Lantheus Holdings, Inc.

Good morning. Welcome to the Lancia's third quarter 2024 conference call. All lines have been placed on mute. This call is being recorded, and a replay will be available in the investor 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'll now turn the call over to Mark Narni, Vice President of Investillations. Mark?

Thank you. Good morning. With me today are 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. We will begin with prepared remarks and then open the call for Q&A. 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. 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. 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.

Thank you, Mark, and good morning, everyone. Lantheus is the leading radiopharmaceutical-focused company with market-leading commercial products and a growing radiopharmaceutical pipeline targeting areas of significant unmet need. 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. Polarify, our PSMA PET imaging agent, delivered solid performance and remains on track to reach blockbuster status in 2024. And DFINITY, our ultrasound enhancing agent, grew double digits year over year. The continued success of these flagship diagnostic agents enables us to invest both organically and inorganically in our pipeline to extend our radiopharmaceutical leadership and create long-term value for shareholders. Before we move on to review the quarter, I'd like to commend CMS for its landmark decision to pay separately for specialized diagnostic radiopharmaceuticals beginning January 1, 2025. Under the hospital's outpatient prospective payment system, or OPPS rule, this is a significant win for patient access and will ensure specialized diagnostic radiopharmaceuticals, including Polarify, are accessible for Medicare fee-for-service patients going forward, while also supporting long-term innovation in the field, including potentially MK6240 and NAV4694, our late-stage diagnostic product candidates for Alzheimer's disease. 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. 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 in sales. 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 secure strategic partnerships. Sequentially, the overwhelming majority of our existing accounts grew along with the PSMA pet market. 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. 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. 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. 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. The rule provides separate payment for diagnostic radiopharmaceuticals with per-day costs greater than $630 following the expiry of transitional pass-through payment status. This represents significant progress for the field of diagnostic radiopharmaceuticals and, most importantly, sustained patient access. 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. Polarify's calendar year 2025 payment rate is found in addendum B and is the same as its current payment rate. Note that this is in addition to the PET-CT procedural payment. We will be working with our customers to ensure they understand the final rule and recognize the value that Polarify does and and will continue to offer to the prostate cancer community. 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. DFINITY's long-term success remains driven by its proven clinical and commercial value, longstanding track record of clinical application, and our ongoing operational excellence. We are also pleased by the FDA's approval of Thercato, also known by its generic name, Flupiridaz, which we outlicensed to GE Healthcare in 2017. Flurcado is an F18 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. 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. 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. MK6240 is a tau PET tracer for Alzheimer's disease currently utilized in 119 ongoing academic and industry-sponsored clinical trials. 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. Tau pathology is closely linked to symptom severity, rate of decline, and development of declines in visio-spatial and language function. NAV4694 has low nonspecific white matter binding and high sensitivity, which suggests it could be useful for early detection of beta amyloid accumulation. We believe earlier detection may aid in the identification of those Alzheimer's patients most likely to realize a therapeutic benefit. Like MK6240, NAV4694 is currently being used in both academic and industry-sponsored studies. 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. 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. We expect to submit NDAs for MK6240 in 2025 and NAV4694 in 2026 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. Now, I'll turn it back to Brian to discuss the rest of our pipeline.

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. Paul covered our neurology program, so I'll discuss our oncology product candidates. Within our prostate cancer portfolio, PNT2002 is our investigational PSMA-targeted radiotherapeutic for the treatment of patients with metastatic castrate-resistant prostate cancer. 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. 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. 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 foreign interaction on our path forward. As a reminder, this flash study met its primary endpoint of RPFS, which was a meaningful and statistically significant improvement for the PNT-2002 arm versus alternate RP or hormone therapy. The OS results and hazard ratio in the ITT population remain confounded by the overwhelming number of patients who crossed over to receive PNT2002. 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. He discussed POCOC analyses and confidence intervals that were adjusted for the crossover population, noting that the meaningful benefit from PMT-2002 compared to the control arm. 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. We continue to work with our partners on our other clinical radiopharmaceutical programs. These include LNTH-2401 and 2402, our RM2 novel theranostic pair targeting gastrin-releasing peptide receptor, or GRPR, for prostate, breast, and other cancers, and LMTH2403, our LLRC15 targeted radiotherapeutic for the treatment of osteosarcoma and other solid tumors. I'm particularly excited about these new oncology radiotherapeutic 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. 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. Turning to the details, consolidated net revenue for the third quarter was $378.7 million. an increase of 18.4%. Radiopharmaceutical oncology contributed $259.8 million of sales, attributable 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. Precision diagnostic revenue of $103.7 million was 7.7% higher. Highlights include sales at DFINITY at $77 million, 14.3% higher, along with Technolite revenue of $20.5 million, down 12% due to opportunistic sales in the prior year quarter, not repeated in this year's third quarter, but rather in the second. Lastly, strategic partnerships and other revenue was $15.3 million, up 108.3%, with the Relastore royalty stream completely annualized out of the result. Investigational usage of MK-6240 and now $46.94 contributed $10 million and $2.3 million, respectively. And lastly, we recognized a milestone associated with an outlicensed asset from Progenix. Gross profit margin for the third quarter was 68.2%, an increase of 109 basis points. Favorable product mix on year-over-year strength of Polarify and Divinity was offset in part by higher contracted material freight and overhead costs. 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. Sales and marketing efforts concentrated on polarized brand strategy, market research, and patient advocacy. ERP cost of ownership and optimization projects were the primary investment drivers for G&A. Operating profit for the quarter was $165.1 million, an increase of 18.3%. 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. Total adjustments in the quarter were 6 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. 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. Our effective tax rate was 27.1%. The resulting gap reported net income for the third quarter was $131 million and $124.1 million on an adjusted basis, an increase of 20.4%. The weighted average fully diluted share count outstanding was 73.1 million shares, slightly lower than previously guided. Gapfully diluted earnings per share for the third quarter were $1.79 and $1.70 on an adjusted basis, an increase of 15.6%. Now turning to cash flows, third quarter operating cash flow totaled $175.1 million, $58.3 million over prior year. Capital expenditures totaled $15.8 million, essentially flat with the prior year. Free cash flow, which we define as operating cash flow less capital expenditures, was $159.3 million, an increase of $57.1 million over the prior year. During the quarter, the company invested $47 million to acquire RM2 from Light and Water Regulators, as well as to in-license preclinical assets TRUP2 and LRCC15 from Radio Farm Theranostics, and we made the tech transfer milestone payment related to the NAV4694 asset. and currently we invested $5 million in common shares of Radio Farm. Taken together, cash and cash equivalents, net restricted cash now stands at $866.4 million. We also have access to our $350 million undrawn bank revolver, adding to our strong liquidity position. We'd like to note that the company's 2027 $575 million convertible debt was reclassified to current liability as of September 30, as the company's stock price remained above the 130% of the conversion price threshold for more than 20 of the last 30 business days in accordance with the bond's terms and conditions. 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. Turning now to 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. We continue to expect Polarify to grow mid-20% over 2023, as has been the case over the last couple of quarters. 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. This guide reflects timing differences between Q3 and Q4 within our operating expense lines. 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. 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.

Thank you, Bob. As the leading radiopharmaceutical-focused company, Lantheus has accomplished a lot and has an amazing future. We have levered the strength of our spec and DFINITY franchises and successfully launched Polarify to become the first pet radiopharmaceutical diagnostic blockbuster. 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. We will continue to pursue thoughtful business development and M&A and intelligently deploy our capital. 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. LandVis 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. We look forward to delivering on these commitments. Operator, we're now ready to take questions. You can proceed.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. 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 reenter the queue. Please stand by while we compile the Q&A roster. Now, first question. Coming from the line of Rhianna Ruiz with Living Partners, your line is now open.

Hi. Good morning, everyone. 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?

Thanks, Rowana. 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. 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, you know, position vacation schedules, but also two significant holidays of July 4th and Labor Day during the quarter. In the quarter for Polarify sequentially, the overwhelming majority of our accounts did grow on an absolute basis in line with the broader market. 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. 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 decline. impact to net price and really net price compression from third quarter versus second quarter, which drove the majority of the sequential decline. And then lastly, we did make some intentional tradeoffs, largely due to product availability. And there were a handful of accounts 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 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.

Thank you. And our next question, coming from the line of, Anthony Pachani with the Missoula Group. Your line is now open.

Thanks, and congratulations on another good quarter here and the positive announcement from CMS. Maybe, Paul, just to clear up some of the comments on the final rates for 2025, you said they're largely in line. I know there was some confusion out there between mean unit cost and ASP, but Addendum B seems pretty clear that the reimbursement rate for Polarify will remain steady in 2025. 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 and the 2024 guide, why this stepped down sequentially. Thanks again. Congratulations.

Thanks, Anthony. So, maybe I'll take the CMS question, and then I'll let Bob answer the four QPs. 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. CMS did note that they would be paying separately for radiopharm diagnostics above a 630-day arithmetic mean cost, which really just allows for some lower-priced products to remain bundled, and then the more innovative 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. 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. And so what that really does is sustain Polarify payment in that for 2025. Clearly, there has been some confusion and discussion on the marketplace on the differences between payment rates and what CMS was going to use. I think CMS specifically highlighted seven agents that we note, six PET1 specs 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 or are expected to lose pass-through within the next 12 to 15 months. And so, those agents are already reporting their true cost to CMS. And therefore, we believe that CMS put in place 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. 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, 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, 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 pure dollar perspective, we had always thought that Q4 would be greater than Q1. So, DFINITY looks to be sort of 10%-ish for the year, but that and the spec business, as Paul noted, that, you know, there are some competitive dynamics with people having 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. So, from that perspective, I do think that there could be some opportunity for overperformance in both of those, but at the same time, Again, we don't forecast for those type elements. As far as EPS goes, yes, absolutely. It is a step down from Q3 into Q4. But that's predicated on the fact that, as I had noted, 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 OPX between the two quarters, and hence the step down in projected earnings.

Thank you. And our next question, coming from the line of Richard Newiter with Druid Security. The phone is now open.

Hi, thanks for taking the questions, or a question. Just sticking on Polarify, kind of a two-part single question, sorry. You said... You said you maintain confidence that, you know, you can see Polarify sustaining as a $1 billion franchise in 25. 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. Just help me reconcile why you use the word sustain instead of grow, and then do you have direct dialogue with CMS that gives you that level of confidence to know that this is going to be 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 change? Thank you.

Yes. Thanks for mixing up the questions like that. I'm not sure which one we want to answer first, but 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?

No, Rich, I think – 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. Based on the roll-in of our strategic partnerships, we have seen 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 continue to grow. 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. 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. On the CMS side of things, I think we have engaged with CMS in the past. We will continue to reach out to them. Based on 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. Naturally, CMS always reserves the right to make adjustments should they need to. But I think in our conversations with relevant stakeholders in the marketplace, we We believe that 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 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. Okay. 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. And so we feel there's a very clear path forward. for Polarify to retain separate payment 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.

Thank you. And our next question coming from the line of Matt Taylor with Jefferies. Your line is now open.

Hi. 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 partners longer term. Can you talk about your ability to adjust pricing within those contracts if you are going to get this better price in the future?

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 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?

Matt, you're reading addendum B correctly on the proposed price. Naturally, we look at the average militaries used per dose to come out to a proposed or final, in this case, final payment rate for 2025. It's not to say that CMS does not reserve the right to make adjustments, but we feel confident that Polarify is going to be paid appropriately in 2025, and that if 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 come out with. 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 recently having lost TPT or about to be losing TPT, which is consistent with reporting ASP.

Thank you. And our next question, coming from Delaina, Larry Sella with CJS Securities. Your line is now open.

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 rolled in yet? Or is this kind of a good basis to annualize what that impact was based on what happened this quarter? 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, you know, less impact from price to continue to grow it on a revenue basis? Thanks.

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 $2 billion and could grow to $3 billion by the end of the decade. 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 conventional imaging. On the 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. We kicked this off, as we've highlighted in the past, last year. It really gained steam throughout the course of this year. 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 normalized throughout the first half of next year, with the second half of 25 really being a kind of go-forward net price compression solidified, given that these are 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. 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.

Thank you. And our next question, coming from the line of

Hi, good morning and thanks for taking the questions. 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 pipeline. So can you tell us how these assets differentiate from what's currently available or the blood tests that are coming down the external or the other pipeline? You know, What's your thinking on that and on the market for these? And we potentially hear a little bit more about these in 2025.

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. So with our all-timers portfolio, we're, I think, really excited about these assets with MK6240 and NAV because They appear to be best-in-class assets where they have really great detection rates, de minimis off-target. And, you know, I think they're in a very advanced phase three 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. I think you were asking the question about serologic markers for tau versus MK6240 imaging. The big difference being that you can see the anatomy with the PET imaging, and that correlates with issues such as symptom severity, the rate of decline, and that's important information. And as mentioned in the comments, 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.

Thanks, Jeff. Maybe just a few more points to add, Tara, because I think it's an area that we're incredibly excited about in the portfolio. Naturally, not only for the potential, if you look at what analysts are forecasting for the uptake of disease-modifying therapies, they're looking at potentially north of 500,000 individuals on therapy by the end of the decade, and that's just based on recently approved agents. If you look at their labels and note that they are requiring the presence, in this case, of beta amyloid pathology, that creates a very large potential market for Alzheimer's pet imaging. We've looked at it to be about $1.5 billion by the end of the decade and $2.5 billion by the middle of the 2030s. And so that's a significant opportunity. Serological blood testing very much is going to have a role in this marketplace. I think we look at it as very complementary to imaging, much as we've seen in prostate cancer, where PSA screening becomes commonplace when a man reaches the age of 45 or 50. But that really helps determine, along with many other factors, which patients are appropriate for a PSMA PET scan. And we believe eventually will be appropriate for an Alzheimer's PET scan, which can only grow the market from a complementary basis. And I would note, you know, it's somewhat obvious, but these are both F18 agents. that would lever the same commercial and production infrastructure that we've established with Polarify. 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 significant scan potential per individual patient.

Thank you. And our next question, coming from the line of Yonzi, would be Riley, your line is open.

Good morning. Thank you for taking our questions. Maybe asking the question differently. So for the CMS reimbursement rate update, we thought the MUC method will get a lower reimbursement rate for the RFI. However, in this latest update, it actually went up. So how should we think about this calculation and what does it mean to 2026 if there is a change from this MUC method to ASP method? Thank you.

Jan, Juan, appreciate. I know there's a lot of considerations in the marketplace, so understand there's some confusion in the differences with what CMS has come out with. I think what we've seen, and I don't mean to just reiterate, but what I think we've seen is CMS came out with their calendar year 2025 rules. which is different just to be 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 among some of the material adjustments they've made. We continue to report ASP for Polarify. We have been doing so since launch. We will continue to do so going forward. And so while it's a little early to determine exactly what payment rates would be for 2026, based on the rate we have, as well as CMS's openness to paying on ASP once that becomes more ubiquitous in the radiopharmaceutical diagnostic space, we believe that that could be sustainable. We will continue to report ASP. If CMS adjusts, as they said they would be open to, their payment mechanisms to be more based on ASP versus MUC. Polarify would be set up to, again, have their payment rates reflect the true current cost to hospitals. Naturally, we will be working as part of the broader coalition to ensure that all innovative radiopharmaceutical diagnostics continue to report ASP to further support CMS's intent to move there. That's just not possible at this time given the Not everyone reports ASP.

Thank you. Now, next question coming from Delaina. Can Deliver with Brookline Capital Partners markets? Your line is now open.

Great. Thank you. I'm going to ask about PNC 2002, and this is going to be a hypothetical question, but if CMS wants you to go to wait for 100% of events in the trial. Are we looking at roughly a six-month timeframe, you know, nine-month timeframe? You know, what should we expect if you have to go that route?

Yeah, I think you're referring to the FDA. You know, it's possible that the agency would like to see the completion of the study. If you look at the rate of reported OS events from us and our partner, it's not unreasonable to think that this will continue into the first quarter. However, clearly, we don't control the final OS event, which could keep the trial open for a bit longer. So I really prefer not to speculate too much on that. And I think, you know, look, we're going to confer with our partner, Lilly, as I mentioned, and also reach out to the agency to get a better understanding of a clear path forward.

Thank you. And our next question coming from the lineup, Justin Waltz with Jones Trading. Your line is now open.

Hi, thanks for taking the question. Sticking with P&T 2002, I'm wondering if you can provide any commentary on the plan subset analysis analyses and related to this, what outcomes do you think would push Lantheus to stick with the Point Lillie agreement versus stepping away?

Yeah, we have a lot to unpack here, and I think we did mention that we are looking at subset analyses. I think if you look back at the recent ESMO meeting, and Dr. Sartor's presentation, he clearly pointed out a few analyses that were post hoc where we adjusted for the OS crossover rate. And actually, there's quite positive findings there that support the effect of 2002 in this population. You know, I think we've got a ways to go to unpack the data. And I think, you know, with Jeff, you know, you can comment on this a bit further if you'd like. We continue to unpack the data. We continue to work with Lilly, and we'll meet with the agency, and we'll 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. I think the thing to keep in mind is that the high degree of crossover from the hormonal therapy switch-on to 2002 has completely confounded the overall survival events and the statistics behind the ITT population. So it's a bit of a conundrum. I think all of us that have designed trials like this and conducted them that have similar high crossover rates are dealing with this issue at the same time. So, you know, Jack, do you want to?

Yeah, I would just add that, you know, it's very clear this trial met its primary endpoint. It has 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.

Thank you. And our next question coming from Delaina. And with William Blair, your line is now open.

Great. Thanks for taking our question. We're curious about the $1.5 billion, $2.5 billion TAM for the Alzheimer's market. Yeah, thanks for providing that guidance. Maybe talk about kind of the number of scans dynamic that's baked into this assumption. And what's currently kind of the average scans per patient, and how will that grow, in your view, into the next decade? And along with that, how will the dialogue with payers, just to ensure them that there's actually a benefit to patients as you kind of use these agents to track the disease progression on a longitudinal basis? Thank you.

Andy, thanks for the questions. I think very spot on. We are, when we look at the specifics around our addressable market assumptions, those are really grounded in what the broader consensus is around therapeutic uptake. And so, 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 500,000 patients on therapy by the end of the decade. 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, you know, quick math, the list price for neurological, in this case, both tau and beta amyloid is approximately $3,000 per scan on the market, give or take. And so, with the potential of $500,000 and $3,000 per scan, you're 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 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 label for what we've seen as recently approved therapeutic agents. Two, when we look at the payer dynamic, and I think that's very astute, if you look at a scan at potentially $3,000 as a one-off event plus a procedure cost relative to the price of these therapeutics, which appears to be in the $30,000 to $35,000 range, 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 policy 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 of PSMA PETs, 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, the 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.

Thank you. Our next question, coming from Delaina, Thank you very much.

If we could follow up a little bit also on, if you could give any color on how we should be thinking about the royalties from Proclari, now that that is launched, and any early color that you have on that, that would be helpful. And also, you highlighted, obviously, the approval of Fricado. How Would you be thinking about the ability to grow that business given also the supply implications?

Two good questions on our partnerships. We are incredibly pleased with the approvals of PCLARI 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. Curium continues to commercialize that market. I think as we've said in the past, overall, we're incredibly excited about the potential for Polarify slash Baclari to be a global brand and to be discussed at medical congresses around the world. I think from a financial perspective, the relevant impact is minimal in the near term as they continue to ramp. And so we do factor those into our results, but they have a minimal role to date in We are optimistic that that could grow over time, but won't necessarily be a material driver of Polarify performance. On the Flicato piece, GE has the commercialization rights. We join and work with them on a joint steering committee. Naturally, the market opportunity is sizable given the number of MPI studies overall, but I'll defer specific questions to GE as they are the commercial lead of that agent. But cardiac imaging is a large market in SPECT. It is a sizable market in PET with rubidium. There are benefits of that agent that GE will certainly be talking about. 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 tier double-digit royalties in the U.S., as well as mid-single-digit royalties on sales outside of the U.S.

Thank you. Ladies and gentlemen, there are no further questions in the queue at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect, and have a wonderful day.