NASDAQ:LNTH
Lantheus Holdings, Inc. (NASDAQ:LNTH) announced its intent to acquire Life Molecular Imaging Ltd. (LMI) for $350 million in cash and an additional $400 million in potential earn out and milestone payments. LMI sole commercial product is NeuraCeq, a globally approved[1] F-18 radioactive diagnostic agent for positron emission tomography (PET) imaging of the brain to evaluate β-amyloid neuritic plaque density. Neuraceq was approved in 2014 and is protected by various patents that expire over the years of 2029 to 2032. The deal also includes LMI’s commercialization force and five development candidates including a Tau agent designated PI-2620. Details of the transaction were included in a press release and Form 8-K filing. A conference call was held on January 13th providing additional color. The transaction is expected to close in 2H:25.
If consummated, the acquisition would provide Lantheus with an established beta amyloid imaging agent, a global manufacturing network, a commercialization team which can accelerate the launch of other neuroimaging products and relationships with manufacturers, hospitals, imaging centers and neurologists around the world. The combination is also expected to enhance Lantheus’ R&D capabilities and drive organic revenue growth by 200 to 300 basis points over the next three years. It is anticipated by be accretive to adjusted EPS within twelve months.
LMI revenue for the fiscal year ending September 30, 2024 was R$1,845 million or $96.6 million,[2] of which $36 million represented an upfront payment by Lantheus for sublicensing rights to RM2. NeuraCeq is LMI’s primary source of revenue and grew year on year driven by a 92% increase in doses. Other contributors to topline include demand for LMI’s radiopharmaceuticals in clinical trials and research and development services for clinical research organizations. LMI has 14 active manufacturing sites in the United States and 22 in the EU. The business segment has 138 employees as of the end of the company’s fiscal year.
The surge in sales of NeuraCeq doses was driven by the approvals of two new disease modifying therapies: Kisunla and Leqembi. These monoclonal antibodies are amyloid targeting treatments used to treat Alzheimer’s disease (AD) and are the first new effective products in almost 20 years approved for the condition. In addition to its commercialized product, NeuraCeq, LMI has a pipeline of other radiotracer products that are in various stages of development.
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 Lantheus’ own NAV-4694 and MK-6240 for imaging beta amyloid and Tau respectively. Growth for NeuraCeq is substantial and management has indicated that the recent revenue growth trajectory is about 80% on an annual basis with adoption of new disease modifying therapies driving the demand.
Summary
Our initial take is positive based on the head start this provides Lantheus in entering the neuroimaging space. Rough valuation based on FY2024 results is about 5x product revenues. At first glance this appears steep, but when accounting for the shift forward in sales for in-development products, global relationships in the AD imaging space, the pipeline of products and the tremendous growth anticipated in this area, it appears to be more reasonable. With the approval of two amyloid beta targeting antibodies and increased interest in development of other AD agents, demand for biomarker imaging has increased dramatically. NeuraCeq saw a 92% increase in unit sales in 2024 in a market that was only about $300 million.[3] This has initiated an opportunity for a total addressable market of $1.5 billion by 2030 and $2.5 billion by mid-2030 and an aging population, greater penetration of disease modifying therapies and additional new products are also expected to contribute to growth in the AD space.
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[1] NeuraCeq is commercially approved in the US, Canada, Europe, the UK Switzerland, China, Japan, South Korea and Japan. The product is supplied to Australia on a named patient basis, to Chile according to local legislation and Brazil by simplified notification scheme.
[2] This amount is calculated by using the January 2024 exchange rate of 19.09 South African Rand to 1 US dollar.
[3] This estimate is based on NeuraCeq holding a 20% market share.
