Telix Pharmaceuticals Ltd Q2 FY2025 Earnings Call

Thank you for your patience, and welcome to the Telix Half Quarter 2025 Results and Investor Webcast. I will now turn 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 one 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 the 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 four 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. In the first half of 2025, we saw strong commercial growth in our Precision Medicine business and continued our investments for future development. We achieved significant revenue growth, with total group revenues rising 63% year-on-year, mainly driven by the success of Illuccix and increased third-party revenues from RLS. Our precision medicine revenues increased by 30% year-on-year, and EBITDA improved by 24%. Gross margins in our Precision Medicine sector remained steady at 64%, thanks to our efficient production of Illuccix. The group's overall gross margin was 53%, influenced by the RLS product mix and associated manufacturing and distribution costs. We made substantial investments in our global manufacturing infrastructure to secure long-term growth, while also increasing our R&D pipeline investments by 47% year-on-year. Following these investments, we generated $18 million in operational cash flow and ended the half-year with a robust cash position of $207 million. Moving to our group revenues, Telix generated $390 million, consisting of $79 million from RLS third-party sales and $311 million primarily from our Precision Medicine business. This marks a 63% increase year-on-year and a 41% increase compared to the second half of 2024. Illuccix continues to show strong growth, particularly in volume doses. Kevin will provide more details shortly. On the group P&L front, we experienced solid growth and made strategic investments to set the stage for future growth. The group's gross margin stood at 53%, reflecting the addition of RLS products and its associated costs. R&D expenditures increased by 47% to $82 million, with a rise in investment in our therapeutic pipeline, accounting for 54% of our overall R&D investment, up from 43% last year. Richard will discuss our therapeutic portfolio later in the presentation. Selling and marketing expenses rose to 13% of revenue from 10% as we prepared for product and geographic expansion, including an additional $7 million from RLS. Manufacturing and distribution costs, excluding RLS COGS, climbed to 5% of revenue from 4%, driven by investment in our infrastructure across several facilities. General and administrative expenses decreased to 12% of revenue from 16% last year. Consequently, adjusted EBITDA fell to $21 million due to our investment activities. Moving on to the income statement of our Precision Medicine business, gross margins remained steady at 64%, indicating sustained operational efficiency with Illuccix and our readiness for new product launches and geographic expansion. We increased selling and marketing expenses to 12% of revenue, which was balanced by reductions in R&D and general administrative expenses. This led to a $20 million year-on-year increase in precision medicine EBITDA, motivated by a 29% revenue growth. In our TMS business, we made significant investments, particularly highlighting RLS's role, its contribution, and its employment across more than 30 locations, enhancing our delivery capabilities. RLS's EBITDA approached breakeven within the five months since acquisition, and growing volumes will further enhance its contribution. RLS accounted for one-third of Telix's group revenue, with total network revenues for this period reaching $110 million. This encompassed $79 million from third-party products and $31 million from intersegment revenues linked to Illuccix. RLS's gross margins were around 7%, which is standard for this type of operation, covering manufacturing and distribution costs in radiopharmacies. RLS's operating costs, excluding COGS, totaled $15 million over the five months since acquisition, and we anticipate these costs will remain consistent as a percentage of revenue for the second half of 2025. Our TMS business also incorporates various subsidiaries, where we are driving further operational advancements. Chris will elaborate on our TMS strategy later. Turning to our cash flow, we recorded a positive operating cash flow of $18 million in the first half of 2025, showcasing the commercial business's ability to support our R&D pipeline and market expansion efforts. Telix used its cash reserves for strategic acquisitions, the largest being RLS, and ended June with $207 million in cash. Moving to capital allocation priorities, Telix focuses on four core areas: R&D development, optimizing commercial performance, exploring strategic growth via M&A, and enhancing supply chain resilience. These focus areas are key to sustaining our long-term growth. In R&D, we are progressing several late-stage clinical programs while optimizing our commercial framework to expand into new focus areas and geographies. In terms of M&A, we made three strategic investments in the first half of 2025, acquiring RLS Radiopharmacies, ImaginAb, and a FAP candidate. We continue to strategically invest in our manufacturing and supply chain to maintain our competitive edge and ensure efficient scaling as demand rises, all while maintaining a solid cash reserve. As I conclude, I would like to reaffirm our full-year revenue and R&D guidance. We predict revenues from Illuccix and RLS will range between $770 million and $800 million, with R&D investments anticipated to increase by 20% to 25% compared to last year. We remain committed to our investment strategy over the next three years, focusing on revenue growth through advancing assets to commercialization and geographic expansion while reinvesting earnings to enhance capabilities, infrastructure, and readiness for our therapeutic programs. At this phase, our priority lies in building long-term asset value over optimizing short-term earnings per share growth, as we believe that an early focus on earnings could hinder the necessary strategic investments to unlock 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 everybody online. So I'd like to start by taking a moment, if you could advance on to the next slide, please, to talk about why Telix is highly differentiated and built for long-term success. Starting with our therapeutics pipeline. Our pipeline is built around areas of high unmet medical need with a diversified portfolio strategy that gives us multiple shots on goal, even in some cases, concentrated in the same disease area. Our R&D efforts remain sharply focused on advancing next-generation assets, whether that's in the alpha or beta therapies, novel isotopes or innovative targeting agents. As a data-driven organization, our decisions are grounded in rigorous scientific and clinical evidence, ensuring that we prioritize our limited resources towards the most promising opportunities. Turning to manufacturing and supply chain excellence. I want to emphasize that radiopharmaceutical manufacturing and distribution is an extremely complex business from an operational quality and regulatory perspective. A robust, reliable supply chain is critical to long-term success, especially for a multiproduct portfolio like ours that's also going to one day deliver therapeutic outcomes. This is why we've made strategic investments in selective aspects of vertical integration over the past couple of years, alongside deepening relationships with key strategic partners that we think are best aligned with our long-term commercial strategy. Our investment in commercial infrastructure is starting to deliver real operational and financial returns, including with continued volume growth for Illuccix in a maturing market landscape. This performance reflects our proven track record in commercial execution, and I think it positions us very well for future product launches. This year also marks a major inflection point for Telix as we transition from effectively a single product, single market company to a multiproduct, multi-region commercial organization. And we've done it pretty cost-effectively. With this global infrastructure in place, our precision medicine assets are laying the operational and financial foundation for the rollout of our future therapeutic pipeline, which, as a reminder, is really not that far away. Next slide, please. So within prostate cancer, our multiproduct strategy, supported by next-generation follow-on assets, is designed to drive sustained revenue growth. This approach strengthens our market position while expanding our commercial runway. We may have been second to market with Illuccix, but we are leading our new strategy through a life cycle management initiative that will enable us to continue to capture market share and to compete on the merits of our product portfolio to dramatically reduce the impact and viability of new entrants. We'll continue to expand the market through new indications and indication expansion, notably our BiPASS study, a groundbreaking Phase III study that's aimed at expanding the label to use Illuccix and Gozellix right to the front of the patient journey with the potential to disrupt current diagnostic pathways and significantly expand the total addressable market. Kevin is going to talk more about this exciting near-term opportunity during his part of the presentation. Finally, we continue to focus on product innovation, leveraging the strength of our distribution model, customer service and innovation focus to maximize product choice to the benefit of physicians and patients. For example, we recently unveiled the AlFluor chemistry program. This first application, the development of a PSMA targeting agent, enables us to combine the imaging benefits of fluorine-18 with the convenience of gallium kit-based workflows the market has already come to appreciate. We have an extensive clinical data package to support this, including a Phase III study in a significant number of patients. Following a helpful consultation with the FDA, we are now planning a registration-enabling study to take this forward to a new drug application. Next slide, please. Let's take a moment to understand what transitioning from a single product, single market company to a multiproduct, multi-region commercial organization actually means. It takes a highly complex global manufacturing and distribution infrastructure to deliver our precision medicine assets and obviously, future therapeutics that are coming down the pathway to patients. Due to the relatively short half-lives of isotopes and the need for just-in-time manufacturing, highly specialized facilities and logistics are required to avoid factors throughout the journey that can lead to disruption and delays. We have continued investing in our manufacturing infrastructure globally to have greater control throughout the process and significantly reduce quality and delivery risk. We see this as a crucial point of competitive advantage because without reliability, there is no commercial traction in this industry. Our global footprint reflects our commitment to leadership in radiopharma. We believe a truly global presence is critical to becoming and maintaining market leadership in this space. Next slide, please. On the topic of RLS integration, the RLS acquisition was a highly strategic investment, enhancing our U.S. presence, which is a critical market with a production and distribution network that covers over 85% of the U.S. and provides last-mile delivery and a footprint to expand our manufacturing capability in the U.S. Darren has already talked to the financial contribution of RLS. I want to touch on the value drivers and integration progress to date. In just five short months, the integration is going very well, and I have been personally extensively involved in the process alongside Darren Patti, Telix's Group COO. RLS can deliver value in the following ways. Firstly, we are already seeing the synergies of having two distinct commercial teams that complement each other in terms of the way that they view and engage with the market. Having a nuclear pharmacy network provides a new entry point and insights, bringing us closer to the customer and enabling us to identify significant new opportunities. To be clear, our team manages everything from producing the end dose, quality controlling it to walking it into the clinical site. This business is all about service to the end customer. Second is a pathway to margin improvement. The volume of Illuccix sales through the RLS network has increased by 50% on a dose volume basis in the first six months since the acquisition. This is not at the expense of our key partners; rather it demonstrates the synergies between the two commercial organizations and our ability to capture commercial white space and optimize our competitiveness. PET agents like Illuccix and Gozellix reflect higher-margin, higher-value products for nuclear pharmacies to distribute. As we increase product distribution of our own products through RLS, we expect to see long-term improvement in gross margins and the ability to mitigate competitive and distributor risk. Finally, our goal with RLS is to build a radio metal production network to meet future demand for imaging and therapeutic radiopharmaceuticals to grow the RLS business, but also to reduce our own reliance on third parties for supply chain in the U.S. Again, with this investment, we will be focusing on high-margin products, not historical commoditized products. We are currently in facilities planning and development for six cyclotrons across the RLS network initially, with the facilities upgrade process to commence in the second half and will be complemented by in-house capabilities to produce select therapeutic products alongside our pharmacy production function for dose drawing and dispensing. So this will support both commercial activity and clinical activity. Next slide, please. The third pillar of value creation I want to discuss is our therapeutics pipeline and platform. We are highly dedicated to bringing our therapeutics to market, which remains a key focus of our investment strategy. As you heard from Darren, it constitutes an increasing share of our R&D spending. We are making significant strides across the entire pipeline, and the momentum we are generating demonstrates the strength of our execution. I'll let Richard elaborate on our overall progress across the pipeline. With the acquisition of Los Angeles-based ImaginAb, we gained a biologics and drug development platform well-suited for targeted alpha therapies. This exceptionally skilled team brings a wealth of experience and is supported by key opinion leaders who have a compelling vision for the future of our targeting platform in radiopharmaceuticals. The acquired platform employs small engineered biologics or antibodies that facilitate highly specific cancer targeting, enabling rapid tumor uptake and blood clearance. With our expertise in antibody engineering, linker and chelator optimization, and isotope selection, we are well-positioned to develop highly potent and targeted radiopharmaceuticals, ranging from small molecules to advanced biotherapeutic products. We believe that these specialized in-house R&D capabilities are crucial for the company's long-term success. Please move to the next slide. So just to wrap up in terms of expectations around top line and bottom line growth and reiterating some of the messages that Darren has given you, I've been showing this chart in our investor presentation since the start of the year, and there are some important signaling aspects to this graphic. We are now in the middle stage of our trajectory, where we're diversifying our revenue streams, expanding globally and derisking the business. If you recall, our midterm strategy has been to reinvest our revenues into the business to fuel long-term growth. We're making very targeted investments today to position the company for long-term growth, both in top line expansion and bottom line performance. But right now, it's without putting every last dollar into that growth and infrastructure that when we hit our pre-commercial launch year for the Therapeutics business, we are really ready to go. I want to give a little final comment before I hand over to Kevin and take a moment to address the information request from the SEC. I know many people have had questions about it. I'm personally disappointed to be in the situation as I really don't believe it reflects the quality of our organization or our commitment to excellence. The subpoena was a request for documents primarily relating to our disclosure activity related to the development of our prostate cancer therapeutic candidates. We are in the process of responding to the SEC to resolve this as soon as possible. I want to make clear that there have been no allegations or charges leveled at the company or any individuals. We do not know what or who triggered this. Let me be clear, this has no impact on our commercial portfolio or the momentum of our pipeline development. In fact, we're operating with more urgency and focus than ever before to bring these breakthrough assets to patients. I believe you can see evidence of this progress in today's presentation. So with that, I'd like to transition over to Kevin, our CEO of Precision Medicine for a commercial update. Thanks, Kevin.

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 three 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 two 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 a meaningful impact for patients. We remain laser-focused on the execution of these three strategic pillars, driving the expansion of our global Precision Medicine business and paving the road for our Therapeutics business. 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 five 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 a successful launch of our follow-on products. 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. 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 two 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. 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 one 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. 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. 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.

Thank you, Kevin. So let me present to you today the update of our Therapeutic business unit. And you will see that during the first half of this year, 2025, we were moving the needle on all our therapeutic areas. You can see on this slide, our strategic focus is centered around three therapeutic pillars: first, urology oncology; second, neurology oncology; and third, solid tumors and hematology. So within urology, we have a pipeline asset for prostate cancer and more specifically targeting the mCRPC standing for metastatic castrate-resistant prostate cancer. And also kidney cancer, we're targeting the ccRCC indication for clear cell renal cell carcinoma. But we have also a therapeutic agent such as TLX090 for metastatic bone pain deviation, which is frequent in prostate cancer late stage. Within neuro-oncology, we have a pipeline asset for glioblastoma. And I'm happy to share that we are also adding a new indication for leptomeningeal disease with the alpha version of the TLX102 compound. Within our third pillar regarding solid tumors and hematology, we have the TLX400, our FAP-targeting asset that we closed the acquisition during Q1 2025. This asset has the pan-cancer potential, and we are exploring various indications. We also have molecules for soft tissue sarcoma and a bone marrow conditioning agent for pediatric high-risk leukemia patients. I will come back on that in a minute. In summary, you can see that we have ten early and late-stage assets. Late-stage assets, primarily focused on beta therapies, followed by earlier-stage assets exploring alpha therapies. In addition to these ten assets, we also have preclinical compounds targeting for the most well-known DLL3 and alpha v beta 6 coming from the ImaginAb acquisition. We are exploring the best combination with isotopes for these targets. Our diagnostic strategy includes having a companion diagnostic for all our disease area of focus, and we are working in close collaboration with Kevin and the precision medicine colleagues. Let's talk about prostate as the first pillar of our urology strategy. TLX591 is our Phase III asset for mCRPC. And let me remind you that ProstACT GLOBAL is a combination trial with standard of care, namely we are associating the product with abiraterone, enzalutamide, and docetaxel with 10 patients in each arm. This is a two-part study where the primary readout from Part 1 will be safety and dosimetry. And I'm pleased to disclose that we have reached target enrollment of 30 patients in Part 1 and we'll provide an update once the data analysis is complete. Part 2 of the study is a randomized treatment expansion, including 490 patients. In order to accelerate ProstACT GLOBAL Part 2, firstly, we are currently in the process of getting the required regulatory approvals in various countries in order to expand the number of sites. Secondly, the protocol in Part 2 is more patient-friendly in that the patients will not need to come back to the hospital for multiple scans, which were required in Part 1 to complete the dosimetry data. Let's move on to TLX592, which is our next-generation PSMA targeting alpha therapy using actinium in development. Earlier this year, we presented data at ASCO GU from our clinical study evaluating the biodistribution and the dose to the organs of the copper-64 level imaging version. This was essentially a proof of concept of this asset, and we are really looking forward to moving into Phase I. I'm pleased to say that we have now received the Human Research Ethics Committee approval in Australia for the first-in-human study with this 592 asset. Let's move forward, TLX090, our Samarium agent. This is being developed to treat the pain palliation in patients that have osteoblastic metastatic disease. It fits nicely and perfectly with our urologic platform because frequently, the patients that have osteoblastic metastatic disease have prostate cancer. Currently, we are developing this as a single-dose agent for pain palliation, but there is potential in the future for multiple dose regimens as well. And I'm pleased to announce that we just received the FDA approval for Phase I study and look forward to start. It's another great milestone for this first half of the year 2025. I'm sure you can agree with me. Moving to the next slide, our second pillar of the urology strategy is focused on kidney cancer. TLX250 is our CA9 targeting agent, known to be expressed in over 90% of clear cell renal cell carcinoma and in several other solid tumors. We have ongoing studies investigating both mono and combination therapies, particularly focusing on monotherapy for advanced third and fourth-line patients with ccRCC. I'm pleased to announce that we are advancing with a pivotal trial called LUTEON, with the submission to the Human Research Ethics Committee in Australia now complete. On the right, you can see images of a patient with metastatic advanced renal cell carcinoma. The top shows initial images from a zirconium level girentuximab scan, highlighting intense activity in the sacrum where a metastatic lesion was located. After three cycles of therapy with lutetium girentuximab, the bottom row shows a significant decrease in activity in the sacral lesion, increasing our confidence that the therapy has effectively targeted the bone lesion. Next, considering the life cycle of the girentuximab compound, let's discuss TLX252, our CA9-targeting alpha therapy for a broad tumor approach, including ccRCC. Patients exhibiting high CA9 expression often experience resistance to chemotherapy, immunotherapy, and eventually radiotherapy. We believe this makes it an ideal target for radioligand therapy, as the alpha isotope allows for direct targeting of tumor cells with increased activity. We submitted our application to the Human Research Ethics Committee in Australia in late Q2 and are eager to commence our Phase I trial upon receiving ethics approval. Let's now transition to the neuro-oncology portfolio. I am excited to announce we have received full ethics approval in Australia to initiate the IPAX-BrIGHT study. This pivotal registration-enabling study aims to address recurrent glioblastoma, especially given the lack of effective treatment options for this condition. Notably, this agent has been designated as an Orphan Drug in both the U.S. and Europe for glioma treatment. Our initial focus with PDX101 will be on glioblastoma, the most prevalent and aggressive primary brain cancer, where there is currently no established second-line treatment. According to the NCCN guidelines in the U.S., participation in clinical trials is recommended for second-line treatment in recurrent cases. Additionally, I'd like to summarize earlier disclosed data. In the recurrent setting, IPAX-1 and IPAX-Linz displayed an acceptable safety profile and encouraging overall survival rates, with durations from the point of recurrent diagnosis ranging between 12 to 13 months and from treatment initiation between 23 to 32 months. This is a significant achievement given the drastically reduced average life expectancy in this challenging disease. On the right part of the slide, you can see a patient case from a compassionate use program in Europe. For this patient, the scans indicate stable disease for 18 months, which is very encouraging given the severity of this disease. Now turning to our targeted alpha therapy approach in neuro-oncology using astatine isotope, we believe that patients with smaller, more diffuse disease might benefit from the mechanism of action and the higher energy deposition of astatine-211. We are currently preparing a regulatory filing for leptomeningeal disease and conducting a collaborative investigator-initiated trial in glioblastoma. Let's move to the next slide, where we will focus on other solid tumors and hematological diseases. Starting with TLX400, our FAPi, which stands for fibroblast activation protein inhibitor, an antigen expressed in the tumor microenvironment. The diagnostic aspect has been confirmed in patients, and we have several publications on this topic. We look forward to bringing this molecule to the clinic, with the Phase I pan-cancer Basket study set to start in 2026. The other two molecules we have are TLX300, licensed from Lilly for PDGFR alpha targeting advanced metastatic soft tissue sarcoma, and we have initiated a Phase I ZOLAR imaging trial that is currently recruiting patients in New Zealand and Australia. We also have TLX66 for bone marrow conditioning related to allogeneic stem cell transplantation, specifically for myelodysplastic syndrome and acute myeloid leukemia. Moving on to the next slide, it's been an extremely busy first part of the year. Telix has one of the most complete therapeutic portfolios with ten pipeline assets, and even more if I include some in the research stages following our recent acquisition of ImaginAb. In urology and neuro-oncology, we are progressing by initiating three pivotal trials. First, we are advancing the pivotal trial with ProstACT GLOBAL; second, we are preparing the pivotal trial LUTEON for the 250 compound, and we are starting the pivotal trial IPAX-BrIGHT. Additionally, we are commencing a clinical trial with TLX090, which is an ideal companion product for our ProstACT portfolio. Importantly, we are also entering first-in-human trials with our two alpha emitters, 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 six 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.

Could we begin with the outlook for gross margins? I found the updates on RMS and the contribution insights very helpful, but I also understand that you believe there is potential for improvement. Additionally, we've observed some notable changes in PSMA pricing over the last quarter, especially towards the end. I'm curious about how this will evolve and how Gozellix factors into the equation as well. Could someone address these points?

Well, Darren, it seems like you have three questions instead of one, but please go ahead and start with the gross margin.

Thank you, David. This half-year has marked a significant shift for the organization compared to last year when we were exclusively selling Illuccix. The first key point to note is that the gross margin for Illuccix has remained fairly stable, with reports showing 65% last year and 64% this year. Therefore, there has not been a notable change in the gross margin for Illuccix in the market. When we examine RLS, we see the inclusion of third-party products along with the internal contributions from selling our Illuccix product. This combination has allowed them to achieve a 7% gross margin, once we factor in the cost of radiopharmacy. We have conducted some benchmarking and found that our industry peers are achieving similar gross margins in the low to mid-range single digits. Thus, the overall gross margin is a combined result of these two business segments, averaging 53%. It's crucial to remember that as we expand the sales of Illuccix, which contributes significantly to the RLS business, we expect the dollar gross margin for that segment to grow with little additional cost to deliver these products to patients. As we introduce more Illuccix and explore future products like Gozellix, Pixclara, and Zircaix, we anticipate these will further enhance the contributions of the RLS business to the organization. I hope this addresses 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 what's going to happen this quarter. It is what's going to happen in the next quarter and the quarter after that and three 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, we provide guidance on an annualized basis rather than on a quarterly basis. You are correct that since July 1, we moved away from pass-through. We reported a 7% growth quarter-on-quarter, which I believe is exceptional, especially considering the financial results of some of our competitors. We decided to stabilize our customer base going into the third quarter. We have one product coming off pass-through and another product receiving reimbursement starting October 1. We need to bridge that gap, and we've taken specific commercial actions to do so. Despite this, we achieved revenue growth quarter-on-quarter while our competition did not. We have a solid stabilization strategy for Q3, and Q4 will benefit from the unique advantage of introducing a second product. Kevin, do you have anything to add?

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 are four 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. The 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 significant success. We've executed a well-coordinated unbranded physician education campaign. From our perspective, 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 convey the value of taking this agent upfront?

Yes, this study originated from engagement with key opinion leaders regarding the future of PSMA as we advance in treatment options. To be frank, not much has changed in patient management over the last 15 years; it remains quite outdated. While MRI technology has improved significantly, we still perform over a million biopsies annually, many of which do not enhance the patient experience. I want to clarify that our aim is not to eliminate biopsies, as they play a crucial role. Instead, we want to ensure that biopsies are meaningful, focusing on their use where essential. Regarding the trial design, we will be sharing details on ClinicalTrials.gov as the study is just starting. We want everyone to be aware of the endpoints. As for your implied question, there will indeed be a monitoring period, though it won't be extensive. There will be a follow-up period to evaluate the utility of prostate imaging for that patient segment. So stay tuned, as we will provide 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 three combinations? Or could that change in the future when you talk about the results from these first 30 patients?

Well, things can always change based on data. But at present, our plan remains as stated. The primary goal of the Part 1 study, and the reason it took some time to recruit patients, is due to it being a multi-time point spectro dosimetry study that involves numerous patient visits and typically requires specialized centers. This means it's really a limited number of departments that are equipped to conduct this study. It is indeed a demanding study on patients. We understand that when we advance to the second part of the study, the transition will be seamless in some countries. That aspect is already in motion. The transition is straightforward, and the study protocol is much simpler from the patient's standpoint. The three different treatment arms were included because we aimed for flexibility regarding the choice of RPs, which we believe is crucial. Therefore, what we're aiming to achieve from Part 1 is to confirm our understanding of the safety profile when combining both RPs and Taxanes. We fully anticipate that this confirmation will allow us to progress into the second part of the study. We believe there is a strong clinical rationale for each of the three combinations, and our goal is to demonstrate to the agency that the safety profile is consistent across different RPs. I hope that answers your question, and we're quite excited to have completed the first run-in part. The study protocol was quite challenging, but the rest of the study will now proceed 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. The pricing is influenced by both competitive factors and reimbursement status. The market is complex, with various customer segments that experience different competitive and pricing dynamics. Customers naturally prefer to use products that are reimbursed. Lantheus has faced challenges after coming off reimbursement, which has impacted their business. We also temporarily came off reimbursement but have since been granted a HCPCS code for our life cycle management product. This product offers innovative features that provide real clinical benefits and improve workflow. We manage pricing and maintain consistency through ongoing innovation and by delivering new capabilities to our customers, setting ourselves apart in both the product's clinical application and its reimbursement profile. Therefore, I want to clarify that we are not overly concerned about pricing pressure because we have a robust life cycle management strategy in place to address 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 have captured over one-third of the market, accounting for 40% of the market share with gallium. We believe gallium is an excellent product, and we will continue to implement our Illuccix and Gozellix strategy in the marketplace. However, we notice that some long-standing users prefer F-18 due to their longstanding experience with it. We are confident that our reliability, combined with our customer-facing commercial team, will support this transition in the coming years as we advance in our life cycle management of Gozellix. We will continue to maximize the use of gallium and explore new opportunities for AlF within our commercial network.

Yes, to conclude, this is a fantastic question, and I appreciate being able to discuss it further. Moving ahead, we have several imaging products in development, including a gallium FAP agent. As we work on this agent, we will consider how to manage physician preferences. Some prefer gallium while others favor F-18. We will ensure that both options are available based on those preferences. Thank you all for your time today, and I’m grateful for the opportunity to provide an update. Thank you very much.

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