willing to give a dollar figure around that market now, I will say that we are very, very impressed with what the size of that market can be. And again, we are not the only company with a TAO imaging agent under development or approved, but we think that MK6240 offers some advantages in performance that will be important to the market. Just as a note, there is, on an annual basis, there are 6.5 million patients who are diagnosed, and it is wonderfully still a very highly prevalent population as well. So it's a very large market, and we are really thrilled about having the opportunity to serve it.

One moment for your next question. Got Barry in the queue here. And for the next question, it comes from the line of Larry Solo from CJS Securities. Larry, your line is open. Please ask your question.

Great, thanks. Good morning, everybody. Just a couple of follow-ups, most of my questions have been answered. But on Polarify, Paul, you mentioned year-over-year growth coming from new and existing accounts sequentially. Obviously, there's a little slower growth too, but just in terms of you said mostly at existing accounts. Javier, can you just give us an update on sort of where you stand and your reach to, there's still a lot of potentially new accounts that you haven't reached yet. Can you kind of give us some thoughts around that? And also, you mentioned PMF facility expansion. Can you give us just an update on the sort of scorecard there?

Yeah, sure. Thanks, Larry. Appreciate the question. So, we made a distinction year over year. If we compare the third quarter of 23 to the third quarter of 22, growth was driven by existing accounts as well as new accounts and additional PMF activations. If we speak sequentially, the vast majority of growth was driven by existing accounts. in that we're over 50 PMFs. We're about 54 PMFs currently activated. We do continue to activate new PMFs specifically in geographic areas where additional dose-time flexibility is important. But the driver has been and continues to be, if we look kind of quarter over quarter and certainly into the future, will be the activation of existing accounts. where we already have imaging centers, whether they be freestanding or hospital or government facilities, that have access to and are regularly offering Polarify, and where it is certainly being requested by name. The real work that we've been on for the last year is to continue to activate the referring community. That would be urology, that would be medical oncology, radiation oncology, for them to understand who the target patient is, the frequency in which those patients could be scanned, And we still see significant room for growth in that space. The vast majority of accounts have adopted some sort of PSMA PET imaging, a market that's annualizing approximately $1.3 billion, meaning that there's not too many accounts out there that are not already adopting. There may be some small mobile facilities where either due to geographics or just timing of offering, we have to be able to add. but I would call that effectively de minimis going forward. Really the growth in this market is gonna continue to be the activation of referring physicians, ensuring that they understand the breadth of our label and the significant potential that PSMA PET imaging can make to clinical practice, as evident by the change in intended management data, where this is not just a diagnostic, this can truly inform patient management, and we think that clinical benefit plus our broader commercial benefits will continue to support our growth going forward.

Thank you. Answering the next question, it comes from the line of Yuan Z from B. O'Reilly. Yuan, your line is open. Please ask your question.

Good morning. Thank you for taking our questions and congrats on the quarter. Can you please clarify the total cost of a PSMA PET scan on average? I mean the cost of the agent and the procedure in either hospital setting or outpatient setting.

Thank you. So, Yuan, first of all, thank you for the question.

I may ask a follow-up question to you, if you will. The total cost of the procedure is certainly going to vary. So, if you think about the cost of procedure to either a hospital or a freestanding imaging center, there's naturally a cost of the tracer, which would effectively be polarified for the vast majority of PSMA PET scans, and then there are certainly three other commercial agents and two other academic agents available. Commercially, the agents are priced relatively close together. And so when we look at what that is, that's a fairly consistent cost across the marketplace. Now, to estimate the cost of the procedure, there's a fixed cost that's going to be associated with the PET CT scanner, which is usually an investment in the millions of dollars, but then will last many years. And then there's naturally the staff associated and otherwise. I can't estimate what that is. That is a difference for each imaging center and hospital. But overall, PET-CT has been adopted in this marketplace for decades. It continues to grow. And I think we've seen the benefits of Polarify cause a number of institutions to even think about increasing the number of PET-CT scanners that they have to be able to better support the patients they serve, and the referring physicians that come to them. So I don't know if that helps answer the question.

I would just add one, that the whole market that was built by FDG is really what built the PET scanning market, especially in oncology, in the United States market. So it's well built out, and I think it's well, the financial aspects of it are well understood, but they are also then different by each product. Because as Paul noted, while the medical art associated with with offering a PET scan may be similar across different products, it would be the cost of the tracer that would be different.

Thank you. And for the next question, it comes from the line of David Turkley from J&P Securities. David, your line is open. Please ask your question.

Great. Good morning. Maybe just a real quick one for Bob. Thanks for pointing out some of the impacts in the quarter. But if we looked at the seasonal trends, the holiday, and then the one less selling day, Is there any way you could put, like, an approximate dollar amount on what you think that costs you in the quarter?

The way I'll answer that, David, is maybe by sort of normalizing or, you know, adjusting to the sequential growth rate. So if you make the adjustments, and we do see this, and we pointed out, you know, coming out of the last quarter, that we would see increasing sort of impacts from holidays, particularly. going to July 4, in this case, and Labor Day, and then we will see it again when we get to Thanksgiving and then the week between Christmas and New Year's. But if we look at the impact of the things that we highlighted, we would have expected that the adjusted growth rate sequentially to be something in the mid-single digits, which is why we kind of used the language around a consistent quarterly sequential growth rate, because if you look at the growth rate from Q1 to Q2 and now Q2 to Q3, and then the implied guidance, if you will, in Q4, they're all very similar kinds of growth rates.

David, maybe I'll just add. I think when we look at the dynamics of the quarter, and as I highlighted on the prepared remarks, June, July, and August had relatively consistent volumes on a weekly basis, taking out the holiday weeks, if you will. But where we saw growth continue at more historical levels was the August to September and the September to October. And we believe that's consistent with what we see across the industry. Indeed, DFINITY, which we've been at for 22 plus years, our third quarter is always our weakest quarter and is even down sequentially. and where you look at other procedural-based reporting organizations, July and August are relatively slow. Now, in the past couple years, we may not have been able to see that, and our financials may not have depicted that as much because the growth trajectory of Polarify at 100% plus growth, activating new PMS, adding new accounts, that doesn't necessarily stick out. But if you look at last year as an example, our sequential growth, Q2 to Q3 was also the lowest sequential growth of the year.

And so that's consistent with what Bob just highlighted.

Thank you. And we have a follow-up question from Rwanda Ruiz from Lear Inc.

Please go ahead.

Hi. Yeah, just a quick one for me. I'm not sure if I heard it on the call, but have you mentioned the current – market share for Polarify in the quarter relative to last quarter? I think last quarter was around 70% penetrated.

Thanks, Rana. We had not mentioned it. We had not gotten the question. Overall, I think Polarify remains the clear market leader and number one PSMA PET imaging agent with over 250,000 scans since launch. We believe our share was relatively consistent in the quarter at approximately 70%. I do use the term approximate recognizer that only two of the four commercial players actually report PSMA pet revenues. But overall, we know added competition in the quarter. We believe that impact was relatively minimal and so are comfortable that our continued commercial and clinical value proposition as well as the significant growth potential as highlighted by the $3 billion plus potential by 2028, will continue to ensure that Polarify continues to grow and also remains the clear market leader for many years to come.

Is there a follow-up question from Rich?

Oh, hi. Can you hear me?

We can now.

Oh, sorry. So thank you for taking the follow-up here. Thanks for those seasonality comments on Polarify. It's helpful. I'm just curious, Bob, I think you had mentioned that you still have some selling day issues or holidays between 3Q and 4Q, but your updated Polarify guidance actually assumes you show a 6% or close to it at the midpoint quarter over quarter growth rate. So I'm just curious, is that just 4Q pickup, which more than offsets maybe the holiday impact, which it didn't have because of a weak July-August or a weaker, softer July-August than 3Q? What drives the reacceleration there?

So, and I'll, you know, Paul, you can jump in on this as well. But, you know, one, we've been really pleased with the recent trends that we've seen from a dose-volume perspective. which I think is fairly consistent when you look across broader, you know, broader healthcare once you get into that post-summer seasonality that you do see a pickup once again as patients return to the docs and the docs return also to back to work after a summer. So, you know, that range does not include, you know, we're not adjusting, if you will, for those holidays. And you can see, you know, I think we provided a visibility to what those holiday periods look like. Again, what we've seen more recently is informing our guidance range. And of course, from a selling day perspective, Q4 and Q3 are similar. So that would only be the holiday impact.

I don't have a lot more to add. I think we've seen robust growth.

We saw it coming out of the summer and the post-holiday period. As I highlighted, we've seen that continue into October. As people are back to the doctor's offices, doctors are finished and techs and others have finished, you know, the traditional summer holiday period. And so our guidance takes that into account as well as the November and Christmas week impact that we've seen and are well understood in the industry.

And I will just add, and I'll continue to remind people, we are still very much wonderfully in a launch here, and we are getting to know the market. As you heard Bob and Paul both refer to, we now appreciate that similar to Dysinity and similar to what a lot of other life sciences companies see, third quarter has some obstacle vacationality in it that does impact total number of procedures that then rebound in Q4. And just to be clear on the math with what Bob was saying is, versus Q2, Q3 had one full less selling day. But we see the number of available selling days in Q3 equal to that of Q4. So there will be no impact based on number of selling days for Q4.

All right. So, presenters, ladies and gentlemen, there are no further questions at this time. And thank you for participating in today's conference. This concludes the program.

Thank you, everyone.

And have a wonderful day.