Great Southern Bancorp Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 15 speakers on the call.

Operator

Good morning. Welcome to the Lantheus 4th Quarter and Full Year 2024 Conference Call. This is your operator for today's call. Please note that all lines have been placed on mute to limit background noise. This call is being recorded.

Operator

A replay will be available in the Investors section of the company's website approximately 2 hours after the completion of the call and will be archived for at least 30 days. I will now turn the call over to your host for today, Mark Kinarney, Vice President of Investor Relations. Mark?

Speaker 1

Thank you. Good morning and welcome to today's call. 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 the call with prepared remarks and then open the call for Q and A. This morning, we issued a press release, which was furnished to the SEC under Form 8 ks reporting our Q2 2024 results.

Speaker 1

The release and today's slide presentation are in the Investors section of our website. Any comments made during our call 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 during this call will also include certain non GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in the Investors section of our website.

Speaker 1

I will now turn the call over to our CEO, Brian.

Speaker 2

Thank you, Mark, and good morning, everyone. At Lantheus, we are the leading radiopharmaceutical focused company with a clear purpose to find, fight and follow disease to deliver better patient outcomes. Last quarter, we outlined our strategy to enhance our leadership by maximizing the value of our existing portfolio and expanding our innovative pipeline of radiopharmaceuticals through focused business development and M and A, all while sustaining a strengthening and attractive financial profile. Our continued operational performance, financial discipline and growing pipeline will enable us to create long term sustainable value. We delivered another strong quarter led by our commercial products, Clarify, DEFINITY and TechneLite.

Speaker 2

I am particularly proud to share that since the beginning of 2024, our products have positively impacted the lives of more than 3,400,000 patients and their families. You will hear more about the quarter from Paul and Bob in just a few moments. Beyond our commercial portfolio, we progressed our pipeline and utilized the strength of our balance sheet to execute 3 strategic transactions. We are expanding our pipeline with a mix of late and early stage assets that have the potential to address high unmet medical needs. Most recently, we announced the acquisition of NAV4694, a late stage next generation F-eighteen PET imaging agent candidate targeting beta amyloid in Alzheimer's disease.

Speaker 2

We entered the Alzheimer's diagnostic space in 2023 when we acquired MK-six thousand two hundred and forty, our novel clinical stage tau targeting F-eighteen PET imaging agent candidate and we now have 2 complementary next generation Alzheimer's disease diagnostic candidates that we believe could provide critical insights for diagnosis, staging and monitoring. As more therapeutic options become available, it is pivotal time for us to advance new diagnostics to address Alzheimer's disease. We also acquired the global rights to Life Molecular Imaging's RM2 clinical stage radio diagnostic and radiotherapeutic pair. Gallium RM2 and lutetium RM2 also known as LNTH-two thousand four hundred and one and 2,402 target the gastrin releasing peptide receptor or GRPR. This potentially best in class diagnostic pair fortifies our oncology pipeline and will potentially take us into new disease areas.

Speaker 2

GRPR is minimally expressed in healthy prostate cells and over expressed in 75% to 100% of prostate cancer cells and is highly correlated with androgen expression. RM2 could potentially be used in earlier stages of disease. In addition, the 15% to 25% of metastatic castration resistant prostate cancer patients having low to no PSMA expression, we believe this diagnostic pair could be valuable addition to the prostate cancer community. We plan to work with Life Molecular to initiate a Phase IIIa prostate cancer study as soon as practical. Additionally, this quarter we licensed 2 product candidates from Radiopharm Theradostics.

Speaker 2

This includes an LRRC-fifteen targeted monoclonal antibody, which is a potential 1st in class, highly specific radium conjugate with both orphan drug and rare pediatric disease designations from the FDA for the treatment of osteosarcoma. The agent is designed to target the surrounding tumor microenvironment cells expressing the protein potentially treating a broad range of cancers. The second candidate is a TROP-two targeted nanobody radio conjugate, which has best in class potential and is advancing in preclinical development. We look forward to updating you on our progress as we continue to thoughtfully build out our portfolio. And with that, I'd like to now turn the call over to Paul to provide an operational update.

Speaker 3

Thank you, Brian. I'm excited to share details on another remarkable quarter. Polarifi generated net sales of more than $273,000,000 up nearly 30% from the prior year period, driven by continued PSMA PET diagnostic growth and sustained preference for Polarifi as the number one utilized PSMA PET imaging agent and the clear standard for patients and healthcare providers. Existing accounts continue to grow as our sales and marketing efforts, including our Let's Be Clear campaign generate awareness and ultimately demand for Polarifi among strategic accounts and referring physicians. Polarifi remains the only PSMA PET imaging agent that is widely available through a diverse F-eighteen distributor network that we continue to enhance ensuring convenient and reliable supply.

Speaker 3

Polarifi has now been administered in all 48 contiguous states as well as Washington DC, Puerto Rico and outside of the U. S. Through our European partnership. Earlier this month, CMS released the calendar year 2025 proposed hospital outpatient Prospective Payment System or OPPS rule, which recognizes the value and need for broad access to diagnostic radiopharmaceuticals including Polari Fi. The rule proposes separate payment for diagnostic radiopharmaceuticals with per day cost greater than $6.30 following the expiry of transitional pass through payment or TPT.

Speaker 3

This represents significant progress for the field of diagnostic radiopharmaceuticals and most importantly sustained patient access. If implemented as a final rule in November, CMS would maintain separate payment for PolariFi for the approximately 20% of patients with traditional Medicare fee for service insurance coverage who are treated in the hospital outpatient setting in addition to the PetCT procedural payment. In the proposed rule, separate payment would be based on mean unit cost or MUC beginning in 2025 and potentially transition to ASP at a future date once manufacturers have an opportunity to submit, certify or restate relevant ASPs. CMS outlined its proposed payment rates including Polarify in Addendum B of the proposed rules. As we are in the midst of a 60 day comment period, we want to limit speculation on this topic.

Speaker 3

Naturally, we will continue to work with industry stakeholders and CMS to maximize patient access and look forward to updating you further when we see the final rule in November. In parallel to CMS's proposed rule, we will continue to support the passage of legislation to codify separate payment for innovative diagnostic radiopharmaceuticals. CMS's proposal represents significant progress and we will continue to implement our multifaceted strategy to sustain broad patient access to PolariFi. This entails differentiating PolariFi clinically and commercially through our educational and promotional efforts and entering into long term strategic partnerships with our key customers. These efforts will further solidify Polarify's leadership and support growth in 2025 and beyond.

Speaker 3

Clarify has seen significant adoption since its launch and we expect the current addressable market to grow from over $2,000,000,000 in 2024 to north of $3,000,000,000 by 2029. In addition, PSMA PET scans still only represent approximately 30% of prostate cancer scans with conventional imaging such as bone scans, MRI and CT making up 70% of prostate cancer scan volume. Clearly, there remains significant near and long term opportunity for PSMA PET and Polarifi is well positioned to be the 1st blockbuster radiopharmaceutical diagnostic. We are pleased with our progress and remain fiercely committed to conveying Polarify's clinical and commercial differentiation to expand the overall market and solidify Polarifi's clear leadership. DEFINITY continued its strong momentum with 2nd quarter net sales of approximately $78,000,000 up almost 11% year over year.

Speaker 3

DEFINITY's drivers of success continue to be its clinical and commercial value proposition, decades of experience in clinical use and our cardiology franchises focus on operational excellence. With our expanding pipeline, including the 3 transactions Brian noted, we continue to build out our R and D team and capabilities. As announced in May, our new Chief Medical Officer, Doctor. Jeff Humphrey brings tremendous oncology and neurology drug development expertise and his leadership and expertise has already and will continue to help advance our pipeline. Within our prostate cancer portfolio, PNT2002 is our investigational PSMA targeted radioligand therapy for the treatment of patients with metastatic castration resistant prostate cancer.

Speaker 3

In December 2023, we reported that SPLASH, the Phase 3 registrational study achieved its primary endpoint with a statistically significant 29% reduction in the risk of radiographic progression or death. In the coming weeks, we expect to have reached approximately 75% of protocol specified OS events and plan to share more mature overall survival data in the 3rd quarter. Additionally, we are pleased that the FDA accepted our abbreviated new drug application for PNT-two thousand and three, a product candidate for the treatment of neuroendocrine tumors. If approved and pending positive resolution of the Hatch Waxman litigation, PNT-two thousand and three could launch in 2026, making it the 1st radio equivalent to lutetium dotaTate. As Brian mentioned, the acquisition of NAV-four thousand six hundred and ninety four expands our Alzheimer's Diagnostics pipeline.

Speaker 3

With NAV-four thousand six hundred and ninety four and MK-six thousand two hundred and forty, we have 2 unique diagnostic candidates to aid in addressing the tremendous unmet need among alzheimer's patients. The FDA's recent approval of another amyloid beta directed antibody includes in the dosage and administration section of the label, the need to confirm the presence of amyloid beta pathology prior to initiating treatment. We view this as a positive for the future of PET imaging for Alzheimer's disease. Also last month, the National Institute Alzheimer's Association published revised criteria for the diagnosis and staging of Alzheimer's disease. One of the guidelines' main principle is that Alzheimer's disease should be defined biologically using protein based biomarkers and not only based on a clinical assessment.

Speaker 3

These guidelines recommend that biomarkers including both amyloid and tau PET imaging may be used to diagnose Alzheimer's disease and provide an indication of its severity. We are excited at the prospect of aiding in the diagnosis, staging and monitoring of Alzheimer's disease. Recently, we held a pre NDA meeting with the FDA and we expect to submit an NDA for MK-six thousand two hundred and forty in 2025. We look forward to sharing more about the regulatory pathways and timelines for MK-six thousand two hundred and forty and NAV-four thousand six hundred and ninety four in the future. I will now turn the call over to Bob.

Speaker 4

Thank you, Paul, and good morning, everyone. I will provide highlights of the Q2 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 2nd quarter was $394,100,000 an increase of 22.5 percent. Radiopharmaceutical oncology contributed $273,300,000 of sales, up 29.3 percent attributable entirely to the continued strength of Polarifi and generally in line with expectations and seasonal trends we've noted over the last year. Precision Diagnostic revenue of $112,100,000 was 14.9 percent higher.

Speaker 4

Highlights include sales of DEFINITY at 78,100,000 dollars 10.7 percent higher, along with TechneLite revenue of $28,200,000 up 30.5% due to opportunistic sales in the quarter. Lastly, strategic partnerships and other revenue was $15,700,000 of RELISTOR related royalties not repeated this year offset by a strong MK-six thousand two hundred and forty contribution. Gross profit margin for the Q2 was 68.4 percent, a decrease of 121 basis points from the Q2 of 2023 due largely to an approximate 80 basis point headwind due to the previously noted RELISTOR royalty sale mid last year. Further, benefits from favorable overall product mix led by robust volumes of POLARIFI and DEFINITY were offset by higher than forecasted TechneLite volumes, all amidst higher contracted material and overhead costs as well as expenses tied to Plurify Lifecycle Management and PMF network expansion. Operating expenses at 25 percent of net revenue were 202 basis points higher than the prior year rate and ahead of expected spending levels.

Speaker 4

The company continues to invest in the Clarify franchise as well as development of our clinical pipeline. R and D expenses increased in the quarter notably to advance MK-six thousand two hundred and forty as well as business development evaluations not previously forecasted across multiple functions. Operating profit for the quarter was $171,000,000 or an increase of 14%. Other income and expense at $4,200,000 of income is a result of net interest income offset in part by interest expense in our existing debt. Total adjustments for the quarter were $90,900,000 of expense before taxes.

Speaker 4

Of this amount $18,500,000 $10,100,000 of expense is associated with non cash stock and incentive plans and acquired intangible amortization respectively. Dollars 38,300,000 of IP R and D and transactional expenses relate to the deals announced in the quarter, along with $22,500,000 of unrealized loss tied to our equity investment in Perspectives, with the remainder relating to acquisition, integration and other non recurring expenses. Our effective tax rate was 27.6 percent. Reported net income for the 2nd quarter was $62,100,000 $126,800,000 on an adjusted basis, an increase of 15.7%. GAAP fully diluted earnings per share for the 2nd quarter were $0.88 and $1.80 on an adjusted basis, an increase of 16.4%.

Speaker 4

Now turning to cash flow, 2nd quarter operating cash flow totaled $84,700,000 $117,000,000 over Q2 last year when we paid the Polarifi CVRs. Capital expenditures totaled $11,200,000 essentially flat with the prior year. Free cash flow, which we defined as operating cash flow less capital expenditures was $73,500,000 an increase of $116,500,000 over the prior year. During the quarter, the company invested 30 $2,900,000 to acquire NAV 4694. It is worth noting that the other transactions we've announced in recent weeks were funded in July and are not reflected in the use of cash in the Q2 financials.

Speaker 4

Taken together, cash and cash equivalents, net of restricted cash, now stand at $757,000,000 We have access to our $350,000,000 undrawn bank revolver and are comfortable with our strong liquidity position. Now turning to our updated guidance for the full year 2024 as well as some details for the second half of the year, notably adjusted EPS. We are affirming our view of revenue for the full year and the previously implied second half of the year, drawing particular attention to the seasonal patterns between Q3 and Q4 as we have continuously noted. As a reminder, we estimate full year consolidated revenue to be in a range of $1,500,000,000 to $1,520,000,000 with Polarifi expected to grow mid-twenty percent. With regard to Polarifi, we expect the Q3, Q4 revenue split to favor Q4 on an absolute dollar basis, driven by fewer patient visits during the summer months as we have seen traditionally.

Speaker 4

Volumes will continue to grow throughout, offset by the impact on net revenue from our strategic partnerships with key customers, which will begin to manifest more fully as we go deeper into the year. Our prior adjusted EPS guidance of $7 to $7.20 naturally did not take into account the investments we've subsequently made to support our long term future growth as well as the dynamics of our capital structure. Therefore, we are adjusting our view of earnings to account for the cumulative effect of these transactions we've announced over the last several weeks and in anticipation of now filing an NDA for MK-six thousand two hundred and forty in 2025. Much of the anticipated investment for 2024 approximately $0.25 is within the R and D line and will vary on a year to year basis as we near commercialization. Additionally, at the current share price and based on calculations tied to our convertible debt instrument, you should model fully diluted weighted average shares outstanding for the second half of the year to be approximately 74,500,000 shares and about 72,500,000 for the full year.

Speaker 4

Therefore, fully diluted adjusted earnings per share should be in a range of $6.60 to $6.70 As has been the case all year, this estimate does not include any incremental investment for PNT2002 nor any further business development that might be completed this year. Lastly, you'll note that we steered away from quarterly guidance to reflect our focus on solid near term decisions to deliver longer term growth. In the future, we will offer full year guidance and sufficient color for the investment community to track our progress throughout the year. With that, let me turn the call back over to Brian.

Speaker 2

Thank you, Bob. With Polarifi on track to surpass $1,000,000,000 in sales and be the 1st radiopharmaceutical diagnostic blockbuster and DEFINITY maintaining 80 plus percent market share, Lantheus continues to maximize the value of our commercial portfolio. As demonstrated through our 3 strategic transactions in the 2nd quarter and the progress of our current product candidates, we are fully committed to advancing and expanding our pipeline. We will continue to focus on radio diagnostics and radiotherapeutics that can make a difference for significant patient populations. Lastly, we will continue to sustain an attractive financial profile by delivering strong performance for our commercial portfolio and deploying our long standing radiopharmaceutical expertise and capital resources to invest in and bolster our pipeline through strategic business development.

Speaker 2

In closing, we will continue to advance innovation and realize our purpose to find, fight and follow disease to deliver better patient outcomes as the leading radiopharmaceutical focused company. And with that, we are now ready to take your questions. Operator, please go ahead.

Operator

Thank you. Our first question comes from the line of Anthony Petrone from Mizuho Group.

Speaker 5

Thank you and congratulations on the quarter here. Maybe two questions for me. One will be on PolariFi and the second will be on the revised earnings guidance. So on PolariFi, maybe just to level set the viewpoints from the company on the CMS recommendation to unbundle. It seems like that certainly was a positive proposal from CMS.

Speaker 5

There's a debate on how pricing will settle out once we get into the final ruling period in late October, November. So maybe just to level set what we've learned in proposal season and the expectations into the final rule for Clarify? And then the second question on earnings guidance, clearly a big step up here in R and D. Brian, you called out MK Bob and Brian, you called out MK-six thousand two hundred and forty, but also other business development costs in there. I think there perhaps is also some exposure to the perspective deal in there.

Speaker 5

So maybe just the moving parts on the step up in R and D. And is this the runway we should be expecting going forward? Thank you.

Speaker 2

Okay. And thanks for the questions. Good morning. Before Paul launches into the CMS topic, we are trying to avoid too much speculation here since we're within the comment period. So you win the over under, we're going to answer your question.

Speaker 2

But for the rest of the folks listening on the line, we will avoid this topic. And then after Paul goes, then Bob will do some clarification on EPS. So Paul, if you don't mind.

Speaker 3

Thanks, Brian. Thanks, Anthony. Good morning. As noted in the prepared remarks, we are pleased that CMS recognizes the value of diagnostic radiopharmaceuticals including Polarifi and the need to pay separately for diagnostic radiopharmaceuticals. If the proposed rule that was put forth becomes final in November, CMS would be maintaining separate payment for Polarifi for the 20% of patients that are subject to TPT expiry, namely those with traditional Medicare fee for service treated in the hospital outpatient setting.

Speaker 3

As you noted, the proposed separate payment is based on mean unit cost or MUC beginning in 2025 and as noted in the CMS language could potentially transition to ASP once manufacturers have an opportunity to submit, certify or restate relevant ASPs. It's important to note that CMS highlighted that they utilize MUC as manufacturers of radiopharmaceutical diagnostics are not required to and indeed many do not report ASP for radiopharmaceutical diagnostics once off pass through. Lantheus does and will continue to submit Polarifi ASP to CMS going forward. As Brian noted, we are in the midst of a 60 day comment period and we're going to continue to work with industry stakeholders and engage with CMS to maximize patient access. Overall, this is significant progress for sustained patient access and the field of diagnostic radiopharmaceuticals overall not only Clarify, but also future potential products we have in our pipeline like MK and NAV in Alzheimer's.

Speaker 4

All right. Thanks. And so Anthony, when you think about the guide, naturally we don't forecast impacts of transactions. And in this case, in addition to that, a significant opportunity to advance MK-six thousand two hundred and forty for an NDA filing in 2025. As far as what to expect as we go forward, you're right, you outlined it actually in your own question in terms of the $0.25 dilution this year from the number of transactions where we've added a number of really interesting promising pipeline assets.

Speaker 4

But as we look forward, obviously our investment will be commensurate with the opportunity from a commercial perspective. And thinking about commercial, we do expenses will vary over time, much like you saw us do with the Polarifi opportunity. If I take you back to late 2020, early 2021, we were investing ahead of the curve to make sure that we were ready to be able to commercialize that asset, and maximize the market opportunity. And we do those types of investments with an eye towards return on investment, as well as our ability to execute. So we'll give more color on that as we get into 2020 get further into 2025 and obviously 2026 as things progress.

Speaker 4

And we'll make sure that the investment community can build out models and track overall progress.

Operator

Our next question comes from the line of Roanna Reiss from Leerink Partners.

Speaker 6

Great. Good morning, everyone. Adding on a question from the first one, I was curious, what are your thoughts behind the potential Clarify revenue growth trends when transitioning from 2Q to 3Q? And I was also curious how your ongoing strategic contracts with top accounts might be an incremental tailwind going into second half this year?

Speaker 4

Good morning. I'll start, this is Bob, and then I'll turn it over to Paul for the last bit. In terms of seasonal trends, I think in my prepared remarks, I was trying to be specific about how you would expect Q3 and Q4 with absolute dollar peak sales, if you will, would be in Q4 versus Q3. So you would split it that way. And that's in line with seasonal trends that we have seen historically, which I think can be broadened, if you will, across more than just Polarify, but broader healthcare.

Speaker 4

But I did also note that you would expect volumes to continue to grow throughout the year. And if you were to look at those volume growth, they would be very much in line with our seasonal trends that we've noted. But for more on color on that, I'll give it to Paul.

Speaker 3

Thanks, Bob. Good morning, Rowena. Strategic partnerships, as mentioned in the prepared remarks, remain core part of our multifaceted strategy to sustain Polarifi's clear position as the number one PSMA PET imaging agent. We view these partnerships with key customers as incredibly beneficial to ensure that Polarify remains that PSMA PET agent of choice and accessible to all patients even amidst 3 other competitors in the market. Conversations with these key customers continue to go well and we are pleased with our progress.

Speaker 3

Given the competitive nature of our business, I think you'll understand why we don't necessarily want to elaborate further on the progress or the specificity around these partnerships, But we're pleased with the progress and we continue to push forward.

Operator

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

Speaker 7

Hi. Thanks for taking the question. I was wondering if you could maybe help us size the Alzheimer's opportunity for you in any way that clearly coming into much nearer term or intermediate term focus? How big could this be relative to a market opportunity, say like Polarify? And I would imagine the scan per patient component to that is going to be multiple of what is involved in PSMA PET imaging.

Speaker 7

And then if I could just upfront, just piggybacking out the last question, it sounds like even with MUC pricing, you feel better about your bargaining position or you should be in a better bargaining position with the discounting conversations or the contracting conversations you're having than you were prior to the CMS proposal. Is that a fair observation? Thanks.

Speaker 2

Yes. Thanks, Rich. The answer to your last question is no comment, but we're very encouraged by what we're seeing. So it's almost a yes. Anyway, back to the Alzheimer's field, we've quoted before a fairly meaningful TAM in excess of $1,000,000,000 I'm not going to get into that.

Speaker 2

We're placing a bet here. And if you look at all the recent innovation, particularly recent approvals in Alzheimer's Therapeutics, this field is about to explode. And we're at the very beginning of it with, we believe, 2 agents that are considered next generation or best in class. And we want to be there right at the front of it. For example, MK-six thousand two hundred and forty is currently in over 90 trials.

Speaker 2

I believe 83 of them are in academic centers, the top in the country in the world. So NAV, again, possibly the most sensitive and specific beta amyloid marker tracer that could be available once we file. So we're highly encouraged. We're placing a bet and we're going to be at the intersection when this market explodes.

Operator

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

Speaker 8

Hi, good morning. Thanks for taking the question. Just wanted to ask about the 2 main things that were updated on the beginning of the prepared remarks. One is, can you talk about your ability to grow Polarifi next year, if we do see pricing that is lower than peers based on the CMS update in that segment of the market. And Bob, I

Speaker 1

was hoping you could parse out

Speaker 8

a little bit more the R and D step up between MK-six thousand two hundred and forty NDA and the transactions to help with our modeling for the R and D step up this year and going forward?

Speaker 2

Paul, you want to go ahead and grab the first part?

Speaker 3

Good morning, Matt. So obviously, we were incredibly pleased as we shared with the proposed CMS rules. As we affirm today, we continue to expect Polarifi to grow substantially this year in that mid-twenty percent range, the vast majority of it driven by volume with some slight contribution from price as our earlier pricing increases at the beginning of this year, have a moderating impact based on strategic partnerships. I think we are incredibly excited and positive about the future prospects of Polarifi. The PSMA pet market right now is annualizing just north of $1,500,000,000 if you look at all relevant players in the Q2 and you annualize that.

Speaker 3

That's compared to a total addressable market that this year is north of $2,000,000,000 and we expect to grow to north of $3,000,000,000 by the end of the decade. And then if you add in that that 70% of prostate cancer scans are still with less specific conventional imaging and only 30% is with what we would call this next generation of PSMA PET scans led by Polarifi. We think there's significant opportunity for this market to expand and to continue to grow. Naturally, we've been putting in place a number of initiatives to ensure Polarifi's leadership and the market to continue expand led by our commercial and clinical brand differentiation in the market through our commercial teams as well as our marketing efforts. And so we haven't put a number on 2025 at this point yet, but we remain very positive that Polarify and the overall market will continue to grow and the Polarify will remain retain its leadership position.

Speaker 4

And Matt, just to your question about helping with modeling on the different R and D assets, if you will, the clinical pipeline.

Speaker 2

As I

Speaker 4

look at the totals, I would put 70% of it really kind of falls on NaV-four thousand six hundred and ninety four in RM2 with more or less the balance going to MK-six thousand two hundred and forty. That obviously will the MK-six thousand two hundred and forty will evolve probably quicker in the sense that of an NDA filing projected for 2025, where of course as we get closer to commercialization effort things will change, but I'll provide color on that when we get to 2025.

Operator

Our next question comes from the line of Tara Bancroft from TD Cowen. Hi, good morning. So I was hoping you could explain a little bit more of your thinking on the potential impact of other entrants to clarify in the out years. What assumptions you have there for market share and what goes into your confidence in maintaining your share? Thanks.

Speaker 3

Thanks, Tara. We certainly are aware of the clinical development environment for other players. I think overall, we believe that Polarify has significant and sustainable competitive advantages both commercially and clinically that we've outlined before. We take new competition incredibly seriously. Overall, I think we believe that 1st and foremost raises awareness in the marketplace

Speaker 8

where

Speaker 3

there is broader voice to demonstrate the potential for PSMA PET imaging. And so I think we're very positive about Polarify's current position. We think we continue to have a leading product that has demonstrated superiority out there in the marketplace with what we're able to be able to help physicians make more informed decisions to manage prostate cancer patients. And so we take new entrants quite seriously, but we continue to invest to invest in life cycle management, in product improvements, as well as in our commercial expertise to continue to grow and lead in this space for many years to come. Amanda, anything you want to add?

Speaker 9

No, I think it's all great.

Operator

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

Speaker 10

Great. Thank you. Good morning. I guess, 2 quick follow ups, if I may just squeeze 2 in. I guess said another way or asked another way, does the CMS proposals at all change your ongoing negotiations and sort of your strategic initiatives in terms of locking in customers?

Speaker 10

I mean, do you have is it you have to play a little bit of a waiting game now? Does that change at all? And then second question, just you mentioned the total market size today in the U. S. Is about $1,500,000,000 and that basically just sounds like you're adding up the Lucix and your PolariFi.

Speaker 10

Are there any other competitors doing anything meaningful or making any inroads on that market? Thanks.

Speaker 2

Yes. No, thanks for the questions. As far as our commercial game plan, nothing changes. We're committed to our strategic partnerships. We're committed to bringing the best product to more people.

Speaker 2

So nothing changes. As far as competition is concerned, look, we monitor it. We're aware of it. Anything a competitor does is meaningful and we'll assess how we respond to it. But I'll let Amanda elaborate a little bit on that point.

Speaker 9

Thanks, Brian. So from a competitive dynamic perspective, POLARIFI is the clear market leader in PSMA PET imaging with more than 400,000 scans since we've launched. We believe our continued market leadership will reflect our clear clinical and commercial value proposition. We've seen our market leadership continue to expand and solidify with our absolute annual revenue growth outpacing that of what we see with our competitors. In addition, our market share remains relatively stable as we shared during the call in the mid-sixty percent range even amidst 3 other commercial competitors.

Speaker 9

And overall, finally, we believe there remains a substantial growth opportunity in the PSMA pet market. As Paul shared with you earlier, it's evidenced by the $2,000,000,000 TAM current addressable market and the $3,000,000,000 future addressable market and with the significant number of prostate cancer scans that are performed with conventional imaging instead of PSMA PET. So we continue to focus on ensuring Polarifi continues to grow and remains the market leader. And in the near term, we've affirmed our revenue guidance and expect Polarifi to grow in the mid-twenty percent range, predominantly driven by volume.

Operator

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

Speaker 11

Good morning. Congrats on the commercial progress of generaifi. We are a little bit surprised to see the thousand two hundred and forty NDA submission scheduled in 2025. So can you maybe clarify what was discussed with FDA and what would be the target indication for this agent? And then can you maybe quickly comment on your current thoughts on the share buyback and dividend?

Speaker 11

Thank you.

Speaker 2

Yes. So we'll start with the share buyback first comment. Bob, you want to flag that?

Speaker 4

All right. So I'll start with that. So from a buyback perspective, obviously, when we think about capital allocation, we broadly consider all elements. Obviously, our first priority is going to be business development. You see us execute that here in Q2.

Speaker 4

We still have plenty of dry powder, but we also have a full pipeline. It's a topic that we have continuously taken up with the Board and we will continue to evaluate those opportunities as it becomes appropriate.

Speaker 12

Yes. And thanks for the question about MK-six

Operator

thousand two

Speaker 12

hundred and forty. We've recently held a pre NDA meeting with FDA and we expect to submit the NDA for MK-six thousand two hundred and forty in 2025. We look forward to sharing more about the regulatory pathways and timelines for MK and NAV in the future. Thanks for the question.

Operator

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

Speaker 13

Hey, great. Maybe just one for Bob. And I appreciate the commentary you made on seasonality because we kind of look at the back half, I know you don't want to explicitly call out 3 versus 4Q by product. But could I mean, it looks like maybe, Clarify, it could be sort of flattish or maybe even down in 3Q versus 2Q just to kind of get that cadence right for the year. Is that kind of a fair assumption?

Speaker 4

From a as we look at it, I mean, we've given enough pieces and parts to do the math, I think. And sequentially, you're going to see it, particularly from a gross, polarified volume perspective, it will continue to increase from a volume perspective. We do think though that those seasonal trends from as these strategic partnerships with key customers come into play will mitigate more fully as we get into the back half of the year. But to be fair, I mean, our overall guidance hasn't changed from our perspective from a mid-twenty percent growth rate. So the view really hasn't mitigated itself throughout the balance of the year.

Speaker 4

So yes, I do expect that Q3 will be the lower of the 2 quarters for planning purposes.

Operator

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

Speaker 7

Hi, thanks for taking the question. Can you provide any color on your expectations for the upcoming splash readout and what you would like to see there to convince you to move forward with your Point Lilly partnership?

Speaker 2

Yes. Thanks for the question. Look, we're going to see additional data coming this quarter. We've said that before. And as the trial progresses, we don't exactly control the time line, but we have a great feel that it will be this Q3.

Speaker 2

Our expectation is to move ahead, and that's the best I can tell you at this time. We're pretty comfortable with what we're seeing and what we have seen in meeting our primary endpoint. And obviously, the overall survival crossover analysis and the confounding of it is something that's been an industry topic now for over a year. We like the asset. We'd like to move ahead.

Speaker 2

We're encouraged by what we've seen already with our primary endpoint. And we'll update the world when we know what we have.

Operator

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

Speaker 14

All right. Thanks for taking our question. I'm just wondering if you could educate us on the potential product profile differentiation of NAV-four thousand six hundred and ninety four. I guess in the market, Aimovid has been approved for over a decade now. That's from Eli Lilly.

Speaker 14

Just wondering how you plan to provide that positioning differentiation as you kind of launch into a field that already has existing standard of care? Thank you.

Speaker 2

Jeff, do you want to kick that off?

Operator

Yes. Thank you. Thank you.

Speaker 12

So for NAV, it's currently in Phase III development as expected. We expect to bring it through pivotal trials and into commercialization. The agent has higher sensitivity and specificity and less off target binding in the brain that potentially allows for clearer images, better understanding of the anatomic distribution and importantly earlier detection of beta amyloid that earlier detection may lead to earlier treatment and potentially better outcomes. Thanks for the question.

Operator

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

Speaker 2

Hi, thank you. What is your ability to leverage your existing commercial footprint for both 6,240 and then potentially PNT2002? I think that's a great question. I appreciate it. You want to take it, Paul?

Speaker 3

I think it's appreciate the question. I think we're excited to build from a position of strength from our long history and existing capabilities in radiopharmaceuticals both diagnostics and what we build building in therapeutics. And I'd cover a few specific points. Within the Alzheimer's space, both NAV and MK are F-eighteen based products. So they will be manufactured and we would be able to lever the existing PMS network with the out the door times and the production slots that we've been working with our key partners that now are across 58 different pet manufacturing facilities in the country.

Speaker 3

And so we believe that comes from a position of strength to be able to build on that and enhance those relationships from a production and delivery perspective of which we all know that in radiopharmaceuticals and diagnostics in particular that can be a hurdle for new entrants and others in the market. From a commercial perspective, if we look at where the imaging agents would be administered and scanned for Alzheimer's, We are already in, the vast majority of PETCT sites across the country. Those same sites would be adding capacity to be able to scan for Alzheimer's agents both tau tangles and those targeting beta amyloid. And so we would be able to lever our existing support around support around referring physicians recognizing that with Polarifi we're currently calling on urologists and oncologists, but neurologists and those memory clinics and others that we'll be seeing and treating Alzheimer's patients would require investment. As Bob has mentioned, we make investments commensurate with the commercial opportunity, but we do have significant infrastructure there that we could lever.

Speaker 3

From a therapeutic perspective, specifically with PNT2002, similarly, if we look at the treating sites for PETCT, there's about 2,000 in the country and there's about 300 plus radiopharmaceutical therapeutic sites with almost all of those therapeutic sites having imaging. So we already have relationships at these sites that would be treating for PMT-two as well as PMT-three and we would be able to lever that infrastructure. Again, we would make commensurate investments on the referring physician landscape for 3. It would be with the neuroendocrine treating physicians, which could be medical oncologists as well as radiation oncologists and the like. We already have some presence there with Polarify, but naturally we would make appropriate investments commensurate with the opportunity.

Speaker 3

And so we feel we're coming from a position of strength where we lever our existing manufacturing as well as commercial relationships and look forward to bringing these exciting agents if approved to the market.

Operator

Thank Our next question comes from the line of Richard Newitter from Truist Securities.

Speaker 7

Hi, thanks. Just two quick follow ups. It sounds like the vast majority of the bridge from your old earnings guidance to the new is some higher share count, but we estimate about $0.15 And then it sounds like the R and D step up is most of the rest, they're $0.40 plus of the rest. Is that right? Or is there anything else in OpEx assumptions or even gross margin?

Speaker 7

I think your last gross margin guide was around flat year over year with 23%. Does that still stand? And then, and just on Polarifi, can you grow Polarifi next year? I think The Street has a mid single digit growth rate for Polarifi. I'm just wondering if that's the reasonable level.

Speaker 7

I think in your prepared remarks, you said you're confident in Polarifi continuing to grow into the future. So reconcile that, please. Thank you.

Speaker 4

Rich, your reconciliation is basically spot on. When we started the sort of the guidance paragraph, I did say that naturally when we started from our starting jumping off point of $7 $7.20 we hadn't taken into consideration this acceleration in R and D spend, the transactions that we do because you don't forecast that kind of stuff. Sometimes these opportunities arise and you take advantage of it. So from a reconciliation perspective, you've got exactly the share count, which is just a mathematical issue. And then you're right, the rest of it, the majority of the additional spend is R and D based.

Speaker 4

But that considers both what we spent in Q2 versus and as well as Q3 and Q4. So again, yes, I mean, our underlying operational profile hasn't really changed other than the ability now to invest in an R and D pipeline that will launch us into our future in terms of additional growth drivers.

Speaker 3

Ladies and gentlemen Rich, maybe just some added color on 2025, right? Today, we're talking about 24 and what we're able to deliver to have Polarify be the 1st ever radiopharmaceutical diagnostic blockbuster with over $1,000,000,000 in sales. We've guided to Polarify growing mid-twenty percent. We grew almost 30% year over year this quarter. We're highlighting that the current market is annualizing at about $1,500,000,000 and has the potential this year to be north of $2,000,000,000 and continue to grow.

Speaker 3

And so we believe we are well positioned. Naturally, there will be a time and a place when we give specific 2025 guidance. But suffice it to say, a product that's been growing 30% in the first half of this year, 30% year over year with our guide to be in the mid-twenty percent. We still have some ample room and momentum to continue to grow into lead. And the recent CMS proposed rules only further support that story in addition to the commercial differentiation, the continued life cycle management.

Speaker 3

And so we remain very positive on Polarifi's near and long term growth potential.

Operator

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.

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Earnings Conference Call
Great Southern Bancorp Q2 2024
00:00 / 00:00
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