Zacks Small Cap Research – LNTH: Sale of SPECT Tilts Growth to Novel Radiopharmaceuticals – Go Health Pro

Zacks Small Cap Research – LNTH: Sale of SPECT Tilts Growth to Novel Radiopharmaceuticals – Go Health Pro

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By John Vandermosten, CFA

NASDAQ:LNTH

READ THE FULL LNTH RESEARCH REPORT

Lantheus Holdings, Inc. (NASDAQ:LNTH) reported first quarter 2025 financial and operational results on May 7th, producing sales of $373 million, a 1% increase over 1Q:24 levels. Pylarify, TechneLite, and Other Precision Diagnostics saw a year over year decline which was more than offset by an increase in revenue from strategic partnerships and Definity sales. Free cash flow generation was $100 million in the quarter and cash increased sequentially to $939 million. Other important events during the quarter and to date include the acquisition of Evergreen Theragnostics, the announcement of the intent to acquire Life Molecular Imaging (LMI), and the intent to sell the single photon emission computed tomography (SPECT) business to SHINE Technologies. Other reported events include the achievement of primary endpoints for MK-6240 and attendance at multiple investor and scientific conferences.

Along with its first quarter report, the company updated its guidance. It calls for revenue growth in the low single digit range and earnings growth of a few percentage points higher. The new numbers include the impact from Evergreen but do not include LMI nor the divestiture of the SPECT business. This equates to revenue guidance of $1.550 to $1.585 billion and adjusted earnings per share guidance of $6.60 to $6.70. We anticipate that Lantheus will update these expectations as conditions evolve.

1Q:25 Financial and Operational Results

Lantheus announced first quarter 2025 results in a May 7th press release in conjunction with a conference call before the market open. A slide deck was provided to guide investors through the event. The company subsequently filed Form 10-Q with the SEC. First quarter revenues totaled $373 million producing GAAP earnings of $1.02 per share and adjusted earnings of $1.53 per share.

For the quarter ending March 31st, 2025 relative to the same prior year period:

  • Net sales were $373 million up 1% from $370 million. The increase was driven by a 65% increase in Strategic Partnerships and Other and a 3% increase in Definity sales partially offset by a fractional decline in Pylarify sales, a 9% fall in TechneLite due to a molybdenum supply constraint and an 8% contraction in Other Precision Diagnostics. Pass through status expired for Pylarify this quarter and while additional reimbursement is available through the recent CMS rule change and elimination of the transition pricing window, Medicare amounts are now reimbursed at mean unit cost which is lower than prior levels. Other important drivers for 1Q:25 revenues include the recognition of a $2 million milestone for Flyrcado and revenue generated from sales of NAV-4694 and MK-6240 for investigational use;

  • Cost of goods sold rose 5% to $135 million and gross margin was impacted by a decrease in Pylarify price and an increase in contracted material and overhead costs partially offset by an increase in Pylarify volume. Other offsets include Curium royalty revenue and milestone revenue from Flyrcado. Product gross profit margin fell to 62.7% from 64.7%[1];

  • Sales and marketing expenses were $42.5 million, down 7% from $45.5 million as expenses lapped a brand campaign launch for Pylarify in the prior year and the absence of launch support for PNT2002;

  • General and administrative expenses were $56.8 million vs. $47.9 million, increasing 19%. The change was attributable to higher professional fees, stock compensation and employee-related costs;

  • Research and development expenses were $36.3 million, down 24% from $48.0 million. The decrease was driven by the presence of an upfront payment in the prior year period that did not recur and offset by increases in project costs and new hires;

  • Interest expense was $4.8 million, slightly less than prior year levels of $4.9 million and related to the 2.625% convertible senior notes due in 2027 and cost of maintaining access to the 2022 revolving facility;

  • There was no contribution from sale of assets compared to a $6.2 million gain;

  • Investment in equity securities was a net unrealized loss of $14.9 million related to the carrying value of Perspective and Radiopharm’s common stock;

  • Other income was ($14.1) million vs. ($8.8) million;

  • Income tax of $23.6 million represents a 24.4% tax rate with deferred and state income taxes explaining the difference between it and the US statutory rate;

  • GAAP net income was $72.9 million or $1.02 per diluted share. Adjusted net income as presented by Lantheus was $109.5 million or $1.53 per diluted share. The difference between the two is explained in part by the removal of stock and incentive plan compensation, strategic collaboration and license costs, amortization of acquired intangible assets and unrealized loss in investment securities offset by the income tax effect of non-GAAP adjustments. Other minor line items also contributed to the difference between GAAP and adjusted results.

On March 31st, 2025, Lantheus held $939 million in cash and equivalents compared to $913 million at the end of 2024. Free cash flow for 1Q:25 was $100 million vs. $119 million in the same prior year quarter. Updated guidance for 2025 calls for revenues of $1.550 to $1.585 billion a 0.6% reduction at the midpoint and EPS of $6.60 to $6.70, a 6.3% reduction at the midpoint. There was no modification to previous free cash flow guidance of $550 to $600 million which was provided in the 4Q:24 slide deck.

Sale of SPECT Business

Just prior to the 1Q:25 earnings report, Lantheus announced its intent to sell the single photon emission computed tomography (SPECT) business to Illuminated Holdings, Inc., the parent company of SHINE Technologies, LLC. The amount of the anticipated deal was not disclosed; however, the renumeration includes an upfront cash payment, a note convertible into SHINE preferred stock and additional consideration including earnout milestones. The SPECT business has been part of the company since its earliest days and includes Lantheus’ technetium 99m and Xenon (Xe-133) gas businesses. The technetium product line includes TechneLite, NeuroLite and CardioLite. The deal also includes real estate on the North Billerica campus that manufactures these products and the SPECT-related Canadian operations.

The divestiture of this business will help improve overall margins and corporate growth trajectory and allow Lantheus to focus its attention on novel radiopharmaceutical products and their development. We anticipate that the funds received from SHINE will enhance Lantheus’ ability to further invest in development products and support existing assets in the pipeline. The deal is not expected to close until near year end. Assumptions in our model assume that there will be no contribution from these assets from January 1st, 2026 onward.

Data Readout for MK-6240

An April 30th press release announced results from Lantheus’ two pivotal studies in MK-6240 for Alzheimer’s Disease (AD). MK-6240 is an F-18 PET radiodiagnostic that images tau proteins in the form of neurofibrillary tangles (NFTs). The data from the studies will be used to submit a new drug application (NDA) to the FDA, which is scheduled for 3Q:25. MK-6240 is being used in clinical trials to guide therapies that address tau tangles. Approval and marketing of the product are expected in 2026 along with the soon to be acquired PI-2620 from LMI. We expect that data from the trial will be available some time in the next few quarters as data is presented in posters and articles at major scientific conferences.

Lantheus anticipates a substantial growth opportunity in AD diagnostics and a total addressable market size of $1.5 billion in 2030 and $2.5 billion by mid-2030. The combination with LMI is expected to advance Lantheus’ entry into the AD market by one year and into the beta amyloid market by two years. This will pave the way for the launch of NAV-4694 and MK-6240. When the LMI acquisition is consummated, Lantheus will immediately have a marketed product, NeuraCeq, and a sales force in place.

Evergreen Theragnostics Acquisition Closes

On January 28th Lantheus announced its intent to acquire private company Evergreen Theragnostics for $250 million in cash plus milestones valued at $752.5 million. The company’s most advanced product, Octevy, is a positron emission tomography (PET) diagnostic for certain neuroendocrine tumors (NETs). It could be a complementary imaging agent for Lantheus’ PNT2003 therapy. Octevy is under review by the FDA and is expected to be approved in time for product commercialization in 2026. Evergreen is developing several other candidates with one in Phase II studies and the others at preclinical stages. Additional information was provided in a Form 8-K filing and webcast. The transaction is expected to be dilutive to earnings following its close due to research and development costs and launch related activities for Octevy. 18 months after close, the contribution of Life Molecular Imaging and Evergreen is expected to be accretive to earnings. Management estimates that the total addressable market for somatostatin NET PET diagnostics is $200 million or 50,000 patients per year. By the next decade this could be $300 to $400 million or 65 to 85 thousand patients.

Beyond its pipeline of diagnostic (Gallium-68) and therapeutic (Lutetium-177) radioisotopes, Evergreen owns a Contract Development and Manufacturing Facility (CDMO) in Springfield, New Jersey and a discovery lab in Cranbury, New Jersey. The CDMO is 14,000 square feet and is certified for good manufacturing practice (GMP) standards. The discovery lab is 6,500 square feet and houses a preclinical facility and vertically integrated laboratory.

Lantheus management expects that Octevy will be approved on a similar timeline to PNT2003 and both can be commercialized as a theranostic pair. This effort will be executed by partners. Evergreen has signed previous agreements for sales and distribution of Octevy with radiopharmacies UPPI and Jubilant Radiopharma. On April 1st, 2025, Lantheus announced that it had completed the acquisition of Evergreen.

Lantheus Pipeline

Corporate Milestones

  • $250 million share repurchase program announced – November 2024

  • Acquisition announcement for Life Molecular Imaging – January 2025

  • Acquisition announcement for Evergreen Theragnostics – January 2025

  • Purchase of additional Radiopharm Theranostics shares – January 2025

  • Sale of SPECT business announced – May 2025

  • Close of Life Molecular Imaging acquisition – May 2025

  • Submit NDA for MK-6240 to FDA for approval in Tau imaging – 3Q:25

  • Completion of SPECT business unit transfer to Shine – year end 2025

  • MK-6240 market launch – 2026

  • NAV-4694 NDA market submission – 2026

  • FDA approval and launch of PNT2003 – 2026

Summary

Lantheus reported first quarter 2025 results exhibiting a slowdown in trends from 2024. Much of the deceleration is due to pricing changes and contracting for Pylarify which should be less impactful in the second half of the year. Other contributors to the tempered growth include the impact from molybdenum supply constraints in the TechneLite business line. There are a number of positive factors which should reaccelerate the revenue trend in the second half of 2025 and in 2026 including market expansion opportunities from using Pylarify in less severe prostate cancer, the addition of NeuraCeq revenues, new sales following approvals of PNT2003, Octevy, MK-6240 and NAV-4694. Lantheus’ focus on faster growing products in the PET space that take advantage of novel active molecules is a strategy shift that is expected to increase the company’s long-term growth. Other important events in the quarter include a data readout from MK-6240 that will support an NDA to be filed later this year. We update our 2024 estimates to reflect the close of the Evergreen acquisition, first quarter actual results and management guidance. After the close of the LMI transaction and folding in the entity’s AD-focused global sales team, Lantheus can immediately launch its own products when approved and gain faster access to formularies and physicians which we expect to contribute to revenues in 2026.

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[1] We calculate gross margin as 1-COGS/(revenues from Pylarify, Definity, Technelite and Other Precision Diagnostics) as reported in company filings. We exclude revenues from Strategic Partnerships and Other from the calculation.

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