NASDAQ:LNTH
READ THE FULL LNTH RESEARCH REPORT
We are initiating coverage of Lantheus Holdings, Inc. (NASDAQ:LNTH) and assign a valuation of $134 per share. This valuation is based on our estimates for continued growth of Pylarify, Definity and TechneLite as well as long term opportunity in Alzheimer’s disease imaging and prostate cancer treatment among other strategic investments. Lantheus is a radiopharmaceutical company that develops its products for diagnostic and therapeutic use primarily in oncology but also in other areas including cardiology. Lantheus’ products are primarily used in Positron Emission Tomography (PET), PET-computed tomography (PET-CT), Single Photon Emission Computed Tomography (SPECT) and ultrasound imaging.
Radiopharmaceuticals are an important tool for both diagnostic and therapeutic applications in oncology. They play a vital role in identifying, staging of and treating the disease. These drugs aid in detecting cancer early, localizing the tumor and determining the extent of the disease for further treatment. Radiopharmaceuticals can also serve as cancer therapy where targeted radiation is delivered to cancer cells.
The company’s most important revenue generator, Pylarify, was approved by the FDA in 2021 as a diagnostic agent to identify prostate-specific membrane antigen (PSMA) positive lesions in men with prostate cancer. Full rights to the product emerged through the acquisition of Progenics by Lantheus in 2020. Following approval, sales of Pylarify surged and are expected to exceed $1 billion in 2024. Revenue growth for this product should benefit from the recent Centers for Medicare and Medicaid Services (CMS) finalized calendar year 2025 reimbursement rule which provides access to Medicare fee for service (FFS) patients, comprising 20% of Pylarify volumes.
Definity is an ultrasound contrast agent which was first launched in 2001. It is the dominant agent in the market for echocardiography and is used for imaging of the left ventricle and in stress echocardiography and myocardial perfusion. Revenue growth for this agent is expected to continue over the medium term. TechneLite is a radiopharmaceutical used in medical imaging that relies on sodium pertechnetate (Tc-99m) to provide a variety of diagnostic scans. Common uses are for brain scans, thyroid imaging, blood pool imaging and urinary bladder imaging. Tc-99m emits gamma radiation that can be detected by SPECT. We anticipate a slight decline in TechneLite revenues as Lantheus orients its growth efforts towards newer, higher margin products.
Beyond these primary revenue drivers, Lantheus has made strategic investments in the next generation of radiopharmaceuticals. This includes the fruits of partnerships with POINT and Perspective, as well as investment in development stage Alzheimer’s disease (AD) imaging products, and cancer treatment. These efforts have been achieved through acquisition of business, licensing rights and strategic agreements. AD diagnosis is a high return endeavor which is expected to expand dramatically due to the approval of several new treatment therapies. Lantheus has acquired two companies that are developing PET imaging agents for β-amyloid and Tau tangles. The investment in AD imaging is particularly attractive given the almost seven million Americans with AD and the recent approval of several AD agents that require a confirmed amyloid pathology. This change is expected to increase the demand for diagnostics such as the ones being developed by the acquired companies.
Lantheus is expanding its exposure to prostate cancer, extending its reach beyond diagnostics to treatment with POINT Biopharma’s PNT2002, which is a potential competitor to Pluvicto. Lantheus also has rights to PNT2003, which is a novel product intended to treat neuroendocrine tumors and a generic alternative to Lutathera. The arrangement that Lantheus has with Perspective Therapeutics also addresses treatment of neuroendocrine tumors. This agreement grants Lantheus the right to negotiate a license for Perspective’s clinical stage alpha (α) therapy which is being developed for both neuroendocrine tumors and prostate cancer.
Key reasons to own Lantheus shares:
- Multiple product exposure with growth or established market position
- Pylarify
- Definity
- TechneLite (Neurolite, Cardiolite)
- GE Health’s flurpiridaz (Flyrcado)
- Infrastructure in place to support existing and new products
- Nuclear handling licenses (federal, state, local)
- Distribution network and supply chain
- Established relationships with nuclear medicine departments
- Establishes Lantheus as a valuable partner for development assets
- Leveraging AI to improve diagnostics
- aPromise AI software to interpret Pylarify images
- Automated Bone Scan Index (aBSI) for metastases detection
- Pipeline of in-development clinical assets
- PNT2002 to treat PSMA-expressing metastatic castration resistant prostate cancer (mCRPC)
- LNTH-2401 68Ga GRPR target in mCRPC and other solid tumors
- MK-6240 to image Tau tangles in AD
- NAV-4694 to image β-amyloid in AD
- Microbubble franchise product extensions with partners
- Favorable Medicare reimbursement rates expected
- CMS allows for separate payment in 2025 for novel radiopharmaceuticals
- Changes reimbursement paradigm
- Supports continued volume growth Pylarify
- Preclinical assets provide long-term revenue opportunity
- LNTH-2402 177Lu GRPR target in mCRPC and other solid tumors
- LNTH-2403 LRRC15 in solid tumors
- LNTH-2404 TROP2 in solid tumors
The initiation report provides an introduction to radiopharmaceuticals, defining the class and discussing the different types of radiation and particles involved. We start with a brief history of the space then describe the diagnostic and therapeutic categories including details regarding the important subcategories of the therapeutic modality including radioligand therapy and radioconjugates. We discuss the most broadly used radionuclide, technetium, and explain how it is sourced and produced. Radiopharmaceuticals require a more refined logistics, management and care compared to other health care products and we describe the considerations required for regulation, transportation and disposal. The report provides an industry review tracing the recent commercial history of radiopharmaceuticals, including new company formation and merger and acquisition activity.
The next section examines the primary end markets for Lantheus’ products including indications in prostate cancer and AD. The section reviews the use of ultrasound enhancing agents which are used to improve echocardiograms. Products and pipeline are next, as we review commercial assets in Lantheus’ portfolio including Pylarify, Definity, CardioLite, NeuroLite, Xenon-133 and the recently approved flurpiridaz, marketed by GE Healthcare. Next is the development pipeline with the POINT assets standing out along the AD agents and other earlier stage candidates.
Peers and competitors are reviewed in the radiopharmaceutical and microbubble spaces. We then provide a summary of historical milestones and background on Lantheus followed by a summary of recent financial performance. Key members of senior management are introduced and risks related to life sciences companies in general and for Lantheus specifically are discussed. We wind down our initiation report with valuation work and a discussion of the assumptions supporting our model. The target price relies on a blend of 2026 EBITDA and EPS multiples that reflect the company’s strong financial condition and anticipated growth rate. We initiate on Lantheus, Inc. with a valuation of $134 per share.
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