Perspective Therapeutics, Inc. (CATX) Q3 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the IsoRay Third Quarter Fiscal 2019 Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. [Operator Instructions]. At this time, it’s my pleasure to turn the floor over to Mr. Mark Levin. Sir, the floor is yours.

Thank you, operator. Good afternoon and thank you for joining us today for the IsoRay fiscal third quarter 2019 earnings call for the quarter ended March 31, 2019. Before we get started, I will take a few minutes to read the forward-looking statements. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. When used in this conference call, words such as will, believe, expect, anticipate, encourage, and similar expressions as they relate to the company or its management as well as assumptions made by and information currently available to the company’s management identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances and the company undertakes no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether resulting from such changes, new information, subsequent events or otherwise. Additional information concerning forward-looking statements is contained under the heading of Safe Harbor statement and Risk Factors listed from time-to-time in the company's filings with the Securities and Exchange Commission. Statements made on today's call are as of today, May 9, 2019. We will begin today's call with Lori Woods, IsoRay's Chief Executive Officer. And then Jonathan Hunt, IsoRay's Chief Financial Officer, who will discuss the fiscal third quarter financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. I will now turn the call over to Lori Woods.

Thank you, Mark. Good afternoon, and thank you for joining us today for IsoRay’s fiscal third quarter 2019 earnings conference call for the quarter ended March 31, 2019. I will begin our call with some highlights from the third quarter’s financial results and then I will give some updates on the recently launched products as well as other developments and ongoing strategic initiatives. I will then turn the call over to IsoRay’s Chief Financial Officer, Jonathan Hunt, who will provide a more detailed review of the fiscal third quarter 2019 financial results. We are pleased to report another quarter of record revenue, gross margin and gross profit. This fiscal third quarter of 2019 marks our eighth consecutive quarter of double-digit revenue growth with sales growing 22% over the year-ago quarter. Once again, the key driver of growth this quarter was IsoRay’s core prostate brachytherapy revenue which increased 30% versus the fiscal third quarter of 2018. We continue to see our sales and marketing strategies drive increased adoption, awareness and utilization of our proprietary isotope Cesium-131 in the treatment of patients battling prostate cancer. This quarter’s growth is encouraging as the results speak to our strategic initiative and the focus we have on growing our leadership position within the prostate brachytherapy market. These efforts such as complementary product introductions and improved marketing and media are driving awareness to both clinicians and patients. We are seeing the payoff in the resulting opportunities to develop new customers as well as further expand our relationship with existing customers. We also believe that the research growth trajectory of our prostate business is resulting from physicians, payers and patients increasingly considering the overall brachytherapy treatment advantages, driven in part by our consistent messaging and focused market outreach. It is our sense that building awareness of Cesium-131’s benefits including cost, faster resolving side effects and overall improvement in the quality of life for patients when compared to non-brachytherapy treatment options is yielding results. We believe this further serves our positioning as we see the healthcare industry experiencing increased pressure to deliver measurably effective healthcare with respect to outcomes and cost. As a result, we expect we will continue to benefit from opportunities for prostate brachytherapy in general and for Cesium-131 in particular as we continue to build awareness of our proprietary isotope. One key recent product introduction that continues to receive a lot of interest from clinicians is Blu Build, which we have launched in a limited capacity to date. Recall that the first patients treated by Dr. David Marshall at Hollings Cancer Center and subsequently by Dr. William Tomlinson at AnMed Health has helped generate more interest in the product from an increasing portion of the broader radiation oncology community. We believe this launch was particularly well served by the extensive media coverage and saw media in adjacent markets also pick up the story. It is our sense that the resulting interest from doctors and patients asking about treatment availability is yet another sign of the effectiveness of our new strategic communications initiative. Further, theirs and others feedback to date has been invaluable as we are always seeking to build on current products by making minor tweaks and adjustments in anticipation of expanding the commercial launch of Blu Build. You may recall that we discussed our belief that Blu Build increases our market opportunity in prostate brachytherapy as it serves as our entrée into the customization segment of the market. Our medical technology advancement allows us to enter that segment where we have essentially had no presence previously. We continue to estimate that Blu Build expands our domestic prostate cancer opportunity by $25 million to approximately $100 million. Another example of IsoRay’s strategic focus and positioning on industry leadership to fuel growth in the market was our recent announcement of IsoRay’s brachytherapy training collaboration with a prestigious Texas Oncology group. I’m hopeful you read that announcement. You can see it posted on the press release section of our Web site. The mission of the collaboration is to develop a program to train the next generation of brachytherapists which builds on our message and serves our positioning as industry leaders. Key to the collaboration is the deep and unique perspective of Dr. Bernard Taylor, director of radiation oncology at Texas Oncology. Dr. Taylor is a seasoned leader in prostate brachytherapy and a prostate cancer survivor himself who was treated with brachytherapy and now exclusively uses Cesium-131 brachytherapy. It is also key to note that Dr. Taylor not only sees significant benefits in using Cesium-131 brachytherapy but he also states, and I quote “In fact, I believe research will ultimately demonstrate that Cesium-131 will make a difference in the treatment of other cancers throughout the body.” We believe that the commitment to educate and train more physicians on the benefits of brachytherapy and Cesium-131 by utilizing the voices of leading influential physicians, like Dr. Taylor, will have two important results. It will expand adoption of Cesium-131 while also giving more prostate cancer patients access to this unique isotope which we believe represents the best treatment option available. The brachytherapy training program will include case observations, practice on artificial prostates, physics planning and real-time procedure methodology. Additionally, Dr. Taylor will continue to host periodic training webinars on brachytherapy, the first of which was held on April 17 and co-hosted by Dr. Atef Omari, medical physicist at Bon Secours Health Systems in Maryland. This first webinar was focused on switching isotopes to Cesium-131 from other commonly used isotopes such as iodine and palladium. Dr. Taylor gave a compelling and candid presentation of the superior benefits of Cesium-131 over other isotopes in both mono and combination therapy and how to seamlessly make the switch as he did in 2018. The replay of the webinar is available on our Web site and we look forward to future webinars on other key topics within brachytherapy and Cesium-131. As we look forward to our participation in this year’s ABS conference in June, we will be furthering our efforts to build awareness for IsoRay’s leadership in brachytherapy with our unique Cesium-131 isotope. Our plans include populating our booth with product literature and well versed staff to engage doctors regarding Cesium-131’s many benefits and applications throughout the body. We also expect to further awareness of our entry into the customized prostate cancer market with Blu Build. In addition, we will be hosting key events for physicians to become better acquainted with Cesium-131 and its many applications. We will be reporting back to you regarding what we believe will be a successful effort to advance our strategic initiatives to serve our market goals. Turning to our partners at GT Medical Technologies in GammaTile Therapy. We were pleased to see the initial positive results from the first three patients treated with GammaTile to date, all of whom were treated the University of Minnesota in February and March. GT Medical Technologies tells us they are now commercially launched and are continuing their efforts to help clinicians and facilities navigate the complex systems dealing with obtaining their radioactive license amendments and the administrative requirements associated with launching a new product. These of course are integral steps as they work toward expanded commercial adoption of GammaTile. Now, I will turn the call over to Jonathan to review the results of our fiscal third quarter.

Thank you, Lori. I am going to discuss some of the financial information that was contained in our press release for the fiscal third quarter ended March 31, 2019 that we released a short while ago. We anticipate that our Form 10-Q will be filed with the SEC on or around May 14. Revenue for the third quarter ended March 31, 2019 grew 22% to a record $1.92 million versus $1.57 million for the same period last year. Third quarter revenue was comprised of 88% for prostate brachytherapy with the balance or 12% of revenue attributed to other brachytherapy, the majority of which is sales to treat brain cancer, including the initial sales of GammaTile Therapy to GT Medical Technologies, which Lori spoke of earlier. Gross profit as a percentage of revenues for the third quarter ended March 31, 2019 increased to a record 45.7% compared to 38.7% for the quarter ended March 31, 2018 and 40.2% in the fiscal second quarter of 2019. The gross margin increase was primarily driven by higher sales, continued operating efficiencies as well as increased isotope unit cost primarily resulting from the adjustment to our isotope supply chain we made at the end of calendar year 2018. Record third quarter gross profit dollars of $879,000 increased 44% when compared to the same period last year. Total operating expenses consisting of sales and marketing, general and administrative and research and development were $2.04 million in the quarter versus $1.95 million in fiscal third quarter 2018. Total R&D expense decreased 37% versus the comparable prior year quarter to $299,000. Collaborative research expenses related to GammaTile Therapy totaled $156,000 in the fiscal third quarter of 2018 which preceded the July 2018 FDA 510(k) approval of GammaTile Therapy and those expenses declined to $0 this quarter. This accounted for the majority of the year-on-year decline in total R&D expense in the quarter. Sales and marketing expenses were $645,000 in the fiscal third quarter of 2019, representing a 7% decrease versus a comparable prior year period. G&A expenses increased 40% to $1.1 million versus fiscal third quarter 2018, but were slightly down from the second quarter of fiscal year 2019 ended December 31, 2018. The year-over-year increase in G&A expenses included approximately $80,000 related to the conclusion of an appealed Washington State hazardous substance tax audit, $50,000 accrued based on negotiations with a former consultant, and approximately $130,000 related to the search and hiring of new employees and increased payroll and benefits expenses due to increased headcount versus the prior year comparable period. IsoRay posted a net loss of $1.13 million for the three months ended March 31, 2019 compared to a net loss of $1.33 million for the quarter ended March 31, 2018. The net loss per diluted share was $0.02 or flat compared to the net loss of $0.02 for the quarter ended March 31, 2018. The weighted average share counts were 67.3 million at the end of fiscal third quarter 2019 versus 55.1 million in the prior year comparable period. As of March 31, 2019, the company had cash, cash equivalents and certificates of deposit that totaled $6.39 million. The company has zero long-term debt. I will now turn the call back over to Lori.

Thank you, Jonathan. That concludes our prepared remarks. The operator will now take questions from our analysts and institutional investors.

Thank you. The floor is now open for your questions. [Operator Instructions]. We’ll take our first question from Ed Woo with Ascendant Capital.

Yes. I saw that you guys recently extended your contract with GT Medical. Has there been any big change in terms?

Hi, Ed. Good afternoon. Yes, we amended our agreement with GT Medical Technologies on April 26. And the reason we did that was because we have now transferred – we’ve now done the design transfer and handed off all of the work to GT Medical Technologies. And post handing off the design transfer, we are helping GammaTile do some process improvement work. And so we’ve changed the agreement so that it will allow for that and allow for us to do some consulting work with them that we bill on a time and materials basis based on market-based rates.

Great. Well, thanks for answering my question and I wish you good luck.

Thanks so much, Ed.

At this time, there appears to be no further questions. I’d like to turn the call back over to Ms. Woods for any closing comments.

Thank you all for joining us today. We understand that there’s multiple companies reporting this afternoon and that there are number of scheduling conflicts. We look forward to talking to you on our fourth quarter earnings conference call in September. Thanks again.

This does conclude today’s teleconference. We appreciate your participation. You may disconnect at this time and have a great day.