Telix Pharmaceuticals Ltd Q1 FY2025 Earnings Call

Thank you for your patience, and welcome to the Telix Half Quarter 2025 Results and Investor Webcast. I will now pass the conference over to Ms. Kyahn Williamson. Please proceed.

Thank you and everybody, for joining us this morning and this evening for those joining from overseas. My name is Kyahn Williamson. I'm the SVP of Investor Relations and Corporate Communications at Telix. You can see there our disclaimer. Just moving forward to Slide 4. I'd like to introduce today's speakers that are on the line with me. We have Chris Behrenbruch, our Group CEO and Managing Director; Darren Smith, our Group Chief Financial Officer; Kevin Richardson, CEO of Telix Precision Medicine; and Richard Valeix, CEO of Telix Therapeutics. Today, we'll be taking you through the H1 2025 financial results presentation lodged earlier today on the ASX and our operational achievements for the half. This call is scheduled to run for 1 hour. And following the presentation, we'll take questions firstly from analysts on the phone and request that you ask one question at a time and hop back in the queue if you have further questions. If we do not get to your questions on the webcast, we will reply to you directly. Moving on to Slide 5, please. In today's presentation, our business leaders will be talking to the investments we have made in the business to set it up for long-term value creation. This slide illustrates the scale of our business today, spanning development, commercialization and global production and manufacturing. It's been a rapid transformation. This time last year, we had one approved product, Illuccix, which was commercial in just a handful of companies. Today, we have multiple approved products. We are preparing to roll out Illuccix across Europe and are preparing for launch of Zircaix and Pixclara. The acquisitions we have made have seen our manufacturing and distribution sites grow to 38 and our workforce has more than doubled with now over 1,000 employees globally. Next slide, please. We've previously presented our growth strategy that is in place to drive value creation for the long term. You can see the 4 pillars on the left-hand side of the slide and the achievements we have delivered against each one this half. These pillars are to grow our precision medicine or commercial stage imaging business and the achievements this half are focused on the goal to grow our share in the PSMA market and bring new products to patients. Kevin will discuss this further. Delivering on our late-stage therapeutics pipeline and building our next-generation pipeline, including alpha therapy candidates. This half, we have made solid progress across an array of programs, which Richard will take you through in more detail. And finally, the expansion of our global delivery infrastructure, a key highlight this half has been the integration of the RLS business. Chris will take you through this and the key value drivers aligned to our strategy. Firstly, however, Darren will talk you through the financial results for H1 2025 in more detail. So I'll hand over to you, Darren.

Thanks, Kyahn, and welcome, everyone. The first half of 2025 showed strong commercial growth in our Precision Medicine business and ongoing investments for future development. We achieved significant revenue growth, with group revenues increasing 63% year-on-year, fueled by Illuccix and new third-party revenues from RLS. Our precision medicine revenues grew by 30% year-on-year, and our EBITDA rose by 24%. Gross margins in our Precision Medicine sector remained stable at 64%, thanks to efficient Illuccix manufacturing. The group's gross margin was 53%, reflecting the mix of RLS third-party products and their manufacturing and distribution costs. During this period, we made considerable investments in our global manufacturing infrastructure to support long-term growth and upped our R&D spending by 47% year-on-year. This resulted in $18 million in operational cash flow, leaving us with a robust $207 million in cash at the end of the half year. Now looking at our group revenues, Telix generated $390 million, comprised of $79 million from RLS third-party sales and $311 million from our Precision Medicine business. This marks a year-on-year increase of 63% and a 41% rise from the second half of 2024. Illuccix continues to show strong growth, particularly in volume doses. Kevin will provide further details later in the presentation. Turning to the group P&L, it reflects solid growth and strategic investments aimed at fostering future long-term expansion. The group gross margin settled at 53%, influenced by the introduction of RLS third-party products and related expenditures. Our R&D investment rose 47% to $82 million, focusing 54% of our overall R&D expenditure into our therapeutic pipeline, up from 43% last year. Richard will discuss our therapeutic portfolio later on. Selling and marketing expenses increased to 13% of revenue from 10% last year as we geared up for product launches and geographic expansion, which included an additional $7 million in expenses from RLS. Manufacturing and distribution costs, excluding RLS, increased to 5% of revenue, driven by investments in our manufacturing and distribution infrastructure. General and administration expenses decreased to 12% from 16% last year. Consequently, adjusted EBITDA slipped to $21 million as a result of these investments. Now, let’s shift focus to our Precision Medicine business income statement. Our gross margin remains steady at 64%, showcasing operational efficiency in Illuccix and our commitment to reinvest in growth. We also prepared for new product launches and geographic growth, raising selling and marketing expenses to 12% of revenue. This rise was balanced by reductions in R&D and general administration expenditures. As a result, our precision medicine EBITDA improved by $20 million year-on-year due to a revenue increase of 29%. Moving forward to our TMS business, it’s important to highlight RLS, the largest component of this segment, which employs over 500 people across 30 locations, enhancing our last-mile delivery capabilities. In the five months since the acquisition, RLS's EBITDA was nearly breakeven, and we anticipate that incorporating more of Telix's products through RLS will bolster its contribution. RLS processed one-third of Telix's group revenue, with total network revenues for those five months hitting $110 million. This included $79 million in third-party products and $31 million in revenues from Intersegment related to Illuccix. RLS's gross margins were 7%, typical for this business type and factoring in manufacturing and distribution costs. Operating expenditures for RLS, excluding COGS since acquisition, totaled $15 million, and we expect these costs to maintain a similar revenue percentage in the latter half of 2025. Our TMS business encompasses various subsidiaries including Iso Therapeutics, ARTMS, and TMS locations in Brussels, Melbourne, Oklahoma, and Sacramento, where we’ve increased investment to boost operations. Chris will elaborate on the TMS strategy later. Now looking at our cash flow, Telix achieved a positive operating cash flow of $18 million in the first half of 2025, underscoring our commercial business's capacity to support R&D pipeline development and preparations for market and product expansion. We used cash on hand for several strategic acquisitions, the most significant being RLS, and ended June with a healthy $207 million in cash reserves. Moving to our capital allocation priorities, Telix is concentrating on four main areas: advancing R&D development, optimizing commercial performance, exploring strategic growth opportunities via M&A, and ensuring supply chain resilience and production capacity. We believe focusing on these four areas will drive long-term growth. In R&D, we’re progressing several late-stage clinical programs while refining our commercial infrastructure for asset advancement and geographic expansion. Regarding M&A, we have invested in three strategic assets this half, namely RLS Radiopharmacies, ImaginAb, and a FAP candidate. We are also strategically investing in our manufacturing and supply chain infrastructure to maintain our competitive edge and ensure efficient scaling as demand increases, all while maintaining a prudent cash buffer on our balance sheet. To conclude, we are reaffirming our full-year revenue and R&D guidance, projecting revenues from Illuccix and RLS to be between $770 million and $800 million. We anticipate our R&D investments will increase by 20% to 25% compared to last year. Lastly, we are committed to an investment strategy focused on growing revenues over the next three years by advancing assets from clinical development to commercialization and expanding indications and geographic reach. We intend to reinvest earnings into our portfolio, ensuring we have the necessary capabilities, infrastructure, and preparedness to execute our therapeutic programs. At this stage, our priority is on building long-term asset value rather than optimizing for immediate EPS growth, as we believe that a short-sighted focus on earnings could hinder the strategic investments essential for unlocking our pipeline's full potential. I'll now hand over to Chris Behrenbruch, Managing Director and Group CEO. Thank you.

Thanks very much, Darren, and good day to everyone online. I'd like to begin by discussing why Telix is distinctively positioned for long-term success, starting with our therapeutics pipeline. Our pipeline targets areas of significant unmet medical need with a diverse portfolio strategy that allows us multiple opportunities for success, even within the same disease category. Our research and development remains focused on advancing next-generation assets, which include alpha and beta therapies, novel isotopes, and innovative targeting agents. As a data-driven organization, our choices are based on thorough scientific and clinical evidence, enabling us to allocate our limited resources to the most promising opportunities. Moving on to our manufacturing and supply chain excellence, it's important to highlight that radiopharmaceutical manufacturing and distribution is a complex operation with regards to quality and regulatory requirements. A robust supply chain is key for long-term success, particularly for a diverse product portfolio like ours that aims to deliver therapeutic results. This is why we've strategically invested in specific areas of vertical integration in recent years and solidified relationships with key partners that align with our long-term commercial goals. Our investment in commercial infrastructure is beginning to yield tangible operational and financial benefits, including consistent volume growth for Illuccix in a competitive market. This success showcases our strong track record in commercial execution, positioning us favorably for future product launches. This year represents a significant turning point for Telix as we evolve from a company focused on a single product and market to one that offers multiple products across various regions. Importantly, we've achieved this transition in a cost-effective manner. With our global operations established, our precision medicine assets are laying the groundwork for the launch of our upcoming therapeutic pipeline, which is on the near horizon. In the area of prostate cancer, our multiproduct strategy paired with next-generation assets is set to drive ongoing revenue growth. This strategy enhances our market positioning and broadens our commercial potential. Although we entered the market with Illuccix later than some competitors, we are effectively leading with a lifecycle management initiative that will help us maintain market share and compete vigorously against new entrants. We will also expand our market through new indications and indications expansion, particularly through our innovative BiPASS study, a groundbreaking Phase III study designed to broaden the usage of Illuccix and Gozellix at the beginning of the patient journey, potentially transforming current diagnostic practices and greatly increasing the total addressable market. Kevin will delve further into this exciting near-term opportunity. Additionally, we remain dedicated to product innovation, harnessing our distribution model, customer service, and commitment to innovation to enhance product choices for both physicians and patients. For instance, we recently launched the AlFluor chemistry program, with its initial application being the development of a PSMA targeting agent that merges the imaging advantages of fluorine-18 with the ease of gallium kit-based workflows that clients have become accustomed to. We have a comprehensive clinical data package to back this, including a Phase III study involving a significant patient cohort. After a constructive consultation with the FDA, we are planning a registration-enabling study to advance this initiative towards a new drug application. Let's take a moment to consider what it means to transition from a single product and market company to a multiproduct, multi-region commercial organization. A complex global manufacturing and distribution structure is necessary to deliver our precision medicine assets and the future therapeutics that will benefit patients. Given the short half-lives of isotopes and the need for on-demand manufacturing, specialized facilities and logistics are essential to prevent disruptions throughout the process. We continue to invest in our global manufacturing infrastructure to maintain greater control over operations and significantly decrease quality and delivery risks. We view this reliability as a vital competitive advantage, as there is no traction in the market without it. Our global reach exemplifies our dedication to leading the radiopharmaceutical industry, and we believe that establishing a truly global presence is critical for maintaining market leadership. Regarding the RLS integration, the acquisition was a key strategic move to enhance our presence in the United States, which is a vital market. RLS provides a production and distribution network that reaches over 85% of the U.S., enabling last-mile delivery and the potential expansion of our manufacturing capabilities there. Darren has already discussed the financial implications of RLS, so I'd like to focus on the value drivers and our integration progress so far. In just five months, the integration process is progressing well, and I’m personally involved alongside Darren Patti, Telix's Group COO. RLS can add value in several ways. Firstly, we're already experiencing the advantages of two distinct commercial teams that complement each other in understanding and engaging with the market. Having a nuclear pharmacy network creates new entry points and insights, bringing us closer to customers and revealing significant new opportunities. Our team oversees everything from producing the end dose and ensuring its quality to delivering it to the clinical site, emphasizing our commitment to customer service. Secondly, there's a path for margin improvement; the volume of Illuccix sales through the RLS network has risen by 50% based on dose volume in the first six months since the acquisition, and this growth has not come at the cost of our key partners. It demonstrates the synergies between the two organizations and our ability to capitalize on untapped commercial opportunities. Products like Illuccix and Gozellix represent higher-margin, higher-value offerings for nuclear pharmacies to distribute. As we boost the distribution of our products through RLS, we anticipate long-term improvements in gross margins and a reduced risk from competition and distributors. Our goal with RLS is to create a radio metal production network to satisfy future demand for imaging and therapeutic radiopharmaceuticals, grow the RLS business, and lessen our reliance on external suppliers in the U.S. With this investment, we will focus on high-margin products rather than historically commoditized ones. Currently, we are planning and developing facilities for six cyclotrons across the RLS network, with facility upgrades starting in the second half of the year and enhanced capabilities to also produce certain therapeutic products alongside our pharmacy operations. The third aspect of value creation I want to discuss is our therapeutics pipeline and platform. We are deeply dedicated to bringing our therapeutics to market, and this goal remains central to our investment strategy. As mentioned by Darren, a growing share of our R&D spending is going towards this priority. We are making significant advances throughout the pipeline, and the momentum we are building reflects our execution strength. I'll allow Richard to detail our pipeline progress further. Our acquisition of ImaginAb, based in Los Angeles, granted us a biologics and drug development platform well-suited for targeted alpha therapies. This talented team is supported by key opinion leaders who share a vision for the future of our targeting platform in radiopharmaceuticals. The platform employs small engineered biologics or antibodies for highly specific cancer targeting, combined with rapid tumor uptake and blood clearance. With our expertise in antibody engineering, linker and chelator optimization, and isotope selection, we are well-equipped to develop potent and targeted radiopharmaceuticals, ranging from small molecules to advanced biotherapeutic products. We believe our specialized in-house R&D capabilities are essential for the company's long-term success. In summary, regarding expectations for top-line and bottom-line growth, I reiterate some points made by Darren. We are currently in a crucial phase of diversifying our revenue streams, expanding globally, and reducing business risks. Our midterm strategy has focused on reinvesting revenues back into the company to enable long-term growth. We are making targeted investments today to position the company for growth in both revenue and performance, without exhausting our resources, ensuring we are primed for success when we reach our pre-commercial launch year for the Therapeutics business. Before handing over to Kevin, I want to address the information request from the SEC, acknowledging that many have inquiries about it. I am personally disappointed to be in this situation, as I believe it doesn’t reflect the quality of our organization or our commitment to excellence. The subpoena is a request for documents mainly related to our disclosure activities regarding the development of our prostate cancer therapeutic candidates. We are in the process of responding to this matter as quickly as possible. I want to be clear that there have been no allegations or charges against the company or any individuals, and we do not know the cause or trigger for this request. Importantly, this situation does not affect our commercial portfolio or the progress of our pipeline development. In fact, we are working with more urgency and focus than ever to deliver these breakthrough assets to patients, and you can see evidence of this progress in today’s presentation. Now, I’d like to transition to Kevin for a commercial update. Thank you.

Sure. Thank you, Chris. And for my first slide, I would like to start with our precision medicine growth strategy. Our growth strategy is based on 3 pillars: expand product offerings, expand geographies and then expand indications on those products. In terms of our first pillar, expanding our product offerings, we have now launched Gozellix, further strengthening our position in the PSMA space. And looking ahead, we have 2 near-term regulatory milestones with Zircaix and Pixclara. These assets will build on our strong commercial foundation established by Illuccix. Moving on to our second pillar. The global rollout of Illuccix continues to progress well with marketing authorizations now secured in over 23 countries. Turning to our third strategic pillar. We are actively exploring new indications for our existing assets, particularly indications where we believe we can deliver meaningful impact for patients. We remain laser-focused on the execution of these 3 strategic pillars, driving the expansion of our global Precision Medicine business and paving the road for our Therapeutics business. Next slide, please. Illuccix continues to deliver strong growth in the high single digits. In the second quarter, Illuccix revenues were up 2% quarter-over-quarter or 25% year-over-year with dose volumes up 7%. Q2 represents the highest unit volume growth we've seen in the last 5 quarters. And despite competitive pricing pressures, we continue to manage the impact to our average selling price. To do so, we continue to drive share growth in clinical accuracy and reliability of dose delivery. Our clinical message is Telix PSMA gallium agents have fewer indeterminate bone lesions and higher inter-reader agreement than F-18 assets. We couple the clinical message with a highly specialized sales force and customer-facing teams that differentiate Telix with our customers every day. We've developed a reputation in the marketplace as an innovator, paving the way for successful launch of our follow-on products. Next slide, please. Moving on to geographic expansion and the global rollout of Illuccix. As you can see, we've established a strong commercial footprint across key markets, including the U.S., Canada, Australia, Brazil, the U.K. and Europe with marketing authorizations now secured in 23 countries. In the second quarter, we successfully launched Illuccix in the U.K. and see encouraging uptake. In the next wave of launches, we are focused on key markets like France, Germany, Italy and Spain. And as you move further east, we're focused on China and Japan, where in China, we have completed our registration study and are preparing an NDA for Illuccix. While in Japan, we are just initiating our Phase III study for Illuccix, and we are happy with the progress thus far. Now on to Latin America, where we have the first approved product for PSMA PET and we have commenced commercial operations there with our partner on the ground. Overall, we remain on track with the global rollout of Illuccix, supported by strong execution in the U.S. Next slide, please. We launched Gozellix earlier this year and successfully delivered our first commercial doses in June. The launch is progressing well through our comprehensive network of distribution partners, Cardinal Health, Pharmalogic, Jubilant and RLS. Telix is the first company to bring 2 PSMA-targeted agents to the market, a differentiated strategy that we believe is central to our competitive advantage. This dual product approach gives customers meaningful choice, whether in terms of economic value or scheduling flexibility and it reinforces our commitment to meeting diverse clinical and operational needs. Now from a reimbursement point of view, we are pleased with the recent HCPCS code we received from CMS, a major reimbursement milestone and look forward to getting an update on the decision around transitional pass-through status in the near future. The HCPCS code will be effective October 1, 2025, streamlining the billing and reimbursement in the hospital outpatient setting for Medicare-eligible patients. Next slide, please. Moving on to our third pillar of growth strategy, label expansion. I wanted to talk about a study that we think has the potential to become the future of prostate cancer diagnosis, our BiPASS biopsy study or biopsy of the prostate avoidance stratification study. Biopsies are highly invasive and carry risk and there are more than 1 million patients getting a biopsy every year with up to 75% of them being negative. When you think about it, what it takes to really be disruptive in this space and be innovative, we think it's minimizing patient trauma, reducing risk and recovery time and lowering cost while improving patient outcomes. Next slide, please. BiPASS is the first registrational study combining MRI and PSMA PET in diagnosing prostate cancer. Patients are categorized into high, medium and low-risk categories for prostate cancer. And for the high-risk category, an image-guided biopsy would be recommended. For the intermediate or an indeterminate category, a precision biopsy would be recommended since PSMA is much more sensitive in the detection of prostate cancer and we can perform one and done. For the low-risk category, if there is no uptake of PSMA in the scan, we can conclude that no biopsy is needed, none and done. So with this study, we aim to improve the predictive accuracy of prostate cancer while reducing the number of biopsies. This study has the potential to significantly broaden our market opportunity, potentially doubling it. We see significant value in moving earlier in the care pathway by positioning our scan at the front of the patient journey. Next slide, please. Moving on to Pixclara. We've engaged with the FDA and agreed on a pathway forward and plan to resubmit the NDA. Recall that the FDA has granted Pixclara Orphan Drug and Fast Track designation, an acknowledgment of the drug candidate's importance in addressing a significant unmet medical need. Turning to Zircaix. Our PDUFA date is approaching next week. We view this as a transformative opportunity targeting an area with no approved therapies. If approved, Zircaix will be first to market, positioning us to lead in the space with significant unmet need for patients and commercial potential. So to summarize, we've built a robust commercial infrastructure that continues to deliver, highlighted by high single-digit growth for Illuccix in the U.S. We've secured marketing authorizations in 23 countries and successfully launched in the U.K. Gozellix, our next-generation PSMA agent, is now on the market with HCPCS reimbursement starting in October. Looking ahead, we have several near-term regulatory milestones, and then we believe our BiPASS study has the potential to redefine the diagnostic pathway in prostate cancer. So with that, I'd like to introduce you to Richard, who will provide you an overview of the therapeutic assets.

Thank you, Kevin. Today, I will update you on our Therapeutic business unit. In the first half of this year, we made progress across all our therapeutic areas. Our strategic focus encompasses three pillars: urology oncology, neurology oncology, and solid tumors and hematology. In urology, we have a pipeline asset for prostate cancer, specifically targeting metastatic castrate-resistant prostate cancer (mCRPC), and for kidney cancer, we're focusing on clear cell renal cell carcinoma (ccRCC). We also have a therapeutic agent, TLX090, for managing metastatic bone pain that is common in late-stage prostate cancer. Within neuro-oncology, we are advancing a pipeline asset for glioblastoma and adding a new indication for leptomeningeal disease with the beta version of our TLX102 compound. For our third pillar focused on solid tumors and hematology, we acquired TLX400, a FAP-targeting asset, in the first quarter of this year. This asset has potential applications across various cancers. Additionally, we have compounds for soft tissue sarcoma and a bone marrow conditioning agent for pediatric high-risk leukemia patients. To summarize, we currently possess ten early and late-stage assets, with late-stage assets primarily targeting beta therapies and earlier-stage assets focusing on alpha therapies. We also have preclinical compounds targeting DLL3 and alpha v beta 6 from our ImaginAb acquisitions, where we are investigating optimal combination therapies with isotopes. Our diagnostics strategy involves developing companion diagnostics for all our focus areas in collaboration with Kevin and the precision medicine team. Now let's discuss our urology strategy, starting with prostate cancer. TLX591 is our Phase III asset for mCRPC. ProstACT GLOBAL is a combination trial using standard care treatments, involving 10 patients in each arm, with Part 1 focusing on safety and dosimetry. We've reached our target enrollment of 30 patients in Part 1 and will provide an update after data analysis. Part 2 will include 490 patients, and we are working on regulatory approvals in various countries to expand our study sites and streamline participation for patients, minimizing their need for multiple hospital visits. Moving on to TLX592, our next-generation alpha therapy targeting PSMA, we've recently presented data on biodistribution and organ doses during our clinical study. We look forward to progressing to Phase I, with Human Research Ethics Committee approval now secured in Australia for first-in-human studies. Now, regarding TLX090, which is being developed for pain relief in osteoblastic metastatic disease, we are currently developing this as a single-dose agent but see future potential for multiple-dose treatments. We just received FDA approval for a Phase I study, marking a significant achievement for the first half of this year. Next, we will focus on kidney cancer, specifically with TLX250, our CA9-targeting agent, which is expressed in over 90% of ccRCC cases. We are conducting studies to explore both mono and combination therapies, with a pivotal trial called LUTEON already submitted for approval to the Human Research Ethics Committee in Australia. We are encouraged by early images showing positive responses in patients treated with our therapy. Considering the life cycle of our girentuximab compound, our TLX252 represents a CA9-targeting alpha therapy aimed at combating resistance seen in patients with high CA9 expression. Our application for Human Research Ethics Committee approval in Australia is in progress as we prepare to start our Phase I trial. Now turning to our neuro-oncology initiatives, we have received full ethics approval in Australia to commence the IPAX-BrIGHT study, aimed at recurrent glioblastoma. Given the lack of effective treatment options for glioblastoma, we are pleased that our agent has been designated as Orphan Drug status in both the U.S. and Europe. Our initial focus will be on glioblastoma, where second-line treatments are currently limited. We have previously disclosed promising safety profiles and overall survival durations for IPAX-1 and IPAX-Linz in recurrent cases. Additionally, we are developing a targeted alpha therapy approach for neuro-oncology using astatine isotopes, which we believe will be beneficial for patients with diffuse disease. We are currently preparing regulatory filings for leptomeningeal disease and an investigator-initiated trial in glioblastoma. Transitioning to our solid tumors and hematology research, TLX400, a fibroblast activation protein inhibitor, is being prepared for clinical trials, with a Phase I pan-cancer study set to begin in 2026. We also have TLX300, in licensing from Lilly for advanced metastatic soft tissue sarcoma, with a Phase I imaging trial currently recruiting in New Zealand and Australia. Furthermore, we are working on TLX66 for bone marrow conditioning in allogeneic stem cell transplants, particularly for myelodysplastic syndromes and acute myeloid leukemia. In conclusion, we have had a very busy start to the year with one of the most comprehensive therapeutic portfolios, including ten pipeline assets and additional research-stage compounds from our ImaginAb acquisition. We are making significant progress in urology and neuro-oncology with three pivotal trials underway, including ProstACT GLOBAL, LUTEON, and IPAX-BrIGHT, along with starting clinical trials for TLX090 and entering first-in-human studies for TLX592 and TLX252. Thank you for your attention.

Thanks very much, Richard. Great rundown and really conveys the depth of the pipeline and development activity and progress over the last 6 months. So as is typical, I get to end the presentation with a summary of our upcoming catalysts and key objectives. This is by no means an exhaustive list but captures some of the key value creation events that are on the near-term horizon. Many of these catalysts are new commercial opportunities that will add to our revenue and earnings growth and will support our expansion and transition into a fully-fledged theranostics company. Some of these catalysts relate to new clinical data points that I believe will reinforce our leadership position as an innovative player in the radiopharma space with a pipeline of either best-in-class or first-in-class assets. Expanding our capabilities is a key driver of near-term value creation as we work to deliver our products into major global markets. Our investments are focused on building the operational strength needed to unlock these markets and then, of course, to scale sustainably. In closing, Telix continues to demonstrate strong growth and operational improvement. We've never been more focused or committed to delivering value for our shareholders, our clinical partners and most importantly, the patients we serve. Thank you for your attention. I hope you found this presentation interesting and informative, and I now open it up for questions.

Today's first question comes from David Low with JPMorgan.

If we could start with just the outlook for gross margins. I mean I think it was very useful to get all the update on RLS and understand exactly where the contribution is, but I heard the message that you think it can improve. And then, of course, we've seen some fairly significant changes in PSMA pricing in the last quarter, particularly the back end. I'm just wondering how that's going to play out and of course, trying to understand how Gozellix fits into that mix as well. So if I could have someone have a go at answering some of those facets, please.

Well, Darren, it seems like you have three questions instead of one, but why don’t you start off with the gross margin.

Yes, thanks, David. This half year has brought significant changes for the organization compared to the previous year when we were only selling Illuccix. The key point is that the gross margin for Illuccix has remained fairly consistent, reporting 65% last year and 64% this year, showing no real change in that aspect. When we look at RLS, we see the addition of third-party products and the internal contribution from selling our Illuccix product, allowing it to achieve a 7% gross margin after including the radiopharmacy cost. Our benchmarking has shown that similar companies are reporting a gross margin in the low to mid-single-digit range, which contributes to the 53% average based on the business volume. It's important to note that as we promote Illuccix and its greater contribution to RLS, we expect to see growth in the dollar gross margin for that segment without significant cost increases for patient delivery. As we introduce more Illuccix and other products like Gozellix, Pixclara, and Zircaix, we anticipate further contributions to the organization. I hope that answers your question, David.

Yes, I think I don't have anything to add except for that, obviously, we didn't acquire RLS for its commodity radiopharmaceutical business. We acquired it to put a larger proportion of our own products through and to prepare for when we have to distribute therapeutic unit doses, which you can't do that without a nuclear pharmacy dose dispensing. If you want to deliver a prefilled syringe to a customer, which is the name of the game, you got to have a pharmacy network to do that. So this is not about like what's going to happen this quarter. It is what's going to happen in the next quarter and the quarter after that and 3 years from now. So let's move on to the next question.

The next question comes from Tara Bancroft with TD Cowen.

This is Nick on for Tara. I have one on the guidance and the continued growth of Illuccix moving forward. So to reach the 2025 guidance with assuming stable RLS revenue, obviously, it's a little bit difficult to say that right now. But it appears like Illuccix sales growth may be slowing a little bit. Is this due to the loss of pass-through status? And what impact could this have on Illuccix net sales? Also, could Gozellix need to return to growth once it does have pass-through status?

Yes. I mean, obviously, we give guidance on an annualized basis, not on a quarter-by-quarter blow. So you're absolutely correct. 1st of July, we came off pass-through. We actually reported 7% growth quarter-on-quarter, which is, I think, exceptional -- 7% growth in volume quarter-on-quarter, which is really exceptional performance if you -- particularly if you take some of our competitors' financial results into consideration. So what we did is we made a decision that we were going to stabilize our customer book going into the third quarter. We have the situation where we have one product coming off pass-through and then another product getting reimbursement effective 1st of October. And we've got to bridge that gap and we chose to take certain commercial actions to do that. And we still had growth in revenue quarter-on-quarter, again, where our competition didn't. And so I think we have a nice stabilization strategy for Q3 and then Q4 continues with the advantage that we uniquely have of a second product introduction. I don't know, Kevin, if you want to add anything to that?

I would just add that we just continue to take the market pragmatically and continue to sell clinically on our accuracy as we spoke of earlier in my presentation and then continue to drive that message with reliability. And again, we have a strategic pillar and our customer-facing team that really represents well and is able to really manage that ASP and volume mix that we work on with that piece of the business and the strategic accounts.

Yes. And I think you'd be mistaken in thinking that this is just a pricing game. It's not. I think there's 4 pieces to commercial success in the market dynamic today, as Kevin said, selling on clinical value proposition, which we have demonstrably the strongest clinical value proposition. It's selling on service and service quality. Then there is, of course, pricing and pricing structure, particularly for large volume customers. Unlike our competition, we don't throw it all at the same price to everybody. We give benefits to our customers that are more loyal than smaller customers. And I think the last thing is clearly reimbursement status. And again, to reiterate, we go into Q4 with a very strong and differentiated commercial strategy with Gozellix. And we're excited about that. We're looking forward to it. Sales team is pumped.

Our next question comes from David Dai with UBS.

Congrats on the quarter. I'm just curious about the Zircaix launch readiness. Maybe you can highlight some of the things you've been doing for Zircaix and how should we think about the launch in the first and the second quarter after approval on August 27?

There's probably not too much to really kind of openly discuss. I mean the commercial team, it's not their first rodeo. We're selling into the same customer base, same referral physician base as Illuccix. So it's a very straightforward pathway to the customer. We're clearly focused on using our Illuccix customer base to seed that product launch. And I would say the commercial team is ready to rock and roll on Zircaix. I don't know if you want to add anything to that, Kev?

No, I think the combination of a urological call point with a nuclear med physician base that's reading that is really the key to success there. And we've had an expanded access program going for a while that's demonstrated exactly what we saw in the ZIRCON study. So we're excited about the launch and just haven't given guidance for 2026 yet.

Yes, the expanded access program has been a huge success. We have executed a well-organized unbranded education campaign for physicians. Therefore, we believe the market is ready for this product.

The next question is from Andy Hsieh with William Blair.

Congratulations on the performance. So for the BiPASS study, obviously, very provocative in terms of the disruptive potential. I'm curious, the trial is posted on ClinicalTrials.gov. You have some primary endpoints. Just curious about some secondary endpoints that you're contemplating on and how you think about some of the outcomes, longer-term outcomes for patients pertaining to survival or treatment steps that you can really, really convey the value of taking this agent upfront?

Yes. This study was initiated based on engagement with key opinion leaders regarding the future direction of PSMA as we advance through treatment options. To be honest, patient management practices have not changed much in the past 15 years, and they remain outdated. While MRI technology continues to improve, we still conduct over 1 million biopsies annually, with many of those not contributing positively to patient care. I want to emphasize that our goal is not to eliminate biopsies, as that would be an unreasonable clinical aim. Biopsies are crucial; rather, our aim is to ensure that biopsies are meaningful and utilized only when absolutely necessary. Regarding the trial design, we will be posting it on ClinicalTrials.gov as the study is just getting underway. We want everyone to be informed about the endpoints. To address your implied question, there will indeed be a monitoring period, though it will not be very long. However, there will definitely be a follow-up period to assess the effectiveness of prostate imaging within that patient group. Stay tuned, as we will have more updates on the trial design soon.

The next question comes from David Nierengarten with Wedbush Securities.

I just had one on the ProstACT study. Just around the parameters, you've recruited the patients. Kind of what are you looking for on the dosimetry and safety side? And when you think about the movement into the Part 2 of the study, is it still the plan to carry forward all 3 combinations? Or could that change in the future when you talk about the results from these first 30 patients?

Things can always change based on data. However, our current plan remains as previously stated. The main objective of the Part 1 study, and the reason it took time to recruit patients, is due to its multi-time point specto dosimetry involving many patient visits and typically requiring specialist centers. Therefore, only a subset of departments is really suitable for conducting that study. It is a demanding study for the patients. When we transition into the second part of the study, which will be seamless in some countries, it will be a straightforward process with a much simpler study protocol from the patients' perspective. The three different treatment arms were designed to provide flexibility in the choice of RP, which we believe is important. Our goal for Part 1 is to confirm our understanding of the safety profile in combination with different RPs and Taxanes. We fully expect that this will carry over into the second part of the study. We see a compelling clinical use case for all three combinations, and our mission is to demonstrate to the agency that the safety profile remains consistent across different RPs. I hope that answers your question, and we are truly excited to have completed the first run-in part. The initial study protocol was quite challenging, but the remainder of the study is expected to progress at a much faster pace.

The next question comes from John Hester with Bell Potter.

I want to just come back to the situation with PSMA pricing. I'm sure everyone on the call heard the comments from Lantheus a few weeks ago regarding the competitive situation and also Kevin referred to competitive pricing pressures in the market in his prepared comments. So the question is this, are you worried about that pricing pressure contagion spreading to your own market? And can you also sort of update perhaps on what you've seen on those pricing pressures in this current quarter?

I believe we have shared all the relevant numbers. Pricing is influenced by competitive dynamics and reimbursement status. The market is complex, with various customer segments experiencing different competitive and pricing dynamics. Customers understandably prefer reimbursed products. Lantheus's recent removal from reimbursement has impacted their business. We are also temporarily off reimbursement, but we have received a HCPCS code for our life cycle management product, which has its own innovative features. This is not merely a follow-on; it offers real clinical and workflow benefits. We manage pricing consistency by continuously innovating and delivering capabilities to our customers, setting ourselves apart in both clinical use and reimbursement profiles. I don't want to come across as dismissive, but we do not focus on pricing pressure because we have a life cycle management strategy to tackle it.

Today's last question will come from Andy Hsieh with William Blair.

So Chris, I'm just curious if you can comment a little bit more about the aluminum fluorine technology that you mentioned that kind of allows you to traverse between the gallium-68 and fluorine-18 isotopes. Can you speak to maybe the commercial implication, i.e., what is the next steps in terms of potential regulatory pathway and then supply chain, how does that kind of fit into your goal of being a vertically integrated company, leveraging the RLS and ARTMS platforms?

Well, on the node, so I'll start off with the science lesson, and then I'll hand it over to Kevin to talk about the commercial implications and the physician preference. But essentially, when you react aluminum and fluorine together, it's pretty violent coupling. And what you end up with is a metallized version of F-18. And it turns out that, that metallized version of F-18 is a drop-in replacement for gallium. So what it means is that you have the same targeting agent with the same chelator and you can interchangeably substitute either gallium or F-18. And the beautiful thing about aluminum fluoride is that you make it in extremely large quantities at a cyclotron facility. It's not a drug per se. It's essentially an API, a hot API. And you can drop that activity then into nuclear pharmacy and using all of the benefits and the production workflow advantages that we have of the kit-based approach we can essentially, particularly in high-density areas or where we want to service large academic customers that really are enamored by F-18, and I'll get Kevin to characterize the customer base a bit more, but it enables us to seamlessly transition between gallium and F-18 and of course, continue that life cycle management. And PSMA-11 is really well demonstrated in terms of its sensitivity and specificity as a targeting agent. And now we get to marry that kind of superior pharmacology of PSMA-11 with the utility of F-18. And still, by the way, utilizing our well-trodden and well-understood distribution model. Maybe, Kevin, you want to comment on physician preference?

We launched Illuccix three years ago and we've successfully captured over a third of the market, pushing 40% of the market with gallium. We believe gallium is an excellent product and will continue to implement our Illuccix and Gozellix strategies in the marketplace. However, we observe that some long-established users of F-18 for various products over the years tend to prefer it. We are confident that our reliability, along with our customer-facing commercial team, will support this preference in the coming years as we manage the life cycle from Gozellix and maximize gallium sales, while also exploring opportunities for AlF through our distribution and commercial network.

Yes, to wrap up, that's a great question, and you're the first analyst to ask about it, so I'm glad to elaborate. Moving forward, we have a range of imaging products coming soon, including a gallium FAP agent. As we develop this agent, we'll consider how to avoid participating in physician preference discussions. Some people prefer gallium, while others prefer F-18, much like how some choose BMWs and others choose Mercedes. We'll establish services to provide both options based on preferences. I think we are nearing the end of our time, so thank you all for your time today. I appreciate the opportunity to update you. Thank you very much.

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