Lantheus Holdings, Inc.

Good morning. Welcome to Lanthias First Quarter 2025 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 Canarney, Vice President of Investor Relations. Mark?

Thank you. Good morning. With me today are Brian Markeson, our CEO, Paul Blanchfield, our President, Bob Marshall, our CFO, and Amanda Morgan, our Chief Commercial Officer. We will begin with prepared remarks and then take your questions. This morning we issued a press release which was furnished to the SEC under Form 8K reporting our first quarter 2025 results. The release and today's slide presentation are available 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. Before I dive into my prepared remarks, I'd like to note our press release from last evening where we announced our plans to divest our spec business to Shine Technologies. I would like to extend my heartfelt thanks to the incredible team that has been with company from the very beginning and has played a vital role in shaping Lanthias into what it is today. In 2025, we've been laying the foundation for the next chapter of our business. We announced two acquisitions in the first quarter, Evergreen Theranostics and Life Molecular Imaging. Both are designed to fuel our radiopharmaceutical leadership and sustain long-term growth. We closed on Evergreen in early April and expect to close the LMI acquisition in the coming weeks. And as I mentioned, we also announced an agreement to best our spec business. Collectively, these transactions accomplish a number of objectives. First, they had immediate revenue growth drivers that complement our business and diversify our revenue. Second, they had exciting programs in late and early stage development. Third, they had key capabilities, both people and infrastructure, that will enable the company to deliver novel programs from bench to clinic and ultimately patients. And finally, they streamline and help focus our organization. This year, we are focused on integrating the Evergreen and LMI businesses and finalizing the investment of our spec business. With our strong cash position and disciplined capital allocation strategy, we are well positioned to continue investing in our capabilities, advancing and selectively expanding our pipeline, and returning value to shareholders. With that, I'll turn the call over to Paul to give an operational and strategic update.

Thank you, Brian. I'm pleased to share more about our recent developments. We believe the acquisitions of Evergreen and LMI will strengthen our radio diagnostic and therapeutic capabilities while expanding our commercial portfolio and pipeline, ultimately enhancing our long-term growth potential. Evergreen enhances our capabilities across the entire value chain with scalable radio therapeutic manufacturing infrastructure, an early stage discovery engine, and an expanded pipeline, including Octavi, a registrational stage PET imaging agent targeting neuroendocrine tumors. Evergreen's Springfield, New Jersey site and dedicated team will enable us to manufacture our own clinical stage radiotherapeutics, improve development timelines, and accelerate our pipeline. We also expect to make further investments in this facility and team to enhance our radio diagnostic expertise and process development capabilities. LMI will provide Lanthias with a commercial radio diagnostic Alzheimer's franchise, a talented team, and NeuroSeq, a globally approved F18 PET imaging agent used to detect beta amyloid plaques in patients at risk of Alzheimer's disease. We believe that LMI and Lanthias' combined capabilities will support NeuroSeq's continued growth in the beta amyloid radio diagnostic market and create a scalable and differentiated platform from which to launch all of our Alzheimer's disease PET imaging agents. Alzheimer's disease affects over 50 million people globally and remains an area of significant unmet need for patients, caregivers, providers, and broader society. We believe the Alzheimer's radio diagnostic market is poised for significant growth driven by currently approved therapeutics and over 100 candidates in clinical development targeting beta amyloid or TAU. When approved, these therapeutics are expected to increase the need for accurate and timely diagnosis, staging, patient selection, and monitoring of disease, areas we believe PET imaging is uniquely positioned to address. As such, we believe the U.S. AD radio diagnostics total addressable market could grow to more than $1.5 billion by the end of the decade and $2.5 billion by the mid 2030s, and we are positioning ourselves to lead in this market with the potential for multiple differentiated PET agents targeting beta amyloid or TAU. Finally, yesterday we announced an agreement to divest our SPECT business to Shine Technologies. The SPECT business has been a foundational part of Lanthias' leadership in nuclear medicine dating back to our days as New England nuclear. We believe now is the right time to divest the SPECT business as we continue to focus on PET radio diagnostics, micro bubbles, and radio therapeutic agents. Shine's isotope production capabilities make them a natural owner of this business, and they are committed to investing in and growing the business. We are grateful to the generations of colleagues who have brought our SPECT products to patients and are confident that the business and these colleagues will be in good hands with Shine. We expect the transaction to close by the end of this year. With that, I'll turn the call over to Amanda to provide a commercial update.

Thank you, Paul. I'm pleased to share the progress on our commercial portfolio. Polarify sales for the first quarter were $258 million with -over-year volume growth offset by low single-digit decline in net price. We have successfully executed our strategy to secure the vast majority of Polarify revenue through strategic partnerships with key hospitals and freestanding imaging centers. However, with the expiry of Polarify pass-through status and the implementation of mean unit cost payment for Medicare, FFS, and the hospital outpatient setting, we did experience what we believe will be temporal competitive disruption among smaller non-contracted sites. We plan to maintain our market leadership and will continue to work through these competitive pressures and grow volume and revenue in 2025. We will achieve this by broadening our contracting efforts while maintaining our pricing premium, expanding product availability in both earlier and later calibration time, educating on Polarify's clinical and commercial differentiation, and continuing to provide superior customer service. By 2030, we anticipate the PSMA pet addressable market will exceed $3.5 billion. The key drivers for this growth include the rising incidence and prevalence of the disease, continued conversion of conventional imaging, broader adoption among lower-risk patients, and the expansion of the PSMA-targeted radio ligand therapy. We are pleased with the FDA's recent approval of Plovicto in the pre-chemotherapy MCRPC setting as supported by the PSMA-4 trial results and expect this indication to further increase demand for PSMA pet imaging agents such as Polarify. Notably, Plovicto's label now references the use of any FDA-approved PSMA pet product for patient selection. We believe there is a market expansion opportunity with our Phase IV mirror study in patients with favorable intermediate-risk disease. With this data, our goal is to support future updates to NCCN and SNMMI guidelines to include the use of PSMA pet with Polarify in this patient population, which could in turn expand the addressable market. DFINITY remains the number one utilized ultrasound-enhancing agent with more than 20 years in the market and more than 20 million echocardiograms performed. In the first quarter of 2025, DFINITY achieved approximately $79 million in sales, even with the return of competitive supply to the U.S. market. With our two number one imaging agents in Polarify and DFINITY, we are pleased to continue to serve as the partner of choice for our customers and look forward to the expansion of these relationships with the potential to add NeuroSeq in 2025, PNT2003, OcKeV and MK6240 in 2026, as well as NAB 4694 in 2027. I will now turn it back to Brian to discuss our development pipeline.

Thank you, Amanda. We continue to advance our diverse catalyst-rich pipeline with a focus on assets that are first or best in class in oncology, neurology and cardiology. We believe our neurology pipeline of MK6240 and NAB, combined with LMI's NeuroSeq and PI2620, positions us well to support the diagnosis, staging, patient selection of therapy and monitoring of patients with Alzheimer's disease. Our portfolios are highly complementary and we believe LMI's established commercial franchise provides a platform that will enable us to quickly realize the value of these assets. We recently announced that MK6240, our next generation TAU imaging agent, met its primary endpoints in two pivotal studies assessing its sensitivity and specificity. We plan to submit a new drug application to the FDA in the third quarter of this year and, if approved, look forward to bringing MK6240 to the market in 2026. Additionally, we remain on track to submit an NDA for NAV in 2026 as well. We have strengthened our oncology portfolio with the acquisition of Evergreen's OcKeV, which has the potential to create a theranostic pair with PNT2003, our registrational stage radio equivalent therapeutic candidate for SSTR positive gastro-entropancreatic neuroendocrine tumors, or GEPNETs. PNT2003, which has the potential to be the first FDA approved radio equivalent to Lutathera, is to patent litigation, which is ongoing. Turning to some of our earlier oncology assets, LNTH2503, which was acquired with Evergreen, is a potentially best and first in class theranostic pair targeting the CCK2R receptor. We currently have the diagnostic agent paired with Gallium 68 in phase two development, and we are excited to report the phase one therapeutic trial with Lutathium 177 is now recruiting patients in Europe. Our theranostic pair for LNTH2401 and LNTH2402 includes a Gallium 68 imaging agent with a Lutathium therapeutic agent targeting GRPR, which is a receptor highly expressed in several tumor types, particularly in prostate cancer. We believe there is a potential for this asset to serve independently and in combination with PSMA, since GRPR and PSMA expression are frequently negative correlated. It is important to note that in early disease, GRPR expression is quite similar to PSMA. The diagnostic agent 2401 is already in phase two development, and we remain on track to submit an IND for 2402, the therapeutic candidate. LNTH2403 is a preclinical therapeutic agent targeting LLRC15, which is strongly expressed on multiple malignancies, including head and neck, breast, lung, and pancreatic cancers. We are initially focusing on osteosarcoma, for which the FDA has granted both orphaned drug and rare pediatric disease designations. Osteosarcoma is a malignant bone tumor that primarily develops in children and teenagers, and is the most common childhood bone cancer with around 1,000 new cases diagnosed annually in the US. Finally, for PNT2002, the phase three splash study recently reached 100% of pre-specified overall survival events. The results were comparable to the previously purported 46% and 75% readouts, and remain confounded by patient crossover within the study. While we continue to work closely with our partner Eli Lilly to review the full data set, we do not plan to pursue an NDA or further invest in this asset at this time. I will now turn the call over to Bob.

Thank you, Brian, and good morning, everyone. I will provide highlights of the first quarter 2025 financials, focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted. Turning to the details, consolidated net revenue for the first quarter was $372.8 million, an increase of 0.8%. Radio pharmaceutical oncology, currently Polarify, contributed $257.7 million of sales flat with the revenue of $104.4 million was flat year over year. Highlights include Dfinity at $79.2 million, .5% higher, along with Technolight revenue of $19.7 million, down .2% due to a brief Mali supply issue in March now resolved. Lastly, strategic partnerships and other revenue was $10.7 million, up .1% due to the continued contribution from use of our clinical trials, up 10.4%, as well as from the recognition of the first sale milestone from Lercato of $2 million. Gross profit margin for the first quarter was 67%, a decrease of 180 basis points. The decrease is attributable to impacts at margin stemming from our strategic partnership contracting initiatives, the annualization of 2024 PMF network and related supply additions, unfavorable PMF network dose volume mix, as well as under absorption of overhead due to the Mali supply shortage late in the quarter, partially offset by favorable volumes for Polarify and Dfinity. Operating expenses at .3% of net revenue were 147 basis points higher than the prior year rate and slightly higher than the previously guided spending levels. As noted earlier this year, increases in operating expenses reflect investments made to support several growth and efficiency initiatives. Notably, research and development increased 251 basis points to .3% of net revenue in support of a number of late and early stage development programs. It is worth noting that the company expends nearly $3 million of business development expenses, largely legal and other third party, in support of yesterday's announced vestige of business to shine. We do not adjust our management P&L for transaction related expenses when the deal itself is not signed within the same quarter as incurred, thereby inflating current period. Operating profit for the quarter was 144.3 million, a decrease of 7.1%. Other income and expense at 4.6 million of income is a result of interest income offset in part by interest expense on our existing debt. Total adjustments in the quarter were 52.3 million of expense before taxes. Of this amount, 21.2 and 8 million of expense is associated with non-cash stock and incentive plans and acquired and tangible amortization respectively. 14.9 million is a result of unrealized losses tied to our equity investments and perspectives and radio formed theranostics. 5.4 million is related to RM2 milestones and the remainder relating to acquisition integration and other non-recurring expenses. Our effective tax rate was 26.5%. The resulting gap net income for the first quarter was 72.9 million and 109.5 million on an adjusted basis, a decrease of 7.5%. Gap fully diluted earnings per share for the first quarter were $1.02 and $1.53 on an adjusted basis, a decrease of 9.5%. Now during the cash flow, first quarter operating cash flow totaled $107.6 million, down $19.7 million from Q1 last year as working capital, particularly DPO metrics, have normalized from the post-SAP implementation and requirement. Capital expenditures totaled $8.7 million, $400,000 lower. Free cash flow, which we defined as operating cashless capital was $98.8 million, $20.1 million lower for the previously described reasons. During the quarter, the company invested an additional $5 million in RAD equity and deposited $50 million related to the Evergreen acquisition, which closed on April 1. Taken together, cash and cash equivalents net of restricted cash were $938.5 million at the end of Q1. We have access to our $750 million undrawn bank revolver and are comfortable with our very liquidity position. We are actively monitoring the recent tariff activity and are working closely with our partners and industry groups to assess any potential impact and advocate for the continued exceptions granted to pharmaceuticals and radioisotopes. This is an evolving situation, but at this juncture, direct impact to our business remains de minimis. Turning now to our updated interim corporate guidance for the full year 2025. In anticipation of closing the LMI transaction in the next weeks, we are providing an interim view to the business, but will update a consolidated view of 2025 after we have closed that transaction. That said, our view of Polarify performance for the balance of the year has come into sharper focus. We are updating the implicit Polarify range embedded in the previously guided standalone Lanthias full year view of revenue. That said, we are shifting our implicit Polarify year over range to flat to low single digit percent growth for the full year versus our prior view of low single digit to mid single digit growth. Commentary on all other Lanthias products remains the same. Evergreen adds approximately $10 million of revenue for the balance of the year and reduces adjusted EPS by approximately $0.25 in line with prior dilution guidance. Taken together, revenue is now expected to be $1.55 to $1.585 billion ahead of adding in the potential LMI revenue contribution, demonstrating the power of our strategic intent to diversify revenue streams. For adjusted EPS modeling purposes, we continue to expect low single digit dilution from the combined addition of Evergreen and LMI, assuming a consistent share count. The divestiture of the spec business should not have any impact on 2025 revenue or earnings as is expected to close toward the end of the year. But this strategic move should unlock consolidated revenue growth and gross margin expansion in the future. Additionally, the company advanced several R&D projects with positive ROI metrics not previously considered in the prior guide. Therefore, R&D should be approximately .5% of revenue up approximately 100 basis points for the full year. For now, by only incorporating our Polarify update, R&D investments, and including Evergreen, we now see adjusted EPS in the range of $6.60 to $6.70 versus the prior guide of $7.00 and $7.20. We do expect LMI contribution to the company to be accretive to revenue and earnings immediately. We look forward to providing more specifics after the LMI closing. With that, I'll turn the call back over to Brian.

Thank you, Bob. We are diversifying our revenues and setting up the business for continued long-term growth. We are driving both commercial and clinical success through our leading diagnostic agents and our diversified pipeline. We are committed to advancing our position as the leading radiopharmaceutical focus company with both new clinical developments and inorganic growth acquisitions. Remaining the partner of the company is the company that is providing the best choice for nuclear medicine departments and free-standing imaging centers, delivering sustainable growth, creating long-term value for our shareholders, and bringing innovative products to patients who need them. With that, we are ready to take your questions.

Operator,

please proceed.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourselves to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Anthony Petrone from Mizuho Financial Group.

Thanks and good morning, everyone. I hope everyone's well. Maybe start with Polarify trends in the quarter. Obviously, good detail in the prepared remarks, but maybe just a little bit more on the competitive dynamics you're seeing out there. Certainly, by our math, you're looking at a fair amount of share shift here through the March ending quarter, so a little bit on the Polarify competitive dynamics. I'll have one quick follow-up on gross margin.

Okay, Anthony, thanks. We got the questions. I think Paul will lead it off on the reply. Paul?

Yeah, thanks, Anthony. Good morning. I think in the first quarter, I'll add to what we and Amanda provided in the prepared remarks. First, we were successful in securing the vast majority of our revenues through the strategic partnerships. Those, as we've stated before, have largely been with our long-standing and established hospitals and freestanding imaging centers, many of them who have been with us since launch. Those partnerships were key to stabilizing the business, especially amidst the transition to mean unit cost from a Medicare -for-service reimbursement perspective. They're also going to serve us incredibly well as we launch a broader portfolio. In the quarter, we did experience short-term competitive disruption, specifically among the smaller non-contracted sites due to MUC-related reimbursement, price, as well as product availability. These smaller sites have been more recent adopters of PSMA PET imaging, and as a result, they have been outpacing the broader PSMA PET market growth. We continue to work through competitive pressures and some of these market dynamics, but we do plan to maintain our market leadership to grow volumes and revenues and to expand our contracting efforts with some of these higher growth later adopter accounts, as well as expanding product availability to ensure that we can continue to meet the growth and ensure our growth grows closer to that of the broader market.

That's helpful. Go ahead.

Go ahead. Your follow-up question?

All good. Thanks, Brian. Maybe just the spec sale caught us a little bit by surprise. Maybe just quickly on the rationale to exit spec now, and again, on the positive end here, I know you had the MK6240 headline readout, which was positive. When can we expect to see that data? Thanks.

Yes, thank you. Well, on the MK question and the readout of the data, right now, we're all hands on deck to file the new drug application, and then in the not too distant future, we're going to be happy to showcase the data because it is quite positive, which gives us a lot of confidence going into the submission. On the sale of the spec business, I think it's important to note that if you look at where we're going, our recent acquisitions, our pipeline, molecular imaging, theranostic pairs, radioleagant therapies, the spec business has been a big anchor for us, but not a core to our future growth. What we're doing is we're looking to streamline, unlock value, partner that business with a party like Shine Technologies that is willing to invest further in it, and we will also remain very close to Shine as they proceed and grow that business. Bob, do you want to add to that a little bit?

Yeah, I guess what I would add is maybe sort of like how you think about what this means to the business in terms of, you know, the total is about 115 to 120 million of revenue. It's been a very stable contributor, so that's what I mean when, you know, as a growth factor, when that comes out of the business, it sort of helps to accelerate the best balance of our portfolio, which we do think can continue to grow and expand. The gross margin implications, you know, it's a couple hundred basis points of benefit as we look forward because the business has a gross margin profile that is much below the company's current average. So again, as Brian noted, this does help to unlock additional value while that business

has the potential to grow in Shine's hands.

Thank you. One moment for our next question. Our next question comes from the line of Rowanna Reese from Learing Partners.

Hey, morning everyone. So I was curious, I noticed you tightened your fiscal 25 guidance a bit. Could you talk a bit more about what drivers could put you on either the low end or the high end of that guidance by year end? And just tagging on a quick spec to divestiture question. I assume it probably frees up certain resources and was curious, where would you pivot those in terms of contributing to the rest of the commercial or development pipeline?

Yeah, Rowanna, could

you do me a favor and repeat the second half of that question? I'm not sure I completely got it.

Oh, sure. With the spec business divestiture, I was assuming that you were going to free up certain resources or capital, things like that. Where would you want to use those in terms of either the pipeline or commercial efforts?

Got it. I appreciate the clarification. Bob, you want to start off

and then Paul, we'll pick it up? Yeah, I'll take it from a guidance perspective. So Rowanna, appreciate the question. We've narrowed range, but we're now coalescing around the bottom half of the prior range. And it really is about Polarify. So we're still staying in basically what we had previously guided. It's just that Q1 was extremely informative on how the competitive environment would manage Polarify as we came off pass through. Our original view actually was a pretty wide range that contemplated a range of outcomes with the first half being flattish and then with low single to mid single digit to high single digit type of an outcome. So all we've done is narrow this range to be at the bottom. We're taking the bottom half of that original range. The key thing here though is we do still expect healthy dose volumes throughout the balances of the year. And that is why we landed where we did.

And Rowanna, maybe on your spec question, I think we would characterize it really as a couple things, right? And I'll expand on kind of what Brian and Bob said earlier. But one, this is really about organizational focus. We are ruthlessly prioritizing key growth areas like pet radio diagnostics and radio therapeutics, as well as our DFINITY micro bubbles as future growth drivers. So I think it enables the broader organization to really focus its efforts there. There has naturally been limited investment in the development programs of SPECT. That business is many decades mature. And similarly from a commercial perspective, it's got relatively little complexity working with just a few key partners. We're incredibly excited for the Shine team to take on those capabilities and to further invest in that business. And so this is really around who's the best owner and what our organizational focus needs to be to drive continued growth and value creation. And then lastly, there's the financial benefits that Bob mentioned of just, you know, it's been a relatively stable business with margins below the company average. And so this really allows us to unlock the full potential of our financial capabilities and then focus the organization wholeheartedly on our future in pet diagnostics, radio therapeutics, and micro bubbles.

Yeah, and Rowana, you know, I think it's important to note that a number of our colleagues will be going with the SPECT business to Shine. So if you think about the bigger picture strategically, we're onboarding a team from Evergreen, from life molecular imaging, with phenomenal capability in molecular imaging and radio diagnostics and therapeutics. And, you know, quite frankly, a legacy business that we're not really nurturing and paying that much attention to as we grow the rest of the business is essentially coming out. So moving parts, some leaving, unfortunately, and some coming in, fortunately. And it's really a natural transition of this business all in line with our strategic intent.

Thank you. One moment for our next question. Our next question comes from the line of Richard Newitter from Truist Securities.

Hi, thanks for taking the question. I wanted to maybe just ask on the acquisitions, you know, just looking at 2026, because that's going to be the first full year where these acquisitions will be in there. I think your prior guidance had assumed or your prior comments was low single digit percent dilution from the combination of LMI and Evergreen. Is that still the right way to think about it? You know, it sounds like you think LMI is going to be a creative right out of the gate. So I'm just wondering if you can give us some give us an update on that. And then also, I think last call you had said you expect 2026 with acquisitions to be a double digit revenue growth potential year. Is that still in the cards as well? Thank you.

Yes, before, Rich, thanks for the question. That is definitely in the cards. And I appreciate you asking. And then, you want to take the rest of the answer?

Yeah, so exactly. The guide for the dilution was low single digit, but combination of both Evergreen and LMI. That guide also comes with a sort of mid year sort of closing on the deals. We closed early and expect on Evergreen and expect to close on LMI in the next weeks. That all being said,

yes,

what you know, the 25 cents that they've given to midpoint of what we had said previously, which that 710 is a single digit that does include about 50 basis points of additional interest income lost. But at the same time, I do fully expect that we would get to low single digit dilution off that 710 number once we've closed on LMI as well. And then we and then update our guidance after we've closed to take that into consideration,

both revenue and earnings.

Thank you. One moment for our next question. Our next question comes from the line of Matt Taylor from Jeffreys.

Hi, thank you for taking the question. So I wanted to follow up on some commentary from last quarter. You had talked about in 2026 with the combination of your base business and the acquisition of Evergreen and LMI being able to sustainably grow in the double digits. And I guess I just wondered if there's any change to that thinking positive or negative, and maybe you could give us any color around the quantum within the double digits you could grow beyond this year.

Yeah, thanks, Matt. I appreciate the question on the quantum. I think it's a little early on that front, but on double digits, yes. And let me tell you what we're looking at, right? It's the potential launch of Octave with combined the potential launch of 2003, the potential launch of MK6240, the full annualization of NeuroSeq and our plans to grow it. But more importantly, perhaps is the anchored growth with Polarify and DFINITY, which we plan to continue. Guys, did I leave anything out? No. So that's what we're looking at. That's what we're excited about. And that's anchoring our double digit growth for 2026.

Thank you. One moment for our next question. Our next question comes from the line of Paul Choi from Goldman Sachs.

Good morning. This is Daniel Ahn for Paul. We have two questions. First is like, are you still thinking that there's a chance that part of this Polarify revenue will switch to ASP pricing this year? And what about the trend for 2026 and beyond? The second question is that after the LMI deal closed, what's the current trend of the PET scan market growth in the Alzheimer's scan market? Thank you.

Okay. So on which one do you want to take first, the Alzheimer's or the Polarify?

Why don't I touch on the Polarify? Why don't I touch on the PET scan Alzheimer's? And then Amanda can maybe touch on the 2025 and future long-term growth of the PSMA

and before you do that, we are in constant discussions with CMS and we are working with them. And could ASP emerge rather soon? Yes. But you know, look, it's a little murky down there. So I can't really predict the future. Amanda, the team are really working hard on it. Amanda, you want to comment on that briefly and then we'll switch it over to Paul.

Yeah, we're, we're encouraged by our conversations. It is a fluid conversation. You know what, I will share that the team that we've been communicating with remains the same team as CMS and as of yet, we've not seen impact due to recent administration changes.

Great. All right. Paul? So maybe just, you know, long-term Polarify and the PSMA market, I think we remain very excited about the long-term potential. We've highlighted our addressable market potential in 2030 as being three and a half billion dollars. I think that continues to come into greater focus and affirmation with the Plovicto data as an example and their approval with PSMA 4. And so I think we're very excited about the long-term potential of PSMA PET. From a pricing perspective, near-term strategic partnerships are going to anniversary largely in the first half of this year, which will set us up for more support in long-term growth. And so I think we remain optimistic about the overall PSMA PET market and the long-term potential for Polarify, especially as we broaden the portfolio to be the go-to partner for hospitals and freestanding imaging centers. We have the potential to have the largest and broadest innovative portfolio to work with those sites to expand our strategic partnerships and continue to support that continued growth. And that includes Alzheimer's. Clearly, Life Molecular remains a separate organization under Life Healthcare today. But just monitoring the trends of overall claims data as a result of Alzheimer's scans, specifically for Beta Amloy, but increasingly for Tau, we see very robust growth in that marketplace. And when we think combining the terrific team and capabilities of LMI with that LAMP-IAS and our deep F18 expertise

and experience

with customers, we're very optimistic about the opportunity in Alzheimer's with NeuroSeq as well as MK6240, now 4694, and PI2620 to have a broad, deep portfolio in Alzheimer's that can be a very meaningful franchise for us.

Thank you. One moment for our next question. Our next question comes from the line of Larry Solo from CJS Securities, Inc.

Good morning. Thanks for taking the question. First question, I'm just on the gross margin and a little bit of higher cost. You mentioned the issue with technology. Was gross margin impacted at all just by the, I guess, the overall price discounting on Polarify and is Polarify pricing kind of in line with how you expect it to be so far?

Yes, I mean, particularly when they gave the sort of the explanation for the quarter and on a year over year basis, that particularly was, you know, that does have an impact from the impacts from margin from the strategic partnerships and so forth. But, you know, there were a handful of other things that I mentioned in terms of cost. But when you think about maybe relative to what we had expected, that the real drivers from what our original expectations sort of, you know, 67 and a half to 68, why was it, you know, not there? It really kind of came down to just a couple of the different factors. Really one, rate costs were higher, but also the dose volume mix at in our PMF network. And what that does is like, you know, depending on the mix of Polarify where which of the different networks, they're not all the same. So that makes it cause some of the, drive some of that from expectations. But again, going back to the pricing aspect, you know, we still remain at a price premium to our competitors. And so from an expectation perspective, that was sort of what we had expected.

Thank you. One moment for our next question. Our next question comes from the line of Yuan Zhu from B.

Riley. Good morning. Thank you for taking our questions. Maybe to answer this question a bit differently. Can you please comment more on the effect of this long term contract you find for clients in that bucket? Do they grow in volume of Polarify faster than others? Then if we compare the growth rate across academic centers and the community centers, is there a difference in terms of growth and the market penetration? Thank you.

Yuan, thank you for the question. I think it's very astute. There is certainly a difference in the growth and utilization across the marketplace. You know, it's we're coming up on four years since approval and launch. We saw some very adoption amongst leading academics and large scale free standing imaging centers. The utilization of Polarify and quite honestly other pet CT agents, those have been early adopters. And so their utilization rates are far higher than say other parts of the market. And in some cases, that has led to patient wait times. And whereas some of the smaller non-contracted accounts are growing higher than the overall market because they've been later adopters and are earlier in their adoption curves. And so I do think we see a difference in overall utilization. Our focus had been to secure the vast majority of Polarify revenues through strategic partnerships. We believe we've been very successful with that. And our current evolution is to now increasingly focus on those smaller non-contracted sites that present more near term growth opportunities. And so to some extent, this really comes down to mix and our steadfast focus on securing the vast majority of the business and now evolving to focus on expanding our contracts with smaller accounts to expanding our out the door times to meet growth where it is for those accounts. And that's what we're busy doing on a regular basis now.

Thank you. One moment for our next question. Our next question comes from the line of Justin Walsh from Jones Trading.

Hi, thanks for taking the question. Can you discuss how you view the long-term opportunities of the GRPR targeting imaging and therapy in prostate cancer? Specifically, I'm wondering if there's expected clinical value for imaging GRPR outside of enabling the therapeutic or if that's the key feature there. And if you'd expect therapeutic use ultimately to be in the post-PSMA setting.

Great question. Let me start sort of at the beginning. In early prostate carcinoma, GRPR expression is quite avid and quite similar to PSMA expression. And what we find fascinating about the agent or the target is where one over expresses, the other could be under expressing. So in other words, if you get into later lines of therapy, if PSMA expression is down or depressed, GRPR expression could be quite high and there could be a fair amount of advenity there for radioligand therapy. The gallium diagnostic agent is in phase two right now and we're exploring separate fast-track opportunities to see if we can bring that to the market earlier. I think there will be an interesting role for the imaging agent in and apart from the therapeutic. And I think with the therapeutic, we're focused right now on getting the IMD filed and also getting into the clinic as soon as practical in phase one. And we think there's going to be a very interesting role because ultimately these radioligand therapies are not going to be used as single agents. They will be used in combination like any other therapeutic modality in oncology. And we think they'll be additive. So there could be a very interesting role both in very early, mid and late term prostate cancer disease for the therapy and also for the diagnostic.

Thank you. One moment for our next question. Our next question comes from the line of Kemp Dolliver from Brookline Capital Markets.

Hi, thank you. On the smaller accounts in the market for Polarify, are these accounts that are operating essentially on a spot basis or are they contracted with others? I'm trying to reconcile your position as a premium price product with what looks like a customer base that might be commodity, have a commodity mindset. So can you reconcile that for me?

Yeah, I think we're looking at it a little bit differently. I think as we have grown our business and matched that with our growing PMF network, we have 63 PMFs up and running in the country. And our strategic contracts were designed to partner us for the long term with our highest volume early adopters. And I think what we're seeing is the smaller accounts that now have some capacity were not initially our early focus as we were dealing with the major institutions. So, Amanda, do you want to expand on that a little bit?

Yeah, no, thanks, Brian. That's exactly right. As we continue to evolve, as Paul shared in his prepared remarks, as we continue to evolve in the market, we are continuing to grow and expand our product availability. And that will be through our earlier and later calibration time. So that will enable us to not only partner, as Brian said, with our largest strategic accounts, but also partner with the smaller accounts, so those later adopters that are continuing other uptake of PSMA PET.

Thank you. One moment for our next question. Our next question comes from the line of Frances Duvelle from TD Securities.

Hi, this is Frances on for Terra. Can you elaborate on the extent of the MUC-based pricing impacts on revenue this quarter compared to other factors like the net pricing impacts? And are you still guiding to the MUC pricing affecting only about 10% of total patients?

Thanks for the question. So the MUC-based pricing remains impacting about 20% of patients. That is the overlap or intersection, I should say, between Medicare -for-service relative to Medicare Advantage or commercial payers, and then in the hospital outpatient setting. So that's still around 20% of patients overall when you look at that. I would say, I think when we look at the quarter and some of the dynamics, we looked at MUC pricing, we looked at competitive pricing, as well as product availability in some cases. Fundamentally, I think it's hard to break down into those three because they ultimately all intersect on the impact of customers, as well as the adoption or growth curves in there. And so I think they all had a bit of an issue. I would say MUC is likely more of a transitory impact as customers understand based on the payment timing of claims from Medicare. It does take them a little bit of time to understand what that looks like. The MUC ASP dynamics coming from CMS were quite volatile in the months leading up to January 1st with a number of adjustments to the addendums coming out there. And so I do think it took some time for sites to understand that. We think sites have a pretty good understanding of their book of business, and that should stabilize over time. And then the continued differentiation and availability of Polarify, plus our broadening portfolio will support our continued growth.

Thank you. One moment for our next question. Our next question comes from the line of Shaye Andy from William Blair.

Oh, great. Thanks for giving our questions. So we're curious about your long-term view on Alzheimer's diagnostic markets, specifically pertaining to the encroachment of serum-based biomarkers for diagnostic purposes. So Biogen on the first quarter call, they mentioned for the potential for blood-based markers to potentially supplant the need for PET scans. So I'm just curious if you can comment on that and potentially provide your review there. And a quick follow-up for your 2030 Polarify revenue guidance. I understand that the PSMA opportunity is included, and that's reading out later this year. But could you help us understand the growth potential for PSMA-DC and some of the F2N2-5 assets that's moving earlier minds and recently moved to phase three trials? Thank you.

All right. So I'll kick it off with the Alzheimer's answer and turn it over to Paul. First on serology, blood-based biomarkers. I think they're very important. And I think if you look at the prostate market, you have PSA as a legitimate marker for detection, follow-up, et cetera, for disease. And I would think in AD or Alzheimer's disease, you'd see a similar pattern, hopefully, where people will get screened with serology and then become candidates for a scan or molecular imaging. I think when you compare them, there is no comparison. Molecular imaging gives you quantification, it gives you geography, it gives you correlation to treatment outcome and effect. So none of the serology markers can actually do that. They're not that sensitive, nor are they specific. So if you're looking at specific regions of the brain, for example, with MK6240, and looking at longitudinal follow-up, you're looking at what parts of the brain are mostly affected by the NFTs, serology can never do that,

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least in my current lifetime, I think. So while I appreciate comments from others, I think maybe they're not totally informed, but there's no comparison with molecular imaging and serology. I think serology is a great tool. It's cost-effective. It should be used as a screening mechanism, but if you want to know what's happening inside the brain with Alzheimer's dementia and geography, follow-up, effects of treatment, you really need a molecular imaging scan with beta amyloid and TALEN.

Maybe I'll just add on that and then I'll pivot to the Polarify piece. 100% agree with what Brian just said. I guess I would just add, Andy, when you look at looking at roughly $30,000 a year therapeutic costs, over multiple years, it's not hard to imagine that as a payer and a physician looks at putting on someone's therapy that may cost $100,000 over three years, the desire to not just do a blood test but to do a couple thousand dollar PET scan, that's quite smart money to really understand the location and extent of disease and to effectively monitor that. And so we think there's a symbiotic relationship between serological markers and imaging the same way we see with PSA from a serological test and PSMA. I think on your earlier question on the PSMA therapeutic market, I think we may remain very encouraged on not only Novartis' results with PSMA-4 but PSMA addition, which we're optimistic about as well as you said, there are dozens of candidates targeting PSMA from a radioligand therapy and that really underscores our addressable market view where the scans associated with RLT could go from roughly $30,000, I believe, to almost $200,000 by the end of the decade. Current RLT patient selection only makes up single digits for PSMA PET use. We think that can expand not only with RLT but also with antibody drug conjugates and other therapeutics targeting PSMA so we think there's continued benefit in the molecular imaging and the ability to find and follow disease not only with Polarify but with Alzheimer's as Brian mentioned.

Thank you. One moment for our next question. Our next question comes from the line of David Turkely from Citizens JMP.

Hey, good morning. There was lots of debate heading in about the changes that might happen with the reimbursement and then debates about sort of clients, customers switching. It sounds like you're saying these smaller centers maybe never use Polarify and now you're going to focus on them but despite discussions of whether these images, scans might be apples to apples or not, we're just curious, have you seen any evidence of switching either at the large accounts or the small accounts or even on a patient basis so far?

Yeah, I think great question and I appreciate it. I think if you look at our later adopters, smaller accounts that we have not focused on, there has been a bit of what I would call stroke of the pen risk with them switching over to other agents, post-lumar, whatever, gallium, and we really focused again as we've said repeatedly on our major accounts, those that have the majority of the volume and also providing the most cutting-edge treatment. I think in the smaller accounts, again, and we know where every dose is going because our PMF partners are doing a great job delivering those doses, if they're doing one or two scans a week, we're not going to drop everything and go visit them so naturally they're open to a dialogue about price if that's all that matters to them.

Thank you. One moment for our next question. Our next question comes from the line of John VanderMosten from Zax.

Thank you and good morning. Two for me. First, under what conditions does it make sense to launch a generic competitor to a branded pharmaceutical? And then second, what are some of the leading TAL candidates in development that would benefit from MK6240 and PI2620?

John, I apologize, but you were breaking up on the line and I hate to do this, but could you please repeat the questions?

Apologies. Under what conditions does it make sense to launch a generic competitor to a branded radiopharmaceutical? And the follow-up was looking at the leading TAL candidates in development right now. Which ones might benefit from 6240 and 2620? Well,

I think on the TAL agents and also our NAV beta amyloid, because of their greater sensitivity and specificity, any therapeutic candidate that's in the clinic right now in trials will certainly benefit from better patient selection and follow-up. For example, both MK and NAV have the potential to detect very early centeloid count and they're actually quite frankly more sensitive than blood biomarkers. MK6240 right now is in 103, approximately, academic trials around the world and over 15 sponsored trials with major pharma partners. And we're working very closely with Jansen, Roche, and others, Merck obviously, to name a few, to explore and help them clarify, detect, and put patients into clinical trials for their therapeutics. On the generic radio equivalent question, Paul would love to take that question.

Thanks for the question. So, you know, I'm launching our radio equivalent for 03. First and foremost, we always look at our appropriate return metrics to ensure that we're going to generate a return north of our weighted average cost of capital. So we don't just look for growth at any sort. We're looking to ensure we have a positive financial return from those investments. When we look at the Lutifera opportunity, it is a sizable market. We're pleased with their NETR-2 results that we believe could make this a very sizable market. And so there's certainly a role for additional products in that space. When we look at the ability to combine that with Octavi into a theranostic pair, we think that could be a meaningful addition to the marketplace. And in addition, it further expands our relationships with nuclear medicine departments and hospitals that are already using, say, Polarify on their PET CTs that may already be using NeuroSeq. And so we think this is a good opportunity. And we're focused on bringing this to the market. But suffice it to say, we look very closely at the conditions at demand studies at market research to ensure that there is a positive return to the investments that we're making. And we remain optimistic about that ability to bring Octavi and P&T 03 as a theranostic-like pair next year.

Thank you. One moment for our next question. Our next question comes from the line of Richard Newwitter from Truett Securities.

Hi. Thanks for the follow-up. Just wanted to go back to the Polarify guidance. I'm sorry if you said this and I missed it. So flat to low single digits for the full year, you had previously said flat first half 25 year over year for Polarify. Is that still intact and we just basically maybe a little less recovery in the back half to true it up? Or how should we think of any changes to cadence? Thank you.

No, Rich, that's actually fairly astute. I mean, the range does provide, obviously we delivered a flat college first quarter. The math in and of itself, you're right. The flat to low single digits is for the full year. But so from a Q2 perspective, I would anticipate sequential growth over Q1. But it does sort of imply, I'm not going to get into it. I do expect gross dose volume to grow. But I don't want to get into the pricing aspect of it. But what we are saying is the back half would still have the potential to be mid single digit in the back half. So the language and the overall sentiment remains largely the same as we get into here with the exception of maybe Q2 where we get into sort of the full effect of a year's worth of contracting.

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