Telix Pharmaceuticals Limited (TLX) Q2 2023 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Telix Second Quarter 2023 Results and Business Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kyahn Williamson, SVP of Investor Relations and Corporate Communications. Kyahn, you may proceed.

Well, good morning, and welcome to our investor call today to discuss the Appendix 4C and activity report lodged with the ASX after market close. I'm joined today by Dr. Christian Behrenbruch, our Group CEO; Darren Smith, our Group CFO; and Colin Hayward, our Group Chief Medical Officer. Today, we'll be talking you through the presentation that was lodged on the ASX yesterday afternoon, which is also displayed on the webcast. To those joining by phone, we will give [ a word ] on each slide change, and then we'll open up to Q&A at the end. Just moving to the next slide, please, Q2 operational highlights. The achievements through this quarter again demonstrate how we are making progress across the pipeline, delivering a strong commercial performance and double-digit revenue growth from sales of Illuccix through the U.S. and our other regions. Simultaneously, there's a major organizational focus on preparing for the launch of the 2 new imaging agents in brain and kidney cancer next year, and some really exciting progress across the clinical pipeline, advancing prostate cancer therapy program, scaling new indications for our CT program and progress with our Chinese partner, Grand Pharma in terms of advancing our clinical programs in China. Two acquisitions are Lightpoint Medical and Dedicaid AI platform adds to our late-stage product pipeline and further differentiate and deepen our product offering in the urology field, complementing our prostate and kidney programs. We also completed Stage 1 of the build-out of the production facility in Brussels South, a very important pillar of our growth strategy and evolution for a vertically integrated business. Next slide, please. I won't talk too much about the key financial highlights. You can see the figures here, but it certainly demonstrates the trend in the past 2 quarters has continued with the growth in revenue, our steady gross margin and improved cash balance in what is our third consecutive quarter of positive operating cash inflow. Darren will talk through these results in more detail. But first, I'll hand over to Chris to kick off with some color on the commercial performance for the quarter.

Yes. Good morning, everybody. Thank you very much for attending this webinar today. If we could please move on to Slide 7. So as you can see, the continued quarter-on-quarter growth trend, particularly for the U.S. market, has certainly delivered again this quarter. We are up 19% for the quarter to AUD 116 million or USD 77.6 million on the prior quarter. Actually all operating segments of the business, APAC and Europe are ahead of our internal plan. So we're really starting to see the overall commercialization momentum of Illuccix build. And I think that's reflective of the adoption and utility of PSMA imaging globally. We expect this trajectory to continue. We don't see any real signs of abatement. We feel that our marketing strategy is continuing to capture market share. We're getting a clear message out about our differentiation, particularly around clinical differentiation, which has also started to be reflected in the practice guidelines. We continue to get very positive feedback on our customer service and our overall customer approach. So through a combination of continued white space prosecution and basically new customer acquisition, we feel that we've got a steady trajectory ahead of us. Moving on to Slide #8. I think this is just a really important slide to remind listeners that this is an evolving field. And as we get more clinical experience and we have the opportunity to take comparative products, it's become clear that not all PSMA imaging is created equal and there are attributes of the various products that are either in the market or proximal to market that are certainly unique and differentiated. One of the key messages that we've been putting out there, which is very much starting to align with the practice guidelines is that the additional care is warranted when using F-18 based products, F-18 PSMA products. We obviously recognize that there's diagnostic utility there, but there's certainly a need for patient and physician education around some of the consequences of using F-18 based products. So we're really hanging our hat on not just our supply chain and distribution reliability, which we believe is best in the industry, but really also that clinical reliability and dependency as well. And we feel that's a message that's resonating well with our customer base. And certainly, from a peer review literature and practice guidelines perspective, this is certainly coming into line with our understanding. I'll now hand over to Darren to give you a little bit more of a deep dive into our financial results for the quarter. Darren, over to you.

Thanks, Chris. Now turning to Slide 10. Today's second quarter 4C presents Telix's third consecutive quarter of positive cash flow from operations. The $10.8 million generated during this quarter represents an $8.4 million improvement on the prior quarter. This cash flow increased delicate cash on hand to a respective $131.7 million being $10.4 million higher than at the end of March. The graph at the bottom right of the slide highlights the key cash movements during this quarter. Firstly, Telix continued revenue growth of 20% for the quarter, plus improved cash collection growth customers received $29 million higher than the prior quarter to a total of $112.2 million. This is a 35% improvement. The cash receipt improvement was offset by a number of key costs, one being the payment of cost of goods being at $10.2 million higher, reflecting the growth in sales volume. Operating costs being $3.5 million higher to support sales growth, an additional $2.1 million directed to support the regulatory submissions of 250-CDx and 101-CDx and the $5.8 million payment for the 2022 U.S. income tax. Now turning to Slide 11 and Telix's profit and loss performance. On the back of a healthy revenue growth, Telix's commercial business continues to focus on extracting incremental improvement through the management and control of its expenditure base. Those represented in the top right graph, the gross margin has incrementally improved from 63% in quarter 1 to 64% in quarter 2, reflecting volume-related efficiencies. Additionally, operating expenditure as a percentage of sales has improved or reduced to 25% in quarter 2 versus 28% in quarter 1. Turning to our product development programs. During quarter 2, we have continued to invest strongly into our late-stage assets in line with plan. Approximately 80% of this quarter's investments being focused on supporting the regulatory submissions and the manufacturing scale-up of 250-CDx and 101-CDx. Also included in this investment is the commencement of the prospect global clinical study. Now turning to Slide 12. We can see that Telix's financial performance continues to improve quarter-on-quarter. This is evident and supported by strong and steady revenue growth over 5 quarters since the commencement of sales. Quarter 2 revenue of $120.7 million represented 20% growth quarter-on-quarter, and an annualized sales rate of $480 million. Secondly, positive operational cash flow for the third consecutive quarter and growing. This clearly demonstrates that Telix can self-fund its product development activities through its commercial operations. Third, our adjusted EBITDAR for the fourth consecutive quarter is positive and growing, having increased 24% over the previous quarter to $45.6 million. This result has been driven by the revenue growth in the management and control of expenditure as a percentage of revenue. Finally, Telix increased its cash on hand balance over the quarter by $10.3 million to finish at $131.7 million at the end of June. Together, these financial metrics place Telix in a sound financial position to prosecute its product development activities and plans. I'll now hand you back to Chris to take you through our product development progress in a little bit more detail. Thank you.

Thanks, Darren, for the comprehensive summary. So before I let Colin lose on some of the more interesting program updates, I know there's a lot of interest in how we're progressing on the 2 follow-on imaging products. So just on Slide 14. And Colin, you may choose to make some comments when we transition, but we presented a lot of new data over the past, I'd say, 2 quarters. It's been very gratifying to see the sort of continued release of updates around the utility of the TLX250-CDx program for renal cancer. We see utility in this in a wide variety of settings from [ instant ] renal mass detection to surgical staging and certainly, the ability to detect both localized and metastatic disease is a compelling attribute of this product. We're making really good progress towards our BLA filing, which is still expected to take place this year. We just recently had a meeting with the FDA to review our entire BLA submission plan, and was a very satisfactory meeting with clear guidance, and I think we're in good track to progress that filing with no further clinical data required. We are also launching an expanded access program. This is an important pre-commercial activity. It's part of our breakthrough designation in the United States, but it's also, I think, good practice in terms of maintaining the momentum and availability of this very important asset to patients. So we're really delighted about that. We've launched in Europe, and U.S. and Australia are expected to follow in the next couple of weeks. Also on Slide 15, a little snapshot of our glioma program. This is an under -- sort of an under discussed, perhaps underappreciated program, but we're really excited that we actually have 2 drug approvals to file this year. Again, this program has made great strides over the last couple of weeks. We have had a pre-NDA meeting with the FDA, and we really understand the pathway that we need to take for this, and we're expecting a submission in the next few months for this asset as well. It's initially a fairly small market opportunity because our indication will be quite narrowly focused but we see tremendous opportunity to expand the utility of this product more generally into CNS malignancies. It has an orphan designation. And as I said, the regulatory pathway from the U.S. perspective has been well mapped out. So we're really excited about the prospect of these 2 further regulatory submissions in the second half of this year. And we certainly scaled up our workforce and our commercial team to be ready for these products. Colin, maybe I'll hand over to you now just to do some highlights. Obviously, any other comments you want to make about the ZIRCON experience.

Of course, well, even the FET experience as well, and I think that utility in that post progression setting where MRI really doesn't do a great job with where I get a lot of interest from sites around the U.S. who are very eager to get this on board. But if we can move to Slide 16, really based on unprecedented sensitivity of specificity in ZIRCON. And the fact that we see this continue through the very small renal matters and as per the SNMMI presentation from [ Karen Kelley ] that we see that we're detecting disease outside of the kidneys as well. It becomes a lot of interest in utilizing this product not just for imaging such as in the ZIRDOSE-China study, where we've had our first patients dosed, but also in therapeutics, of course. Heavily in renal cancer with STARSTRUCK and STARLITE studies. But also in STARSTRUCK and STARBURST in other areas where CA9 won't be expressed, and I'll touch on those 2 studies very shortly. As mentioned earlier by Darren, the prostate cancer therapeutic studies are also gaining momentum. The 30 patients recruited in the ProstACT SELECT. I've shown you before how well the antibody targets tumor and how long that activity is residualized into that tumor. And so the ProstACT GLOBAL study, the sites are onboarding and start-up underway right now. Not forgetting GBM and TLX-101 in terms of the therapeutic programs there, the IPAX-2 study, it's open now in all sites and is actively screening patients and we hope to be able to produce some news view soon on that first patient being dosed. But also with the IPAX-Linz study -- investigator-led study, continuing the work of the original IPAX study in the relapsed refractory setting for patients and over 50% recruitment there. And if we look at rare diseases, then the TLX66 in pediatric leukemias in the U.K. study is about to start, and we are also preparing a Phase II study in AML in Australia for this program. Now let me go back to the STARBURST study with Slide 17. This is one of my most exciting studies this year. It's a very simple study. All good things are very simple. Imaging patients who have a high potential for CA9 expression. We know CA9 is almost ubiquitously expressed in clear cell renal cancer, but we know from the literature, I encourage you to go and look into PubMed CA9 and other tumor types, it's heavily expressed in a number of other tumor types, particularly things like head and neck cancer, pancreatic cancer. It's a market for hypoxia. So this study is open and recruiting now. And it's doing just that, it's examining the potential to identify CA9 in other tumor types, and this complements well our investigator study program as well in triple-negative breast cancer and bladder cancer. And of course, the beauty of Theranostics is, if we can get the zirconium type girentuximab to the tumor side, then, of course, we can get therapeutic girentuximab, therapeutic isotopes in different tumor types. So this study really could open up the potential for CA9 as a pan tumor target. If we go to Slide 18, then you can see the rationale for doing the study, which I've talked about before with you. It's a collaboration with Merck KGaA, with their DNA damage repair inhibitor peposertib. The combination of that and radiopharmaceuticals with Lutetium 250, we can see that it has a very good effect in the preclinical models. So our first patients have been dosed in this study, and this includes a renal cohort, but also a general CA9 cohort as well. So really understanding whether we're going to be able to target renal cancer and combine radiopharmaceuticals with DNA damage repair inhibitors and complementing well also the STARLITE studies, which look at the combination of Lutetium girentuximab to potentially enhance immuno-oncology and the STARLITE studies are again active as well. So whilst you can see we're looking at CA9 in other tumor types, we're heavily within the renal space, we're heavily within prostate, within the prostate program of studies and really showing our leadership within GE oncology. And I'll hand over to Chris to continue that.

Yes. Thanks, Colin. So I think it's helpful to visualize the 250 therapy program that's really having a wavefront of 4 studies. The 2 STARLITE studies, which are understanding combination, immunotherapy and STARSTRUCK study, which is really looking at DNA damage repair inhibition, and it's a pan-cancer study. And then it's all kind of tied together with the STARBURST study, which is really about not just looking at renal cancer, but going beyond renal cancer and where could these therapeutic modalities play a role. So it's really gratifying to see all of these studies, they're all up and running. They're all patients. They have a ton of investigator interest. And really over the next 12 months, these studies are going to generate a ton of important data about how we prosecute a pivotal trial strategy for the 250 therapy program. I think as Colin pointed out, it's really important to understand these products are fair agnostic. So every time we do an imaging study and a new cancer type with zirconium are getting the dosimetry data to decide whether it's worth pursuing a therapeutic radionuclide strategy in those patients. So hats off to the clinical team, it's been a really strong quarter of progress. So just moving on to Slide 19. This is starting to show the evolution of the strategy for Telix. And I'll talk a little bit more in a second about some of the acquisitions that we've made, but there's kind of an elephant in the room with Illuccix, which is the 2 major indications for Illuccix are high risk in prior to interventions or let's say, a prostatectomy and then a biochemical recurrence setting. And those 2 indications for Illuccix book end a procedure, which is in most places or at least in the United States to prostatectomy. And so what we really see is the opportunity to engage with the urologist as a key stakeholder and to make sure that we are bringing the benefit of Illuccix into the operating figure. And so for quite a while now, we've had a number of collaborations over the last 2 to 3 years. The Lightpoint relationship actually started off as a collaboration. And we're also really excited about our relationship with Mauna Kea Technologies for endomicroscopy, which is again about doing assessment of pathology in real time in the operating theater using molecular imaging tracers. But the kind of common theme there is how do we bring molecular imaging into the operating season. And the urologist is such a key stakeholder in the use of PSMA imaging. We think this is a really worthwhile clinical and commercial objective that's going to have significant impact on patient outcomes. And so what you can start to see as Telix grows and evolve is we're building a business that's going to go from initial diagnosis and staging, got a whole bunch of current and future indications there that can continue to grow Illuccix, the 250 program, the 250 imaging program comes in very elegantly behind that. We then want to take the benefit of that data into the operating theater. That's where -- for example, Lightpoint comes in. And then at the back end of the disease progression or as we move more towards a systemic disease progression, that's been, again, with both respect to the prostate and the renal programs, we've got those systemic therapies there. So it's really about building that continuity of solutions across urology care. And then underpinning this really as a platform technology, it's clearly to move this information around and to provide the clinical decision support, we need to have tools. This is not about eyeballing images anymore. This is about looking for changes, this is about quantifying things. So it's about looking at the map of disease and in the best decisions about how to progress the patient's treatment forward. And that's why decision support and AI tools are so important. And again, we've made some significant investments there. So moving on to Slide 20. I have to tell you as a bit of a technology node, this is an acquisition that I think is going to be very exciting for the company, the acquisition of Lightpoint and the SENSEI probe. So this is a very small -- a small probe that's about a little bit bigger there or a little bit smaller than the size of a AAA battery. Actually [Technical Difficulty] through the tool port of a robot or a laparoscopic system. It's actually able to be pressed right up against a lymph node or a section of tissue and measure whether or not that tissue contains cancer or not. And we think this is a tool that's going to enhance surgical workflow. We think this is a tool that's going to open up the potential for other types of surgical interventions and perhaps will lead to more widespread adoption of things like [ lymph-node dissection ]. And clearly, there's an opportunity to use this technology to register that preoperative Illuccix with that intraoperative guidance through radiopharmaceutical. And so this is really kind of taking the impact of Illuccix right into the front line of that surgical intervention. We see a clear expansion pathway into renal and bladder cancer. This technology is highly compatible with the future development of our pipeline, particularly TLX250-CDx. So this is a platform technology that we think has just got a lot of longevity for the company. So yes, really exciting acquisition. We're in the process of concluding that transaction, and we look forward to welcoming the Lightpoint team to the company in the next few weeks. Slide 21, I'm not going to talk too much about the AI because we have sort of talked about it in the past and it has been an ongoing development activity at Telix, but we did have the opportunity to make an acquisition. And we think that this acquisition is particularly exciting because what it does is it allows us to build blocks of quality control code that do very specific image analysis functions. And then essentially to use an assembly process that's code-free to build a customized tool for each type of imaging agent that we want to develop. And this is by no means restricted to prostate cancer. We see this as a platform that allows us to super rapidly assemble image analysis tools to cover the entirety of the portfolio. So I'll give you an example of one of the early applications that we'll be working on. It's actually -- the dedicated team has actually developed a needless biopsy tool, which is essentially enabling a PET scan to predict what the Gleason score of the patient is. And what that would potentially mean is that instead of an uncomfortable and sometimes challenging to recover from core biopsy, we can start to assess pathology in vivo in a noninvasive fashion. And again, these are the -- this is not a clinically approved product or a clinically approved application yet, but we're working extremely assertively towards having these tools clinically that [ update ] the strong data sets -- collect a lot of data and to have the regulatory platform around these tools that they may be reliably used in the clinical study. It's a very, very exciting tool. And we think, again, it's going to significantly broaden and expand the utility of our pipeline. And then just to sort of round off some of the corporate development of the business over the last quarter or so, Slide 22. We had a really wonderful event a few weeks back in Brussels at our Seneffe, Brussels South facility, where we launched the -- where we had the opening event for this production site. It's come together really beautifully. It's a 9-clean room production facility. It's in the process of being commissioned for radiation and going through all the quality and validation aspects. This is a key jewel in the crown of the business really from 3 perspectives: One is for European markets to deliver on sort of the post-Illuccix world, we're going to need a facility like this just because of the style and nature of the regulatory manufacturing environment. So for delivering Zirconium and lutetium-based products, this site is vital. The second is, it allows us to focus on the production and availability of key isotopes. It's a very, very large radiation license. So it gives us a ton of optionality in the way in which we work with our supply chain and indeed collaborate with our supply chain. And then third of all, it's going to become a strategic hub for R&D. That means other academics and small companies are going to be able to work with us. We even have a guest suite there to enable other companies to come in and work with us to do manufacturing scale-up of their products. Just to be clear, our aspiration is not to be a CDMO. We partner with CDMOs for that work. But we feel that the process of manufacturing scale-up is really important to control and understand and there's a lot of intellectual property there. And so we want to have a strong handle on the way in which we conduct that. This site is licensed and suitable for both beta emitters and alpha emitters. In fact, they have a dedicated lab for alpha emitters. So this is just a really powerful asset for Telix. As I think Ky said early on in the piece, this is reflective of our strategy becoming where appropriate, more vertically integrated from a manufacturing perspective. All right. Well, just to wrap up and to move on to kind of a bit of forward-looking outlook slides. Slide 24, I think, summarizes the ongoing mission of the company. We aspire to be a household name in urologic oncology with that, as I described, that end-to-end solution from diagnostics and staging through to intervention and systemic therapy. We are really excited to be able to also expand that strength from urologic oncology to neuro-oncology, and we're going to be talking much more about that over the coming weeks and months. The data that we're collecting both on the diagnostic and the therapy side in neuro-oncology, it's very compelling. And so that's going to garner a lot more momentum over the next few quarters. And then that clearly leads to this concept of unlocking the value of our therapy pipeline at the moment [Technical Difficulty] the focus and attention is on Illuccix. The timing's a little bit on our renal program. But really, we still get benchmarked and assessed on our ability to deliver Illuccix, but in fact, the company is far more than that. And so we're excited to continue to unlock the value of that pipeline through compelling clinical data and execution. And so just to wrap up. This is the sort of landscape slide, Slide 25. We put this slide together at the start of the year to sort of map out what the landscape looks like for the business over the course of 2023. As you can see, there's a lot of tick boxes starting to appear there, which is really gratifying. There's obviously the major ones where we're continuing to hit on our financial performance and leadership around our prostate Phase III program, but of course, also getting ready for those 2 additional submissions this year, which is really all eyes on deck -- all hands on deck and all eyes focused from the team to make sure that those things happen in the second half of this year. A lot of other smaller milestones that we've kicked off already. But overall, it's been a very compelling quarter, and we're very pleased to be able to present the outcomes of our efforts to you in this call. With that, I'll pass it back to Ky, I think, for Q&A.

Yes. We'll take questions from the phone line first. So Josh, if you want to -- and now -- so first question from the line of Shane Storey at Wilsons Advisory.

[Operator Instructions] Our first question comes from Shane Storey with Wilsons Advisory.

Chris, I'm going to start with Slide 8, please. There is a chatter in the industry about equivocal [ gallium ] findings using PSMA agents. I appreciate your [ F-18 ] competitors have drawn all of that early attention. But my questions for you are, can you help us understand that issue from an absolute incidence perspective? I mean, how common is that? And then is the data do you think, first, that it's probably emerging, but is it a sufficient quality to start to understand those comparative rates across the, I guess, the 3 different F-18s and your own gallium-based agent? Is that we're planning sort of head-to-head studies to define that?

Yes. Thanks for the question. So we are capturing a lot of data around this. We haven't yet disclosed whether we plan to do a more formalized comparison. Generally, we take the view that more availability of PSMA imaging is good for patients. And so we want to see these agents in widespread use, but also it does afford the company an opportunity to competitively position itself. And we want our customers to understand that when they use Illuccix, they're using the most reliable product, right? And fortunately, there's a growing body of PSMA lutetium that supports that statement. We're starting to see some adjustments to practice guidelines to base awareness that there can be higher, in some cases, much higher false-positive incidence rate, particularly for bony lesions. And the consequence of that is it may lead to patient over treatment. And I don't think anybody has any concern that in a top tier tertiary academic center that that's going to be a problem. But in order for this technology to really have its maximum impact, it's got to be available and usable by everybody. We just think we have a better value proposition there. In terms of your question about whether there's a class effect or not? There clearly is a class effect and it comes down to a very simple thing. When you have F-18 [Technical Difficulty] quite a bit larger than some of the things that we're used to using like FDG. They have a much more kind of a linear structure. Their stability is rather different. And as a class, these F-18-based PSMA agents do degrade than others, some are more stable than others. And the net result is you end up with 3 F-18 ion installation, which gives you [Technical Difficulty]. It's just that users to understand that they're not getting just a targeted imaging agent, but also a significant nonspecific target. And that is significantly accentuated in the whole class.

Right. But it doesn't make you sort of rethink AD&S, say, AD&S set agents for 101?

Oh, no, not at all. So that's a different issue, and it's a different issue from a molecule stability perspective. And also, when we diagnose a patient with glioblastoma or we look at CNS mets, we're looking entirely [Technical Difficulty] looking for annual metrics view is very narrow. So yes, [Technical Difficulty] in fact, FET PET has very poor peripheral uptake altogether. It is a rather brain-specific imaging agent, which is one of the reasons why it's quite useful clinically. So yes, no, I mean F-18-based agents are super important. We're seeing an explosion of F-18 and gallium-based products. So I'm an old-timer nuclear medicine. F-18 production is one of the great achievements of PET. And we deliver millions of F-18-based doses. But we have to look at a very specific product class and F-18-based agent [Technical Difficulty] and I think the [ product lines ] are being updated. And where -- with volume -- we don't have bone accumulation [Technical Difficulty].

Got it. Understood. The final one for me, really just one for Darren, please. With Stage 1 of the Telix and Brussels now completed, how should we be thinking about the CapEx investments that you have planned over the next couple of years as that facility develops, please?

Thanks, Shane. So we did do the official opening just probably at the beginning of June or July. And so we -- while we had the official opening, the operational component of that is still -- we're still working through that, and that should be done within the next 6 months. And I get the approvals, get it up and operational. We are also looking at bringing some cyclotrons to build the capability there. But that's always in what we've previously announced to the market as part of our capital plan. I think once we get it up and running, we'll then start to look at how do we expand on that server. We've obviously got quite a bit of land and space there. So there is further opportunities there. But obviously, we will look elsewhere as well as necessary.

Our next question comes from David Stanton with Jefferies.

I'm just like to hear a little bit more about when we might expect the U.S. FDA submission for TLX250-CDx? Should we be thinking about it this quarter or next quarter?

We haven't been as specific as that because we've only just had a consultation meeting with the FDA. I would -- I haven't given firm guidance on it, but I would expect it to happen around the November time line.

Okay. And then I guess another time line question, Chris, now that I've got you there. Given the ProstACT SELECT is fully recruited, should we expect those top line results around the start of fourth quarter calendar '23?

We'll certainly put something out this year. As you know, when you close out a clinical trial, there's a data collection process and it just takes a bit of time. But yes, we are expecting to put results out this year.

Okay. And final one for me and then I'll get back in the queue. You've mentioned previously that there's the potential for potentially lower pricing for Illuccix in the U.S. towards the end of calendar '23. I noticed that that's sort of not mentioned anywhere in this presentation. Is that still likely to be the case in your view?

Actually I don't think I've ever said that, to be honest with you. I mean I can understand how there might be a misconception about it. But what I've said is that we expect that the market will be more penetrated by the end of this year. That's more of a statement around competitive landscape. I don't think it necessarily translates into a pricing discount per se. I think that what I've said is that as we move into a more penetrated environment and where there's a greater focus on national account strategies, there's always a trade-off between acquiring market share and pricing in that sort of environment. And so volume incentive pricing may become more of a feature. So far we haven't seen very stable pricing. We had a -- our average ASP went down a little bit this quarter, but that was because we had a higher proportion of government contracts or a higher proportion of patients that were under government contracts or under government reimbursement. And so the price mix changed a little bit. But in terms of the pass-through pricing, it's been extremely stable. So yes, that's not necessarily given, it was more of a comment around competitive dynamic.

Our next question comes from John Copley with UBS.

John Copley on for Laura Sutcliffe. Could you tell us, please, what percentage of U.S. Illuccix sales the same shop versus new customers at this stage?

Yes, we don't really disclose that sort of level of detail about customer build. So it's not something that we've sort of tended to do because we don't see a competitive advantage in doing that. What I can tell you is that our growth this quarter was a fairly balanced mix of white space customer acquisition and increasing our share at either sites where there are users of multiple products or where we've been able to acquire business away from competition. So I think it's a fairly evenly mixed profile that makes sense.

Okay. And one more for me. Since Novartis don't report Glucomed sales, could you tell us please what market share you think you have by value and volume at this point in time?

We have an internal viewpoint on Novartis. I mean we have a very clear understanding of what accounts Novartis has. So I think that's a well-understood number. I think as a total market share, it's a low single-digit percentage.

Okay. And how about yourselves? Do you have a view on those as well?

Well, I mean, just in terms of -- [indiscernible] hasn't put out their quarterly guidance yet, but I'd say we're pretty robustly trending to about a 30% market share.

Our next question comes from Steve Wheen with Jarden.

Just a question on the STARSTRUCK program. And the expression of CA9 on other tumor types. Just interested in whether or not the data that you've collected and have received on clear cell renal cancer, how much you can rely on that to actually fast track labels for these other cancer types in a diagnostic setting?

Well, I'll give an initial comment, and then Ky, if you've got anything to chime in on, feel free. Essentially the purpose of STARSTRUCK is, it's a -- sorry, STARBURST study, it's more of a setting study. So it's about narrowing down the half dozen to a dozen or so cancers where we know that CA9, it's an important biomarker where it's been well studied and well understood. And so that's really the scope of it. And then what we expect is that it's very unlikely that we would run a pivotal trial for the therapy program just in a single cancer setting. What -- the front of studies that we're developing right now even more towards a kind of a Loxo style basket study, where the label that you'd be ultimately seeking to go after would be something along the lines of CA9 -- treating a CA9 positive tumor by -- verified by imaging, right, where imaging becomes the biomarker tool. And that's obviously why the approval of the 250-CDx imaging agent is actually a critical milestone towards the clinical availability and sort of acceptance of the therapy. From a predictive perspective, the great thing about Zirconium-89 is it gives you predictive dosimetry for a variety of regular requires in fact, not just lutetium, but also alpha-emitters. And so that's why the STARBURST is so informative. It's going to not only tell us about expression level but it's going to tell us predictably where they're getting enough radiation into those tumors to have a likely treatment effect. Does that make sense?

Yes, that did. Yes.

Colin, do want to add anything?

Well, I think you covered it extremely eloquently. But just to be clear, the STARSTRUCK study is the combination with the DNA damage repair agent, it does include a renal cohort and a non-renal cohort that we will identify by using zirconium rituximab. In terms of the imaging utility, again, we'll see within the STARBURST study where we really examine CA9 expression used [ enlighting zirconium brentuximab ]. And yes, that could potentially lead to imaging, but also perhaps more interesting and more relevant to that patient population that we're starting potential therapeutics in the future as well.

Yes, great. Understood. Can I just also ask a lot -- I mean, obviously, the Brussels plant is -- allows you to be a bit more vertically integrated. Just wondering, is the gross margin implications from that and when we might expect to see that come through your numbers?

Well, it's not about gross margin implications, it's about enablement. So just to be clear, we won't launch a product in Europe with [ Potodium ] or lutetium without the use of that facility. So it's not about margin improvement. It's about actually having the scale of manufacturing capability to deliver to the European market.

Okay. Yes. Understood. And then lastly, just on the European approval. The pathway that you're undertaking at the moment, that seems to be certainly relative to our expectation sooner than expected. Is that your understanding and what -- with the first half '24 expectation of a decision, can you start commercializing that product in Europe straight away after that?

Well, once we have an approval, we can start to commercialize. I mean, obviously, reimbursement varies from country to country and can be shorter or longer, depending on the relevant bureaucracy. But yes, certainly, once we have approval for that product and our dossier has now been accepted in all of the countries that we've applied for. So it's 19 European countries plus the U.K. We are -- once we have that approval, that reference company authority approval, we could start. We are obviously making Illuccix available under -- or making it available under appropriate compassionate programs, which varies from country to country and varies depending on whether there's an approved product on the market or not. And we can continue to see a robust utilization of Illuccix in Europe. Clearly, as we have approved products coming into the market, that dynamic will change over the next 12 months, but in the market ourselves. So I think it's going to be a pretty tight concentration of new product availability and approval. And as you would have seen in the U.S., Steve, although we were second to market, our ramp-up is very fast with Illuccix. So we're pretty confident that there's an informed and loyal customer base out there that's committed to using the product for the long term. Can we move on to the next one?

Our next question comes from Dennis Hulme with Taylor Collison.

With the first patient to be treated in the ProstACT GLOBAL trial this quarter, can you give us some color about what we should expect to see if the site rollout, both in APAC and in other territories? And also, when you're targeting opening up ProstACT GLOBAL in U.S. sites?

Yes. So the regulatory work should be done by the end of the year, and we're on track to achieve that for the U.S. and Europe will be the focus early next year, but we do want to include European studies. I'm also -- I'm currently in China at the moment where we're meeting with our partner, Grand Pharma, to talk about how we include some wider APAC region patients into the study as well. So overall, the progress on ProstACT GLOBAL has a lot of momentum in all the territories that we plan to operate in beyond just the current A&Z footprint. We haven't given guidance on site ramp-up. It's very unusual for companies to do that kind of thing, to be honest. But clearly, once the study is in a more steady-state recruitment mode, I would expect that we'd be able to give visibility on time horizons for recruitment milestones. I don't think that's likely to happen until the beginning of next year at the earliest. And I do think that, clearly, there's a ton of patients available. So we don't see recruitment as being a challenge. But once the study is fully operationalized, I think that will be the time for us to give a clearer picture on that.

Okay. And secondly, we see that Blue Earth announced the commercial launch of their 18 F imaging agent POSLUMA late last month. Are you seeing any evidence of the presence of Blue Earth in the market with POSLUMA in the U.S.

Well, there's evidence, I mean, their advertising and their marketing and got sales force out there. I have to admit, I don't think we bump into them an awful lot. But I think as I've alluded to before, not all F-18-based agents are created equally. And I think that they've got a significant headwind to overcome in terms of both the market being satisfied with the availability of an 18 F-based product and also a product that's currently available, widely available that has, we think, clinically better performance. And so I think what it's going to come down to is kind of an Olympic podium style bake-off between the well-established use of Gallium PSMA and clarify and a new entrant, which really hasn't demonstrated any clinical differentiation or clinical advantage, in fact, may have significant disadvantage compared to the incumbent solutions. So we obviously believe that there will be a market share effect and they'll pick up some customer base for sure. But so far, we don't really see it as a strong commercial contender. It's a market that's pretty well educated. Customers have either decided that they're happy with cyclotron-based products, or they're happy with the nuclear pharmacy delivered product. And so they're going to probably have a larger impact on our competition than off. That's what we currently believe at this point in time.

Our next question comes from David Stanton with Jefferies.

Happy to jump back on. One for Darren, please. You've mentioned in the fact that overall investment is currently tracking to plan for 2023. You've previously talked to about $100 million in F '23 R&D expense. Should we still be thinking that number?

We haven't given any modified -- we haven't given any modified guidance to our R&D expenditure.

Okay. All right. Understood. And Chris, my final one. Do you think there's any -- are you starting to see any seasonality in holistic sales in the U.S. at all?

Sorry, you just broke up a bit then. Can you say that again?

Sorry, sorry. Is there any reason to think that there might be seasonality in Illuccix sales in the U.S. over the medium to longer term?

I think there's always seasonality, but the pluses and minuses and the swings and roundabouts of each month end, 4th of July holidays and Christmas season and summertime and whatever, they all sort of -- there's also the pluses and minuses, and they all kind of average each other out. I think every quarter has got something. So I don't really think that seasonality is going to be something that we're going to kind of obviously be too super worried about. The only thing I'll notice that this whole field is growing at an extremely fast rate. And that, I think, you serves, [ any severe ] kind of localized effect. Yes. But I'm sure you'll hammer me next quarter when I put out our results and then I'll say, well, it was a seasonal effect. So you'll then have the license of this answer to draw a reference upon.

Looking forward to.

All right. So we just have...

I think -- you go on.

Just on time, we've just got a couple of questions on the webcast. We've got time for those just before we wrap up. So I think the first question is just -- just a couple of questions about update on the submission process in Europe for Illuccix.

Yes, I think I've covered that one off.

Yes. And finally, just a question around the life cycle management for Illuccix, whether there is the opportunity to extend patent or make product improvements with a next-generation product.

Absolutely, yes. I mean we've been quite public about it. We have a clear vision for what Illuccix 2.0 and other looks like. We are committed to being a category leader in prostate imaging for a long time. Our product has some attributes that make it quite amenable to product life cycle management. So yes, watch this space. But that will become a lot clearer over the next few months. Clearly, there's a number of ways to risk manage pass-through. And one of them, of course, is to continue to provide new products. So yes, we'll be talking a lot more about that in the coming months, but life cycle management is absolutely a key focus. I've said in the past that it surprises people, but probably 25% to 30% of our R&D budget is actually focused on building and growing Illuccix. And that doesn't just mean label expansion and new clinical utility, but it also means thinking about the product itself. So watch this space. That's my only teaser statement for the morning.

Well, thank you. That's all the time we have for questions now. Thank you, everyone, for your attention. As we all know, it's been a quarter of significant progress and a lot of exciting things happening right across the pipeline. So thank you for your attention, and we will -- always get in touch with me via e-mail if you have any further follow-ups.

Thanks, everyone, for your time. Much appreciated.

This concludes today's conference call. Thank you for participating. You may now disconnect.