Telix Pharmaceuticals Limited (TLX) Q2 2024 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Telix Pharmaceuticals Limited H1 2024 Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Kyahn Williamson, SVP of Investor Relations and Corporate Communications. Please go ahead.

Thank you. And thank you, everybody, for joining us today. We can just skip through our disclaimer slide there for [noting]. If we go to Slide 3, I just want to briefly introduce the agenda and the people on the call today. So we'll be taking you through the introduction and the results summary, our achievements for H1 2024, detailed financial commentary and outlook. So on the call, I'm joined by Dr. Chris Behrenbruch, our Managing Director and Group Chief Executive Officer; Darren Smith, our Group Chief Financial Officer; and David Cade, our Group Chief Medical Officer. We can turn to Slide 4. Obviously, the purpose of today's briefing is to take you through our half year financial results and the detailed commentary, but also the operational achievements for the period. Once again, it's been a period of really high activity and progress across our commercial, clinical research and manufacturing programs. And I think whenever I speak to investors, I always get the comment, [there's been] so much going on. And indeed, there has. But it's also been a period of really significant value creation. And I think we can really sum this up across three key areas of progress. Firstly, being [the momentum] in our prostate cancer therapy program. We've released positive data and are ramping up the Phase III ProstACT GLOBAL study. We've got multiple opportunities across our Precision Medicine or diagnostics portfolio. We continue to deliver very strongly in terms of sales of Illuccix. We are now moving ahead with global expansion plans for that product and planned launches for three new imaging agents in the U.S. There's also been positive news of the proposed reimbursement reform in the U.S. So this all provides the platform for continued revenue growth. And finally, completion of two important strategic acquisitions, which further enhance our manufacturing capabilities in line with our ongoing focus of vertical integration. So this is an investment which really is creating intrinsic value for us in the radiopharma business. So we have multiple products. We have large market opportunities, we are in a growth phase. Subsequent to the half year, we did – we completed a financing raising $650 million, which has significantly strengthened our balance sheet and provides the capacity to pursue these strategic opportunities. So if we move to Slide 5, I just want to recap here, our growth strategy, which encapsulates four pillars to continue to innovate and drive towards commercialization across our late-stage and early-stage theranostic pipeline and continue to build that depth in manufacturing and supply chain. The achievements of our first half to align to this growth strategy and the strengthened balance sheet provides the capacity to really move ahead with the future plans. And Chris will talk about those in more detail later in the presentation. If you just move to Slide 6. This shows a summary of the financial highlights that we have reported today. Darren will take you through these in detail, so I'm not going to talk through each number. But the key metrics, I think, really shows the sum up the financial story of Telix, which we are delivering a commercial profitable business while investing for future growth and continuing to create that value. I think it's been driven by strong sales ongoing focus on cost control, but making really sensible and strategic investments to maximize the commercial opportunity and advance our pipeline. So with that, I'd like to hand over to David to kick off the review of our operational achievements for H1.

Thanks very much Ky. Glad to be with you this morning. So Slide 8, moving on to our late-stage therapeutic programs, which are a critically important part of our pipeline. In summary, I think the first half of 2024 has been really characterized by the key data generated from our prostate therapy programs as well as by the progress made in the kidney and brain cancer therapy programs. And these will see further key data from these studies in the second half of this year. I think particularly pleasing was the ProstACT SELECT study, which reported an important efficacy signal in a population of patients with advanced prostate cancer. And this result was truly competitive with other radioligand therapies when they were at a similar stage of their development, particularly Pluvicto. This is a highly differentiated asset. So that's an important facet of the development of this asset. Our 591 asset was also granted an investigational new drug approval by the FDA, and that enables us to expand our ProstACT GLOBAL Phase III trial into key sites in the United States, and there's a very significant interest and desire to participate in this trial from key U.S. investigators. We also successfully completed the CUPID proof-of-concept study with our asset TLX592, which is our lead alpha asset. So that planning for the actinium alpha version of this asset will proceed into a first-in-human study starting later in 2024. Moving across to our kidney program. This consists of several Phase II trials with TLX250 in combination both with immunotherapies as well as with DNA damage repair inhibition and these continue to enroll and achieve important clinical milestones so that we anticipate interim clinical data becoming available later in 2024. And then over to the right, moving finally to our glioblastoma program, our brain cancer program, following on from the earlier IPAX-1 study of TLX101 in recurrent glioblastoma. This was recently published in Neuro-Oncology Advances. And that study demonstrated some very important disease control and survival outcomes. So our follow-on IPAX-2 trial in newly diagnosed patients is approximately 50% enrolled, and the IPAX-Linz Phase II trial in recurrent glioblastoma is now about 80% enrolled. So very well on track to complete this year. So there's going to be further data on the brain cancer front as well. So that's a snapshot of what we've achieved in the first half. I think it's very, very pleasing to see what we've done but further important clinical data between now and the end of the year. Over to you, Chris.

Yes. Thanks, David. So on the next slide, as we move on to the Diagnostic Imaging products, it's been a very active six months for the diagnostics business or what we increasingly refer to as our Precision Medicine business. We were successful with our preparation and submission for the Illuccix life cycle management product, TLX077, which we believe will bring meaningful additional clinical benefit to patients, and we look forward to talking more about that product's utility profile in the coming months, especially as it's inherently powered by the acquisition of ARTMS. The international registration processes for Illuccix are progressing well all across the board. And this means that our currently essentially negligible rest of world revenue is expected to undergo a material change next year. This is something that we welcome from a revenue diversification perspective, alongside our efforts around commercial product portfolio diversification. And so speaking of which, we made major progress on both the renal and brain cancer imaging front so far this year, notwithstanding a fairly minor speed bump on the FDA submission for Zircaix. Commercial readiness is going very well, and we expect to submit the updated BLA with the manufacturing issue addressed in the next few weeks. We're obviously not waiting around for the FDA. And so with our current recent capital raise, we are driving ahead indication expansion studies in the metastatic setting for both Zircaix and Pixclara. And then these are indications that we believe will significantly further increase the size of the market potential for these products, should our filings and label expansion activities be successful from a regulatory perspective. Pixclara is going to file any day now following our successful final clinical package review with the FDA. We've been granted Fast Track designation for this asset. So we expect it to progress through review relatively quickly because it's north of drug indication, and our expanded access program, or EAP, as we like to call it, is now open, which is really great because it delivers on Telix's commitment to providing access to critical medicines for unmet medical need. I should note that the EAP is also open to pediatric patients, which was a really nice gift from the FDA. Frankly, kids with brain cancer need all the help they can get from a treatment planning complexity perspective. I can have the next slide, please. So from a revenue vantage and Darren Smith will talk more about this in detail, Illuccix is a product that continues to perform very well. And Telix as a commercial execution team continues to take market share in the United States, our major market for this product had a highly successful period of sustained growth, really based on our clinical supply chain and service differentiation. We also have uniquely a multi-product view of how the PSMA landscape will evolve from both a clinical and a reimbursement perspective. And as most of you know, the U.S. reimbursement landscape is quite challenging. And so next year is going to be an even more exciting year for our prostate cancer imaging franchise. We expect to see sustained growth in market share capture and the addressable market just continues to expand for this product. We've also been successful in capturing our fair share of the GPO space, and so this will also continue to support revenue growth into 2025 and 2026. If I can have the next slide, please. So as you know and Ky mentioned in her opening comments, Telix is a highly acquisitive company, and we've had a strategic focus for around the last 18 months on building out our clinical and commercial supply chain through some highly targeted acquisitions and partnerships. And I can't emphasize enough how important this is from a commercial delivery perspective. I've mentioned ARTMS in the context of Illuccix and TLX007, but it underpins much of our commercial product portfolio, including obviously, Zircaix for the zirconium-89 as well as delivering future actinium capability to our Seneffe or South Brussels site in Belgium, which is now preparing for GMP inspections next month and then cyclotron installations for future isotope production by year-end. So really a ton of activity on the manufacturing side. The isotherapeutics site in Texas has also been a pleasure to integrate in most of our bioconjugation in key radiochemistry projects are now operated out of our Texas site. This was an absolutely stellar acquisition for Telix, particularly from a people perspective and really nicely complements our activity at Optimal Tracers in Sacramento. So for example, we recently started shipping product for an international clinical trial for one of our early-stage alpha programs. It was conjugated at ITG in Texas, radiolabeled at Olaratumab in California, and shipped to our Melbourne [radio chemistry team] for clinical use all under one roof. So this is a real speed and execution advantage for these very fast-moving clinical programs, not to mention really controlling the cost of clinical translation. I'd probably also be remiss in not mentioning our partnerships. Long-term, we expect to continue to work with key strategic partners in different geographies, including the U.S. However, in future growth jurisdictions like Latin America and APAC, we are deepening amortized with key strategic partners, for example, the establishment of the manufacturing joint venture in Brazil with R2PHARMA to supply locally manufactured Illuccix and other products for regional markets. And that's really about factoring in the regulatory and the commercial nuances of those specific markets. The R2PHARMA JV is particularly promising as we do still expect Illuccix's approval in Brazil any day. And these are the regulators experiencing some workforce interruptions. But as soon as that resolves, we expect to get the all clear. It's South America. So it's kind of always Mariana. On that note and in summary, Darren, I will send it over to you for the finance section.

Okay. Thanks, Chris. Now turning to Telix's excellent half-year financial results. My key takeaways are that; firstly, built on the back of Illuccix. Telix Commercial business continues its strong growth trajectory, funding our extensive R&D programs. Secondly, we remain focused on creating value for our theranostic pipeline. And thirdly, we have strengthened our balance sheet to commit further investment into enhancing our production and supply chain capabilities and to accelerate advancing our pipeline. Now turning to Slide 13. Telix's revenue performance improved 65% in the first half of 2024 over the prior corresponding year. Kudos goes to our U.S. commercial team who are responsible for delivering a majority of the group's revenue through the sales of Illuccix. And they continue to capitalize on the demand in the U.S. market. Over the last couple of years, we have seen clinical utilization of our product to spend, leading Telix to increasing its initial total addressable market estimates by 60% to $2.4 billion, and we expect further upside through guideline evolution. This is all positive news for this year's revenue expectations, noting we have increased revenue guidance in July by 10% to $745 million to $776 million. This is an increase of approximately 50% on last year's revenue. Illuccix is looking very strong. We, firstly, a growing U.S. Illuccix market, ongoing geographic expansion in Europe and Asia Pacific, and then also the expected U.S. regulatory approvals of our kidney and brain cancer precision medicine products, FDA willing, of course. Now turning to Slide 14. The group's profit and loss presents our focus on growing the topline and controlling expenditure as a percentage of sales. And then strategically allocating the funds generated to build the capabilities and capacity of the business and to develop our product pipeline, building value for our shareholders. With this aim, we have been very successful. As spoken about, we have grown the topline, which is permitted to self-fund the rapidly growing business. We have controlled costs, as demonstrated by the gross margin improving by 3% of sales in the prior year thus optimizing funds generated. Then the planned build-out of Seneffe and the strategic acquisition of ARTMS and ITG, we are enhancing our internal manufacturing and supply chain capabilities to support our growing commercial business and our increased investment in developing our pipeline. Finally, to top it all off over the last three halves, we have taken our 2023 first half loss before tax of $12 million to be a profit of $35 million this half. Now that's a great achievement for a company whose commercial business only started two years ago. Now turning to Slide 15. Here, we highlight the unadulterated performance of the Telix's commercial business and how it is funding Telix's growth. The first thing you'll notice is that the product revenue makes up 99% of the group's total revenue stream. The next thing you'll note is that we are improving the efficiency of our commercial expenditure. That is, we are focused on reducing costs as a percentage of sales. This permits us to continue investing growth, increasing dollars invested while improving the cents per dollar earned from sales we generate for Telix. As a result, the commercial business' operating profit improved 86% over the prior corresponding half to $175 million, representing $0.49 in the dollar of sales. Now that's leverage. And that's what funds the rest of the business. Now turning to Slide 16 and Telix's cash flow for the half. While the company's cash position has remained relatively flat for the half, we did a lot with it. As per the previous slide, the commercial business generated $175 million. We then invested $136 million back into developing our pipeline and building the business' infrastructure to support future growth. This resulted in a respectable positive operating cash flow of approximately $39 million. These funds were then used to acquire strategic businesses and to enhance Telix's in-house production and supply chain capabilities and into further pipeline expansion. Obviously, there is still significant investment opportunities for Telix in this rapidly growing pharmaceutical market. So in July, we raised $650 million in convertible bonds. Obviously, this placement significantly strengthens Telix's balance sheet and permit us to pursue appropriate strategic opportunities as and when they arise. Now turning to Slide 17 and an overview of Telix's pipeline investment. R&D is at the heart of Telix's future value creation. And as such, Telix places considerable focus and resources, 23% of revenue this half into this area of the business. During the half, we focused on the U.S. regulatory submission with three new precision medicine assets in kidney, brain and prostate cancer. We expect to have these products on market next year, availing us to an aggregated total addressable market of approximately $4.5 billion for Telix. Telix has also made significant progress and investment with its ProstACT GLOBAL Phase III clinical trial and in a number of other therapeutic assets. Over the coming years, the therapeutic assets will become an increasing proportion of the company's R&D investment. For this year, we remain on plan and reaffirm our R&D investment guidance. Okay, Chris, back to you to take us through the outlook for the business.

Yes. Thanks very much Darren. And I just note in passing is additional comment on the finance side of things that we post our results after market close just to enable both Australian and U.S. shareholders to digest our financial results. So we think this is important given the significant U.S. shareholding of the company and interest from U.S. investors and strategic partners. So moving to outlook and what's coming down the path on the next slide, please. So further elaborating Ky's earlier strategy slide, over the next six months, you are going to see a very significant transformation of Telix enabled by our recent highly successful financing, There are really four main areas of focus, and we are currently reorganizing ourselves around these execution themes. Firstly, our prostate glio and brain cancer therapy study for our beta-emitting therapeutic products, such as those based on the TSM177, made really a lot of progress this year, as David previously outlined, particularly our ProstACT GLOBAL study, which is now recruiting in the U.S. and APAC and is expected to be extended into other commercially important jurisdictions this year and early next year. With our significantly large balance sheet, we are focused on pushing brain and renal cancer, imaging products, therapeutic products started towards pivotal trials in the back half of this year. So again, just to reemphasize, that's about pushing the rest of our kind of mid-stage pipeline in renal and brain cancer towards pivotal trials in a very near-term viewpoint. On the early-stage development front, Telix now has multiple alpha-emitter candidates in the clinic, which is really super exciting. There is a growing body of evidence that biologics are an ideal delivery vector for alpha-emitters due to their selectivity and lack of renal excretion and so 2025 is going to hopefully be data-rich in terms of progress and outcomes for those assets too, particularly our actinium prostate cancer product, which safely completed dose escalation in pharmacology studies in humans this year. That was the CUPID study. I've already mentioned our initiatives around the precision medicine portfolio. And again, with our current war chest, we are not going to hold back on indication expansion for the two major follow-on products Pixclara and Zircaix, which can essentially double the market potential of those assets, subject to regulatory approvals. Obviously, international expansion remains a priority across the board, including for Illuccix, as I've already outlined earlier in the presentation. Finally, we've made significant inroads into our strategic vertical integration strategy. We are not quite done yet with this, but – so that's part of the premise for the capital raise, and we look forward to keeping you informed of our progress on this front over the coming months. By the way, I'd probably be remiss as the CEO, not noting that we are hiring. So we're looking for talent across the board, commercial and scientifically and clinically. So if you are listening to this call and believe like we do that Radiopharma is the hottest new area of oncology. Please do check out our page on our website. All right. Moving on to the next slide. This slide nicely illustrates straight the growth and expansion of our pipeline, including the addition of several alpha programs, as I mentioned, which are now clinical stage as well as our new musculoskeletal franchise around sarcoma and bone metastases the results a mixture of both life cycle management and new disease areas with significant market opportunities attached to them. Over the next six months, we'll be talking a lot more about how Telix is focused on our therapeutic business again, enabled by our balance sheet, positions us as a leading player in this space with significant portfolio differentiation. I have the next slide, please. Again, however, despite the financial, clinical and execution focus around our therapeutic pipeline, we remain highly committed to our Precision Medicine business. We think it's a differentiator. We think it's important to the field of radiopharma, and this clearly illustrates how we believe we can get to a couple of billion dollars of revenue over the next few years just through what we've already developed. So what we've completed clinical development around – let alone what is coming down the pathway from a therapeutic perspective. I note in particular that the return on capital for the indication expansion activities, which is probably in the $25 million to $30 million range over the next couple of years is just a huge return and gives us further financial means and incentives to vertically integrate as well as double down on our investment in pipeline expansion, both in terms of diagnostics and therapeutics. And certainly, guideline-driven growth will continue to take place across the whole portfolio as the practice of medicine is currently undergoing a major transformation through the use of molecular imaging. We can see this happening in prostate cancer today, and it will invariably happen in other disease areas, too. And that growth doesn't even factor in the potential upside of things like bringing molecular imaging into the operating theater such as through our acquisition of Lightpoint Medical. If I can have the next slide, please. So this slide summarizes in a nutshell what our organic and inorganic growth has delivered to patients, customers and shareholders. We are an utterly unique company that understands intuitively that integrated capabilities in precision medicine, med tech and command over our supply chain and manufacturing capabilities deliver really outstanding outcomes for patients and shareholders. At the heart of Telix, as it's currently evolving, is our therapeutics business that is enabled by a patient-centric treatment approach, deep understanding of clinical workflows and of course, digital health, and the last mile product delivery capabilities that we've established globally. No other company in our space has this mixture of capabilities like we do. This slide, in some respects marks the milestone in Telix development in terms of how we are organized commercially and technologically. And we are looking forward over the coming months to reveal kind of new Telix strategy and, of course, the leadership structure to deliver that revolves around these areas of focus and cross-functional collaboration. And I have the next slide. So tying the prior slide to our execution expectations for the year on a segmental basis, you can start to get a sense of how our strategy is playing out both in terms of what we have achieved so far, but also what is yet to happen in the coming months. There's still a very big list left in 2024. And although we've kicked off some key – picked off some key items in the first half, the second half of this year has some very significant inflection points around revenue and geographic expansion as well as clinical outcomes. So there's still lots to look forward to. Thanks, again for your attention and the opportunity to give you this update on all of our progress activities and growth. I'll now open it up to questions.

Thank you. [Operator Instructions] The first question today comes from Laura Sutcliffe from UBS. Please go ahead.

Hello. Thank you for taking the questions. Firstly, could you talk a little bit about whether the market penetration of Illuccix in the U.S. as it stands is uniform or whether some groups are receiving essentially those scans, while some are getting several times more than average? Or maybe to put it another way, could we be mistaken what looks like quite a well-penetrated market with something that has a lot of potential left? I'm really asking about original Illuccix. So just to keep the question simple, I'm ignoring any TAM you could add with 007?

Yes, I think it's an interesting question. So I mean, as we've talked about in the past, the market dynamic, the commercial dynamic in the U.S. is shifting away from winning individual account business to IDN and group purchasing organization. So that inherently means that the sort of landscape of customer acquisition goes from being fairly granular to being much larger scale. So it's possible to pick up and win much larger swaths of business or take it away from competition in that mature market model. So penetration and ability to acquire market share aren't necessarily correlated. I think specifically on the penetration issue, we still see a fairly large concentration of PSMA imaging in major metropolitan areas, major academic centers. There's still opportunities for penetration in the community setting. We think that's inherently one of our advantages. And in fact, if you look at our relative growth to our competition, I think we demonstrate that, that advantage is being realized. Nobody wants to travel two, three hours to the big smoke to get a scan. And so as Kevin Richardson our venerable leader of the U.S. business and at Texan. So I can't do this with [indiscernible], I won't even attempt, but the ability to deliver PSMA kind of locally farmed to scanner is a real advantage for patients. And so we're going to see more and more shift, I think, of PSMA imaging being utilized in the community setting. And that's where the nuclear pharmacy distribution model has a very big advantage. Does that answer your question satisfactorily?

Yes, sure. And then I was also staying on the prostate cancer theme, but moving to 591. Wondering whether the infrastructure and the relationships that you've built for Illuccix and the financial resources that you've now got give you a bit of optionality around whether to try and market 591 yourselves or seek a partner if assuming it comes to market?

We haven't really given guidance on that, but I mean you would have to appreciate, Laura, that we've built a very, very capable commercial team and we're delivering on a large-scale indication already, which is sort of rather atypical for a biopharma, a small biotech company. I think that as we add Zircaix and Pixclara to the mix, we get a lot of operating leverage. Darren's talked about that. And so we build a sales force that really has a ton of firepower. And the most important thing is that we are delivering. Now there's a strong nexus between Illuccix and the currently approved PSMA therapy in the market. We deliver Illuccix to those customers every single day. So the majority of Pluvicto therapies that are done are selected with an Illuccix scan. And so we already have a nexus with that customer base. So I think we have – I'm not going to commit one way or another because I don't think at this point it's commercially prudent to do that, but we are not lacking in capabilities to commercialize our products.

Okay. Thanks. And then maybe just one final one. Could you talk a little bit about the opportunity that you see in Brazil? If I remember correctly, it's a heavily tender-driven market for drugs, but I don't know how – if that applies to these types of diagnostics? And is it a market you're interested in beyond the Illuccix once you've built some capability there?

Look, our goal – I mean, Brazil itself is – it's really about a partnership around delivering access to our medicines sort of more broadly in Latin America. Brazil is a substantial market. As you know, there's a lot of prostate cancer in Brazil and Latin America generally. We obviously want to service patients globally. I think it's fair to say that outside of the United States, there's probably there's probably 20 jurisdictions that can be somewhere between $5 million and $20 million a year in revenue for us. We see a scenario where maybe three years from now that maybe we can achieve something like 30% to 40% rest of world relative to the U.S. market. So whatever we're doing in the U.S., sort of about 30% to 40% of that can be in the rest of the world. And there are some key jurisdictions like Brazil, like Japan, like some of the larger European countries where the majority of that contribution will come from. And so that's why we continue to persist in developing those relationships. And the R2PHARMA relationship in Brazil is also a bit special because from a regulatory perspective, Brazil tends to be sort of a gateway country to other Latin American countries. So – it's not just about what we do in Brazil potentially once we get an ANVISA approval. And we're confident we'll get an ANVISA approval. We're really in an administrative process right now. But once that approval comes through, it kind of opens up the whole continent and it's a nice incremental revenue to have.

Thanks very much.

Thank you. Your next question comes from Shane Storey from Wilsons Advisory. Please go ahead.

Yes. Good morning, everyone. I was hoping to start with the therapeutic programs [indiscernible] as you can see in the investor deck, you've reiterated the intention to do an interim analysis on global first half of 2025, I can see also the site activation sort of happening in the U.S., but I wondered if you could comment, please, on trial enrollment elsewhere and just how that interim cohort kind of comes into the 10 over the next measure six to nine months? Thanks.

Yes, we don't really give kind of blow-by-blow progress on clinical trials. So yes, we still are expecting to put out some interim results next year, somewhere around the middle of the year. Site ramp up, site activation is going well. Obviously, there's clinicaltrials.gov is not like a perfect in-sync summary of where we're going, but we certainly are adding sites constantly. So we have a good number of U.S. and APAC sites that are ramping up, and we do expect – we're still working from a regulatory perspective to be able to add European and other countries towards back half of this year and early next year. So there's plenty of – I think qualitatively, there's plenty of demand for the trial. It's viewed as a really exciting study just because of the differentiation in the asset. And of course, now that the market is getting more informed about PSMA therapeutics and an understanding of some of the strengths and limitations of different approaches, we turn up with something that's really novel and clinically interesting. So I think it's fair to say that we've been delighted with the response on the study. I don't know, David, if you want to add anything to that from a clinical perspective.

Look, thanks, Chris and its David. Shane, thanks for the question. Yes, all I would add is that – I think the key global investigators in North America, Europe and Australia are very familiar with what peptide-based radioligand therapies can achieve in prostate cancer. And so there's two sort of dynamics going on. Number one is that there aren't any significant competing Phase III trials competing for the same population of patients at the moment. So it's a very opportune time to enroll patients to a trial like ProstACT GLOBAL. And then the second dynamic is that it is a differentiated asset. So the key investigators that have reported in the literature over the last couple of years, VISION in the subsequent trials are very I think academically and scientifically interested to know whether a different delivery vector, an antibody approach will bring therapeutic benefit beyond what we've already seen. So there's a very high scientific interest in a differentiated asset approach and that extends to the patients that we've consulted for this trial, yes.

Yes. And just one other thing. There's a lot of data that's coming out now, Shane. So we've got the two-year follow-up on VISION trial from Pluvicto that showed 40% of patients have renal insufficiency. And that's something that I've been talking about for, as you well know, for years and years about how we have to think about clearance organ pharmacology when we do radioligand therapy. So again, we come to the table with a proposition around a more intensive treatment that we hope will give a better overall survival and a better dosing – better clinical experience for patients but also something that we also hope will have better long-term outcomes for patients given that prostate cancer patients are living longer and longer, right?

My last one, maybe for Darren. I just noticed on – in the investor deck that capital expenditure, they just noted at $22.6 million, which is obviously higher than just the TP&E number in the cash flow. But so I was just hoping that Darren could maybe unpack that a little bit. And then maybe I'm also trying to – Chris talking about vertical integration and how to think about sort of infrastructure investments over the next two or three years? Thank you.

Yes, sure, Shane. So obviously, capital expenditure, part of it is just the finalization of the build-out or the continued build-out of the Seneffe manufacturing site. So that's a part of it. The other component is actually acquisition of some sourced materials for isotope – it's more of kind of an insurance policy to make sure that we have access to the appropriate materials we need to continue our progress and development. So they're kind of the key two items that make up – [indiscernible] that is part of your question.

Maybe on the manufacturing – I mean, Darren's being a bit coy, but we do buy a large amount of raw material. We buy – we're a kilo quantity buyer of yttrium for making lutetium. We have raw materials. We have – we buy all of the ultra-pure metals to make large quantities of Zirconium-89, gallium, copper-64. We're really focused on building that radiometal infrastructure. So that does require some inventory investment. Just in terms of future vertical integration, I mean we haven't given much guidance on that. But clearly, there was a delta in capital raise sort of expectations between what we put out in the F1 versus where we landed with the convertible bond. So we do have some specific investments in mind, and we'll keep the market informed about that in the coming months.

That's right. Thanks. That's all I had.

Thanks, Shane.

Thank you. Your next question comes from Tara Bancroft from TD Cowen. Please go ahead.

Hi. This is Nick on for Tara. Thanks for taking our question. Congrats on the progress in the first half. My questions around Zircaix and Pixclara. And really, can you discuss your expectations for the launch of these two diagnostics given that these will be the first approved targeted PET diagnostics in their respective indications? Thanks.

Yes. Look, we're very optimistic about these assets. The urologist has had a spectacular couple of years with PET and really in PSMA has just informed that referral physician segments so well about what the benefits are of molecular imaging and patient management. And if you look at the indications that we're working towards on Zircaix, which is really around in determining renal masses and detection and staging. These have a lot of similarities to the indications that we have in prostate cancer. And then you can well imagine, well, if you look at the market evolution in prostate cancer, right now, we're seeing – we're seeing much more use of PSMA imaging around surveillance and therapy monitoring and therapy response assessment. So that's clearly the future of where the renal cancer space can go as well and that's a vast market opportunity that's not even reflected in the market opportunity in the sort of the TAM analyses that we put out, which I think are very conservative and defensible, given the indications that we kind of have on foot at the moment. And the nice thing about – I mean the reason why we built a sales force to go after prostate cancer, frankly, from the very beginning was because we have a product portfolio strategy that we will have next year, early next year, we'll have a renal cancer product in the market, which is the same referral physicians. So we're currently footsoldering the urology space very effectively. It's a natural touch point. We do have an expanded access program right now running in the U.S. at 25 sites. That's primarily an access to medicine strategy, obviously, but it does contribute to physician awareness as to where the product is going and what it can do. And so we expect a really rapid adoption of the kidney cancer product. And it's just very highly aligned with what we are experiencing and what we've accomplished with Illuccix. So if you look at the ramp-up of as PSMA imaging generally, but our ramp-up of the Illuccix specifically I think that we should expect to see really good growth on launch of Zircaix. And there's been no shortage of opportunities to take the podium. We've probably done 20 or 30 major medical conferences this year, educating about what role PET imaging can play in renal cancer. And as you note, we have a blue ocean in terms of competitive landscape there. On the Pixclara side of things, that's a very compact market. You can sort of count on a few pairs of hands the number of centers in the U.S. that are really the centers of excellence from a tertiary referral neuro-oncology perspective, that means that you've got a high degree of concentration in specific customers. Again, expanded access is available today. So we're grateful for the support we've had from the FDA in terms of making product availability in advance of market launch. Obviously, that's not a revenue stream. That's a commitment to patient access. But there probably isn't a major site in the U.S. today that doesn't have access to Pixclara if they want to use it. And so I think, again, the adoption will be swift when we get approvals, particularly because FET-PET or Pixclara is already included in – it's been included in European practice guidelines for years. It's embedded into the RANO criteria. So it's just well understood by neuro-oncology that this is something that the rest of the world uses. It's got well-established clinical understanding and utility. And I think the product is really going to fly once it's available in the U.S. And then when you look at the indication expansion potential for CNS mets for non-CNS primaries you go from a patient opportunity that's maybe 25,000, 30,000 scans a year at the face of it, ignoring the fact that we repeat scan GBM patients a lot. But then when you start to manage mets from non-CNS primaries, then the size goes to 100,000-plus scans. And I think that, that's as I commented in the presentation, that's an amazing return on capital for us once Pixclara is established in the market. I hope that gives you a sense of what – how we see it. Zircaix is potentially bigger for Telix than Illuccix is, although we do continue to perform really well on the prostate cancer side. And then when you throw in Pixclara and then indication expansions across the precision medicine portfolio, I think the revenue trajectory looks really bright for the company over the next few years.

That's super helpful. Thank you very much for all that. Just one more question on ProstACT GLOBAL. What are the expectations for that interim data for next year, given that it is just an interim, I believe that you previously mentioned that it would be when about 30% of events have occurred. So should we expect early rPFS data to come? And if not, if it's too early, when would that data come? Thanks.

We haven't given guidance on that, but we will elucidate that over the next short while. And the reason for that is that – as you may recall, we broke the study into two sections. So we have a run-in phase, which is really about CMC comparability. It's a biologic. So it's got some different bar there. We've got a CMC run-in study into the main randomization event and we think it's prudent for us to hold off on giving guidance on that second part, the randomization phase until the run-in has been finalized and that we've presented those results to the FDA and that we have agreement on the second phase of the trial. Does that make sense?

Yes, definitely. Thanks very much for taking my questions.

Thank you very much for listening.

Thank you. [Operator Instructions] Your next question comes from Andy Hsieh from William Blair. Please go ahead.

Great. Thanks for taking our questions and congratulations on all the progress. I have one for TLX250, the STARLITE-2 study. I'm struggling to find kind of a bar for maybe just like nivolumab monotherapy in the post-IO setting. There's a lot of contemporary studies combining with TKI. The most recent one is probably the CONTACT-03 study, 40% response rate there. But mostly it's probably driven by cabo. So just curious about how you think about that. You kind of mentioned about – speaking about having a pivotal study strategy. So maybe you can frame for us what the expectation on the efficacy side would be? And maybe also kind of a question on the targeted conditioning asset that you have, probably not talked about a lot, but there is a development from Actinium regarding their approach negative feedback from the FDA. I'm just curious about what lessons can be learned in terms of improving on the trial design, so you can better position from a regulatory perspective? Thank you.

Well, those are good questions, Andy, as always. So I think – well, the first one is pretty straightforward. So we have two STARLITE trials. We have one in the second-line setting, which, as you pointed out, is in nivo progressive patients. And then we also have a kind of a triple in the first-line study that's being run primarily out of MD Anderson, which is really a nivo TKI-targeted radiation combo. And look, there's a couple of specific goals and objectives with these studies. But one of them is, I'll focus on STARLITE-2 since you did ask. Now the goal there really is to look at whether or not we can take patients that have – that are nivo progressive that were prior responders and really resensitize them back to nivolumab. So it's about understanding the clinical question of how do you layer targeted radiation with an immune checkpoint inhibitor and of course, we're interested, I mean, we're interested in efficacy, but we're also interested in how do you cycle that? And what's the safety profile look like? And what's the overlapping toxicities because anything that you add on to a checkpoint inhibitor in that kind of late-stage patient population you have to think about really carefully from an overlapping toxicity perspective. Now we haven't put out data on it yet, but we've been really encouraged by experience of that study. And I imagine that, in fact, we've given indication to the market that sort of in the next three to four months that we'll put out an update on how those combo IO studies are going. And clearly, if you look at renal cancer overall, we'd be fairly remiss in not considering how targeted radiation in immuno-oncology kind of layer in with each other. IO has had a profound impact on renal cancer care. In fact, that's one of the reasons why we have now this enormous prevalence pool of patients sitting in the back end of their patient – of their disease journey. That is something we think about commercially, both from a therapy perspective, but also from a diagnostic imaging perspective because clearly, they're entwined with each other. The other development, I think, that's really happened in renal space, which we've watched closely over the last 12 months has been the approval of Belzutifan. I think that, that's taken us some time to digest in terms of what the impact is on trial design. And I think where we've landed is when we look at really the incremental efficacy there, there's clearly a need for a therapeutic option in really late-stage renal cancer. And so I think that we haven't sort of formalized exactly the game plan yet, but I think it's fairly likely that at least as a starting point, to really get into that care continuum for renal cancer therapeutically that will at least start with an end-stage monotherapy study, which will give us the opportunity to develop that monotherapeutic signal, show some competitive efficacy to Belzutifan and TKI use in that end-stage patient setting and then move up from there. And then having these combo trials running where we're getting really meaningful and interesting data, I think then will allow us to understand then how targeted radiation layers into some of the earlier line stages of care where things like IO are very prevalent. Does that make sense?

Yes, totally. Thanks for that very comprehensive answer. Appreciate it.

I probably gave you too much detail, but at least you can sort of get a sense of how we're thinking. You also asked about the bone marrow conditioning program. So yes, we obviously watched with some dismay what happened with Actinium. It's a bit of a bummer, but it's really more of a regulator engagement issue than it is anything else? I mean, obviously, if the FDA tells you, you aren't going to get an approval based on a trial. That's something you probably need to tell the market about. We've never had any real belief in that asset. The target is an okay target, but it's not a great target from a kind of disease heterogeneity perspective. The main issue with that asset is its I-131 asset with a very, very high level of activity associated with it. And no nuclear medicine department ideally wants to handle a curie of [I-131],and you're clearly never going to put that anywhere near a pediatric patient either. So I think we've focused on yttrium – yttrium-90 with our program. We love yttrium-90 in this application because it's a beta – fairly low energy beta with a large radiation distance, which is perfect for bone marrow conditioning, but the shielding and radiation handling requirements from a clinical perspective are very straightforward. You're talking about you're talking about perspec shielding, right? And we know how to use the yttrium-90, we use it for search, for microsphere therapy all the time. It's really easy to handle. And so we think that the clinical workflow considerations for the 66 program are much better competitively and that the efficacy will be better as well as a consequence.

Awesome. Thanks for that. Maybe can I ask one more quick one, I promise. So for 592, the Actinium program, obviously, you mentioned about the FC optimization to shorten the biological half-life, I'm curious about the other regions of the antibody. Is there a difference in finding epitope or things like that we should be aware of?

No, the CDRs are the same. So the affinity and the on-off rates and the target interaction are the same as for 591. It's really about the PK engineering. We did modify the scaffold of the antibody so that it has better manufacturability. 591 is a fairly old humanization and sometimes cells squeeze it out happily and sometimes they don't. So we've modernized that as well. But yes, 591 is a targeting perspective is a very well-understood antibody. I hope that answers your question.

Yes, very well.

I think we have time for probably one more question if there is one. Maybe, Ky, a question from online?

Sure. So I've got a first question is with your – can you explain with the EAP for the Zircaix – in the U.S. the patients pay out of pocket and what does it cost? And what are the plans on getting European rest of world approval for Zircaix?

Sure. So the EAP in the U.S. is a company supported program. So it really is about making sure that the key renal cancer centers get access to drug to support patient care in advance of approval. And that's really about our commitment to access to medicine. EAP programs are not homogenous. So they vary from jurisdiction to jurisdiction in the U.S. We have a small amount of cost recovery. That's possible. But generally speaking, it's not a – it's not a charged program. In other parts of the world, certainly, we can make the drug available for a fee under special access or EAP programs, although generally, we are reluctant to do so. We don't take the view that selling unapproved products is a commercially or ethically viable seem to do. So we do it in a very controlled way where there's a formal program and a formal established patient benefit to be achieved. I hope that answers the question around the EAP. Regarding expansion for Zircaix. We've actually had a European scientific consultation around Zircaix, which was very positive. We had that quite recently with the Paul-Ehrlich-Institut, which is kind of the [indiscernible] Institute of the European Medicines Agency. It's run through the German competent authority. We have clear guidance and feedback on the suitability of the zircon data for European submission, and it was very positive. So once we have the manufacturing and the BLA submission in for the FDA, the next step then is to submit in Europe and we will be pursuing a centralized submission in Europe because we have a beautiful Phase III trial result. We have to package the results of the zircon trial slightly differently for European regulators, and we've been working on that. But it's a very near-term objective for the company to be able to submit in Europe. And yes, we actually believe we'll get a very good price point for Zircaix in Europe. So it's well worth our while to pursue. And in parallel to that, the Seneffe side is getting ready to be a producer of several of our products, including Zircaix. So our manufacturing and supply chain activities are aligned with our regulatory activities for Zircaix submission in Europe probably early next year. Maybe one more, Ky, anything else?

Yes. We just have one final question that we have time for. And it is, do you have any views on the 64 [PSARs], PSMA product in development versus Illuccix?

Well, first of all, it's not a product because it's still in clinical development. And some years away from being available and in the market and approved and reimbursed. And there are significant supply chain issues around copper-64 that I think are underappreciated by the market. And very significant clinical deployment issues in using copper-64. So fundamentally, there's no real evidence of change in patient management for this product candidate. The late time point imaging, it's just a red herring. Prostate cancer imaging is a high throughput activity. Nobody wants to have a an imaging center full of people waiting around that are radioactive. The goal is to get a patient in and out as quickly as possible. That's why F-18 and gallium-68 have been so commercially successful. And I just think that we understand the market very well. We understand the reimbursement landscape very well. And I think that in the fullness of time, there will be a small segment of the market that we know will be always attractive from an innovation and novelty perspective. But for mainstream real-world use, it's not going to be a significant player in the market.

Thank you. That completes the time we have allocated. Closing remarks, Chris.

Yes. Well, thanks very much, everyone, for attending. I hope that the information was useful and we're delighted with our progress and look forward to continue to keep you informed and lots of opportunities and change over the next six months. So look forward to keeping you abreast of all of our progress. Thanks for your time today.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.