Lantheus Holdings, Inc. (LNTH) Q3 2024 Earnings Summary

Executive Summary

• Revenue $378.7M (+18.4% YoY) and adjusted diluted EPS $1.70 (+15.6% YoY); sequentially lower vs Q2 ($394.1M revenue; $1.80 adj. EPS) as PYLARIFY saw typical Q3 seasonality and net price compression from strategic partnerships. Gross margin was 68.2% (vs 68.4% in Q2) .
• Guidance narrowed upward: FY24 revenue $1.51–$1.52B (from $1.50–$1.52B) and adjusted EPS $6.65–$6.70 (from $6.60–$6.70). Q4 EPS expected to step down vs Q3 on higher R&D; a ~$0.02 Q4 benefit from organizational changes will reverse in 2025 .
• CMS final OPPS rule (effective Jan 1, 2025) “unbundles” specialized diagnostic radiopharmaceuticals; PYLARIFY will continue to be separately paid for Medicare FFS outpatients, with the 2025 Addendum B payment rate effectively the same as current—supporting 2025 franchise durability .
• Liquidity strengthened (cash $866.4M; $350M revolver), 2027 converts reclassified to current due to stock-price condition (no liquidity concern per management). Post-quarter, Board authorized up to $250M share repurchase over 12 months—incremental capital return catalyst .

What Went Well and What Went Wrong

What Went Well

• PYLARIFY delivered $259.8M (+20.6% YoY) and remains on track for >$1B in 2024; management expects it to remain a $1B franchise in 2025, citing leadership, partnerships, and CMS’s final rule supporting separate payment in hospitals for Medicare FFS .
• DEFINITY posted $77.0M (+14.3% YoY), aided by market growth and competitor supply issues; cardiology franchise execution remained strong .
• Free cash flow surged to $159.3M in Q3; cash rose to $866.4M despite pipeline investments, leaving ample capacity for BD/M&A and buybacks .
• Quote (CEO): “PYLARIFY is on track to exceed $1 billion in sales in 2024 and maintain its market leadership and blockbuster status in 2025.”

What Went Wrong

• Sequential revenue and EPS declined vs Q2 (revenue $378.7M vs $394.1M; adj. EPS $1.70 vs $1.80) as PYLARIFY experienced seasonal volumes and net price compression from strategic partnerships; management also made intentional trade‑offs on price in select transactional accounts .
• Operating expenses rose YoY (24.6% of sales; +111 bps) on higher R&D for early/late-stage assets, weighing on margins despite mix tailwinds from PYLARIFY and DEFINITY .
• PNT2002: At 75% OS events, results for rPFS and OS were not materially changed vs prior interim; OS remains confounded by high crossover, leaving regulatory path subject to ongoing FDA dialogue with partner Eli Lilly .

Financial Results

Headline results – YoY and sequential comparisons

Sequential cash flow and margin detail

Segment and product revenue (YoY)

Key KPIs

Notes:

• Management cited YoY gross margin up 109 bps to 68.2% on mix (PYLARIFY, DEFINITY), partially offset by higher contracted materials, freight and overhead .
• PYLARIFY sequential downtick driven by seasonality, net price effects from strategic partnerships, and deliberate non-participation in select price-sensitive accounts .

Guidance Changes

Additional color:

• Q4 adjusted EPS expected to step down vs Q3 on higher R&D; organizational actions create ~+$0.02 benefit in Q4 that reverses in 2025 .
• 2025 set‑up: CMS final rule maintains separate payment for eligible diagnostic radiopharmaceuticals (incl. PYLARIFY) in hospital outpatient Medicare FFS; PYLARIFY 2025 Addendum B rate “effectively the same as its current payment rate” .

Earnings Call Themes & Trends

Management Commentary

• “PYLARIFY is on track to exceed $1 billion in sales in 2024 and maintain its market leadership and blockbuster status in 2025.” – CEO Brian Markison .
• “PYLARIFY sustained its clear market leadership…Net sales for the quarter were approximately $260 million, up 20% year‑over‑year and down 5% sequentially…driven by…seasonality and…strategic partnerships…as well as intentional trade‑offs largely due to product availability.” – President Paul Blanchfield .
• “Gross profit margin for the third quarter was 68.2%, an increase of 109 basis points…offset in part by higher contracted material, freight and overhead costs.” – CFO Robert Marshall .
• “We are narrowing our view of [FY24] revenue to $1.51–$1.52 billion…[and] adjusted EPS…to $6.65–$6.70…[reflecting] timing differences…[and] near‑term financial impacts from organizational changes…creating ~$0.02 benefit in Q4 that…reverse in 2025.” – CFO .
• “PYLARIFY calendar year 2025 payment rate is…effectively the same as its existing payment rate for Medicare FFS patients in the hospital outpatient setting.” – President Paul Blanchfield .

Q&A Highlights

• PYLARIFY sequential dynamics: Q3 decline reflects seasonality (summer holidays and staffing) plus net price compression from strategic partnerships; majority of accounts grew volumes; management expects Q4 sequential revenue improvement for PYLARIFY and overall .
• CMS OPPS rule: Management affirmed addendum B shows 2025 PYLARIFY payment rate steady vs current, sustaining separate payment for eligible diagnostic radiopharmaceuticals; CMS open to ASP‑based payment when ASP reporting becomes widespread .
• 4Q bridge: Revenue to improve sequentially on PYLARIFY; EPS to step down on higher R&D; DEFINITY/spec upside not forecast due to external competitor supply uncertainty .
• Strategic contracting cadence: Partnerships ramped through 2024; net price impact normalizes through 1H25; long‑term multi‑year agreements support share defense .
• PNT2002: OS remains confounded by high crossover; subset analyses and agency dialogue continue with partner Lilly; primary endpoint (rPFS) met; QoL benefits noted .

Estimates Context

• Wall Street consensus estimates from S&P Global (revenue, EPS, EBITDA) were not available at time of analysis due to data access limits; therefore, we cannot quantify beat/miss vs consensus for Q3 2024 or provide FY24 consensus comparisons at this time. Values retrieved from S&P Global are unavailable.

Key Takeaways for Investors

• Core franchise resilience: PYLARIFY remains the category leader with $259.8M in Q3 and is expected to sustain a $1B+ run‑rate in 2025; DEFINITY delivered solid double‑digit growth .
• Policy derisking: CMS’s final OPPS rule preserves separate payment for PYLARIFY in Medicare FFS hospital outpatient, with 2025 rate aligned to current—reducing reimbursement uncertainty into 2025 .
• Near‑term cadence: Expect stronger Q4 revenue vs Q3 on PYLARIFY volumes, but lower EPS on elevated R&D; margin mix remains favorable, but OpEx is stepping up for pipeline .
• Pipeline optionality: Alzheimer’s diagnostics (MK‑6240 2025 NDA; NAV‑4694 2026 NDA) target a $1.5B+ TAM by decade‑end; oncology radiotherapeutics (incl. PNT2002) provide longer‑dated upside pending regulatory clarity .
• Balance sheet and capital returns: $866.4M cash plus undrawn $350M revolver supports BD and buybacks; $250M repurchase authorization signals confidence and offers downside support .
• Watch pricing normalization: Strategic partnership‑driven net price compression in Q3 should annualize and normalize through 1H25—monitor pricing trajectory vs volume growth as contracts mature .
• Regulatory next steps: Track FDA interactions on PNT2002 as crossover‑confounded OS remains the gating item; additional CMS details on ASP path for diagnostics could further enhance visibility .

Appendix: Additional Detail

• Convertible notes: 2027 $575M converts reclassified to current liability as stock traded above 130% of conversion price for >20 of last 30 trading days in Q3; management emphasized ample liquidity and access to capital .
• Cash flow: Q3 OCF $175.1M; FCF $159.3M; investments included RM2 acquisition and milestones for NAV‑4694; equity investment in Radiopharm .
• Segment notes: “Strategic partnerships & other” more than doubled YoY, aided by MK‑6240 and NAV‑4694 investigational usage and a Progenics‑related milestone .