Thank you for standing by and welcome to the Telix Pharmaceuticals Limited Q4 2022 Financial Results Presentation and Shareholder Update. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the one on your telephone keypad. If you wish to ask a question via webcast, please enter it into the ask a question box and click Submit. I would now like to hand the conference over to Ms. Kyahn Williamson, SVP of Investor Relations and Corporate Communications. Please go ahead.
Well, good morning, everybody, and welcome to our investor call today. We appreciate you taking the time to tune in. We'll be discussing the Appendix 4C cash flow report and activities report lodged on the ASX today. I'm joined by Dr. Christian Behrenbruch, our Group CEO and Managing Director, and Darren Smith, our Group Chief Financial Officer.
We will be taking you through some slides today. For those who are on the webcast, they should be in full view. For those on the phone, we'll give you a verbal cue to let you know which slide we're up to, then we'll move to Q&A at the end. Just starting from slide five. Before we kick off, I would like to note that as a once-off, we did release the Q4 U.S. sales revenue figure ahead of the 4C this quarter.
I expect that probably took some of you by surprise, particularly given it's the height of the holiday season here in Australia. As you will be aware, we were invited to present at the JP Morgan conference, and that's a really important forum to engage with the global healthcare investment community. It was critical we could go into that event being able to convey the top-line U.S. performance, particularly given the proximity to the release of our 4C.
It was really clear coming out of this event that radiopharmaceuticals is a sector of extremely high interest and that Telix is really well-recognized for the strength of its commercial performance, but also for the depth and the potential of our therapeutic pipeline. You know, Q4 has really capped off a transformative year.
We've achieved positive cash flow from operating activities, that's been really underpinned by the strong commercial performance of our launch of Illuccix in the U.S. We've continue to see strong month-on-month growth, resulting in an increase of 43% in the fourth quarter to revenues of AUD 76.8 million and a total of AUD 149 million since launch in April.
We have outlined four key catalysts and focus areas for the year ahead. As you can see. This includes, of course, continued revenue growth and rollout of Illuccix , but also advancing to having a multiple commercial diagnostic products in our portfolio and also delivery on clinical milestones across all of our therapeutic pipeline.
You know, in particular, this includes the first readout of data from our ProstACT SELECT trial this year and also advancing the ProstACT GLOBAL Phase III therapy study. Just in terms of the key financial metrics, you'll see that we delivered AUD 70.82 million of revenue from global sales of Illuccix. U.S. sales revenue continues to be the driving force for commercial performance in this quarter, we really see the rest of the world opportunities starting to take shape throughout the year, and we'll talk more through that later in the year. Receipts from customers were up AUD 72.2 million, up 62% from the previous quarter, this reflects not only increasing sales but also improvement in collections. Finally, the cash balance.
We finished at AUD 116.3 million, and that's only AUD 800,000 less than we were at the previous quarter. This is really a reflection of the strong financial stewardship that is being undertaken in the company, you know, as we continue to invest in the high-value and high-priority programs that will bring the pipeline forward. I'd now like to hand over to Chris to talk in a little more detail about Illuccix and the Q4 performance before Darren will take you through some more details on the financial commentary.
Thanks very much, Kai. You know, look, it's been a great quarter, for me personally, it's sort of the capstone on a, you know, very big year for the company with the Illuccix launch in the United States. We got our reimbursement for Illuccix on the 1st of July. What that means in practical terms was that Q3 was our sort of fully fledged commercial quarter, you know, where we had a very strong, you know, strong tailwind with reimbursement. I think that reimbursement improvement continues as we start to really see rollout across the United States. To have delivered 40% growth quarter-on-quarter, I think is an extraordinary outcome for the company. We don't see an abatement of that growth.
Generally, you know, an overall enlargement of the market and plenty of opportunities to grow the pie, so to speak, is really what we're seeing out there in the real world. I think part of it is about, you know, the evolving patterns of use, the re-referral patterns that we're seeing around the indications that are there, as well as, you know, the realistic real-world growth of utility in prostate cancer imaging across multiple clinical applications.
I note specifically, we also have a label extension planned for the third week of March, which is the patient selection indication. As we start to see therapy take hold, PSMA therapy start to really get traction in the United States, that also serves as a nice tailwind for the business.
We've grown the team pretty significantly to meet the opportunity. We think that this is now, you know, a greater than, you know, a $1.5 billion U.S. market opportunity, based on, again, the type of referral patterns and adoptions that we're seeing. We've risen to the challenge of that also by scaling our infrastructure and delivery network to now about 190 pharmacies in the U.S. market.
Really to make sure that we have that coverage, you know, both in terms of customer base, but also to meet the next sort of stage of commercialization, which is to be able to facilitate those group purchasing and IDN type of relationships where coverage is absolutely critical and expanding our network of delivery is really a requirement to be successful.
I think we've done a tremendous job of scaling up for that eventuality in the market this year. On that note, maybe I'll move over to you, Darren, to sort of elaborate on financial performance.
Okay. Thanks, Chris. It's with great pleasure that I present Telix's fourth quarter Appendix 4C financials. It's been a year of progress for Telix, transitioning in the first quarter from a biotech with a promising portfolio of diagnostic and therapeutic assets, to a commercial phase organization in the second quarter, to now, when Telix has achieved the major milestone of delivering its first quarter of positive cash flows from operating activities.
Three key items helped facilitate this achievement. Firstly, the strong growth achieved in revenue from Illuccix. Secondly, the continued focus on control of operating expenditure. Third, the improvement of management of customer receivables. Turning to the graph on Slide nine, this highlights the key movements that have delivered the AUD 1.6 million cash inflow in Q4, being a AUD 6.9 million improvement on the previous quarter.
As you can see, cash receipts improved 62% to AUD 72.2 million. This was a AUD 27.7 million improvement on the prior quarter as a result of management's focus on collections of receivables. With growth in revenue comes a corresponding growth in cost of goods. This increased AUD 19.8 million to a total of AUD 30.5 million for the quarter.
The net of these two items delivered an additional AUD 7.9 million in cash compared to the prior quarter. The other cash items related to operating activities delivered a net difference of AUD 1 million compared to the prior quarter. This reflected working capital management of SG&A, increasing investment in Telix's product development programs, and the requirement to pay income tax installments in the U.S. and in Belgium. What does this mean for the profit and loss?
I'll have you turn to slide 10. As previously highlighted, Telix's global revenue grew 41% on the previous quarter to a total of AUD 78.2 million. Telix is not only focused on the revenue top line, we've also focused on controlling Telix's cost base. This can be seen both in cost of goods sold and the operating expenditure improved and reduced as a percentage of sales, with COGS reducing from 39% in the prior quarter to 37%, and operating expenditure reducing from 37% to 28% this quarter. As a result, Telix commercial margins after cost of goods and SG&A, but before R&D, have improved from 24% last quarter to 35% on sales this quarter.
Telix is investing these funds into its product development programs with a focus on, firstly, commercializing late-stage assets such as the TLX250-CDx, and two, progressing the development of its potential high-value therapeutic assets, such as the ProstACT GLOBAL Phase III clinical trial. In summary, Telix has finished the year in a sound financial position with continued growth in revenue to controlling its operational expenditure, also improving the management of its working capital, and a solid cash position of $116.3 million. Collectively, this puts Telix in a strong financial position to enter 2023. I'll now hand back to Dr. Chris Behrenbruch to go through the year to come. Chris?
Thanks very much, Darren. With our financial performance, which is, you know, at the moment in excess of AUD 300 million in annualized revenue and underwriting about AUD 100 million of R&D from earnings, this really then enables us to deliver on our ongoing three-year commercial strategy, which is these four key items.
First of all, we will, in 2023, continue to build on Illuccix. Actually, about 20% of our R&D expenditure is still focused on building out, growing out Illuccix, expanding the indications for Illuccix, expanding the territories, and doing product lifecycle management. That includes building new features and capabilities into our product that we think are really gonna excite the market.
Telix has a very deep and over-the-horizon commitment to delivering excellence in prostate cancer imaging, you're gonna really see the effect of that this year from that R&D investment. I will note, just on the topic of global rollout, we expect to be in a position to resubmit our European marketing authorization by the end of this quarter.
That data collection has gone extremely well up until the end of last year, and we're just preparing the regulatory submission for that. We also expect in the next quarter, Brazil and Korea approvals. We also have a clear pathway to get a regulatory approval for Illuccix in Japan, and we've just had late last year, approval to do the phase III bridging study in China with our partner, China Grand Pharma.
This sort of direction of growing the global opportunity for Illuccix is a very tangible and proximal activity for the company. Second of all, you know, we are not a diagnostic imaging company. We are a therapeutics company, really unlike our competition. The focus that we have on our therapy programs and the investment that we're making in our therapy programs is really critical.
This year, you will see the ProstACT GLOBAL trial supercharged and launched in the United States and Europe, subject to regulatory approvals. We have two active clinical trials for the therapy agent recruiting. We're recruiting patients every week, and we're getting lots of excellent data. You will see clinical readouts this year from both ProstACT SELECT and ProstACT TARGET.
We already have abstracts and submission and preparing to talk about some of the really exciting clinical data that we're getting from our therapy program for prostate cancer. I also wanna remind investors and shareholders that we actually have two product approvals to submit this year. You know, we're making great progress towards our NDA submission for brain imaging.
This is an opportunity that's more modest compared to the prostate cancer, but still represents a total addressable market of $250 million-$300 million that we can layer in as a revenue stream on top of Illuccix under an orphan indication in the United States. You know, we'll be talking more and more about the progress towards that NDA submission over the course of the year.
I'll give a bit more color to that product in a minute 'cause it's somewhat under the radar. Of course, last and certainly not least, our excellent phase III results that we attained late last year forms the basis of our BLA submission. I think it's fair to say that our regulatory manufacturing teams are head down and focused on getting that BLA submission in this year for a product launch in early next year in renal cancer. We love this product. It's a follow-on product. It's the same call point as Illuccix. It's an opportunity to deepen our traction with urology and urologic oncology. It's just a natural follow-on product to the success we've had with Illuccix. Frankly, it's gonna impact our success in a positive way with Illuccix.
This is a highly anticipated product that's just generated a ton of interest based on the clinical data. You know, I think for the average biotech company of our market cap, any one of these would be a great objective to have for the year. The fact that we have these four value creation drivers for the year, means that we've just got a super exciting year ahead. Moving on to the next slide. I thought I'd just give a little bit more color to each one of these. I mean, first of all, we're starting to talk more and more about our differentiation. We have a really solid strategy for capturing our fair share of the prostate cancer market, from a therapeutic perspective.
I'm not gonna go through this line by line, but we have a very clear product differentiation. Key opinion leaders are starting to understand it. Medical oncologists understand what our differentiation is and what it means to patient management. I think this differentiation aspect is just critically important. We announce it the approval and success of Pluvicto, the Novartis product in the market.
What we see is that the follow-on competition to that product is really undifferentiated. In fact, it may even be not only clinically undifferentiated, but less clinically beneficial to the patient. So we're really focused on demonstrating over the next 18 months, where does this asset lie in the landscape of prostate cancer therapy, both in the wider context, but specifically with respect to radioligand therapy.
If you move on to the next slide, I think, you know, this is a picture of what the prostate ProstACT GLOBAL trial really looks like and is seeking to achieve. We've just finished manufacturing material for this study, which is just in the process of being released to be able to then complete the regulatory filings for the U.S. and Europe. For the total study, we're expecting to recruit 392 patients. We do have a run-in because we've got a new manufacturing scale-up method. This is our commercial scale-up method, but that's included in the overall scope of the Phase III trial. We expect this year to recruit that 100-120 patients to be able to then deliver an interim readout by around the middle of next year.
This is not a wait forever type of clinical scenario. We've got ProstACT SELECT and Target data delivering plenty of opportunities to talk about asset performance over the course of the year, and then really working towards that interim data point at some point in 2025. You know, this diagram really just shows the trial structure, the randomization scheme, and the standard of care that we're still working towards with this opportunity. I think it's fair to acknowledge that the competitive momentum has really generated a ton of interest for this asset class. We find that there's a high degree of investigator engagement around developing this asset and just no shortage of interest in participating in our clinical trial.
We expect this to be a pretty swiftly recruiting study. Moving on to the next slide, please. The TLX101 program, this is a LAT-1 imaging agent for imaging brain cancer, specifically glioblastoma. You know, this is a been a little bit of an under-the-radar program over the last 12 months as we've focused on building out the manufacturing package and assembling the clinical arguments that we want to take to the agency. There's a clear unmet medical need. This is about bringing a well-established standard of care imaging agent into the U.S. market and commercializing it effectively.
You know, we really see a good understanding and an unmet need commercially and clinically to make this product available. We have a 505(b)(2) submission in progress for that, or submission, development in progress there. We have experience from the Illuccix program of the submission pathway, so we're trotting down a familiar pathway. We have that pre-submission meeting in preparation for the agency. I expect by the middle of the year that we're gonna have some real momentum in this product. Moving on to the next slide, please. You know, certainly, last but not least, the TLX250 program, TLX250-CDx. I think to say that we were delighted with the clinical results late last year would be an understatement.
We have an incredibly accurate imaging agent that's exceeded our expectations in terms of the sensitivity and specificity. We have a product that we're confident can make an enormous difference to the diagnosis and staging of clear cell renal cancer. We believe that this is an asset that will change the standard of care for renal cancer globally. We are gearing up for ASCO GU next month, where we were able to get an oral presentation of the clinical results, which is, it's just very gratifying for the clinical team to be able to perform at ASCO at that standard. We're just delighted about that. This year, 2023 is about all the manufacturing scale up and the package. You know, we'll be doing a rolling BLA submission.
We've had good engagement with the FDA on the process. We have a couple of key meetings in March and May planned with the agency. I imagine by the middle of the year that our BLA submission will be well underway. This is again, something that's gonna move very fast for the company with a launch planned currently in early 2024. Moving on to the next slide. Moving on to the, you know, the opportunity for TLX250-CDx. You know, the ZIRCON trial was really designed to elucidate two indications, and this is what we'll be taking to regulators, to U.S. and European regulators. The opportunity to diagnose new incidental renal masses. You know, a good proportion of renal cancers are discovered incidentally from other imaging.
There's a major unmet need to characterize those lesions and provide both diagnostic and surveillance options for those patients. We also see an opportunity for a more staging-oriented indication. conservatively, when you put those two together, you know, acknowledging that our radiology colleagues do a pretty good job in some cases of diagnosing patients from CT and MRI. for the really high unmet need patients, we see a conservative market opportunity of $500 million-$600 million in the US alone. you know, as I stated before, this is just the ideal follow-on indication for Illuccix. It's a relevant call point, the GU oncology product.
You know, we get to, we get to build on the experience and contact points that our excellent sales team have developed for Illuccix, that's gonna be meaningful and instrumental to driving demand for this product. Of course, just like prostate cancer, where, you know, today the market size for prostate cancer is, you know, somewhere in the vicinity, you know, of three, maybe slightly higher, but certainly 300,000 scans a year. Over the next 2-3 years, indications like longitudinal and treatment response and surveillance, you know, with good clinical data, there's the potential to grow that to, you know, two or three times that market size. We see the same dynamic with renal cancer, with active surveillance and treatment monitoring indications.
We already have some really compelling data in the treatment monitoring and treatment prognosis area. You know, we think that they're, you know, again, subject to building those formal label claims. We see a very, very bright future for this asset, you know, frankly, in a low competitive landscape from Telix's perspective. You know, we're really excited about the future potential of this asset, and it's just great clinical data to support the market launch of this product. You know, moving on to the next slide. Just to kind of wrap up. You know, I've talked about those four key catalysts. Growing Illuccix, our two further follow-on product submissions, and of course, you know, that all-important therapeutics study from a ProstACT GLOBAL perspective.
Next, over the course of the 12 months, we just have so many additional milestones that we're gonna be able to talk to shareholders about. I know there's impatience on the European submission. We're very close to making that a reality for the company. We've got plenty of data coming out of our renal cancer and prostate cancer therapy programs.
We've got a global expansion for Illuccix. We've got pharma collaborations. You know, we've got all kinds of interesting technologies that are directly related to our core pipeline getting out into the hands of key opinion leaders and generating traction. Of course, we've got our research pipeline, which is.
You know, we don't often get a chance to go into deep dive, so you can expect over the course of the year that we'll be running some very interactive science days, where we'll get a chance to explain to investors all of the great stuff that's coming behind the core pipeline. In fact, if you look at our JP Morgan presentation, you know, we're really starting to bifurcate that core and extended research pipeline so people can get a little bit more focus on all the innovation. You know, what does Telix look like five years from now, seven years from now? That's just a really exciting development for the company. I'll wrap it up there. You know, thanks very much for the opportunity to give you this comprehensive update.
We can just move to the final title slide. I'll hand it over now to the floor for any questions and comments we may have.
Thank you. If you wish to ask a question by the phones, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to ask a question via webcast, please enter it into the Ask a Question box and click Submit. Your first question comes from David Stanton with Jefferies. Please go ahead.
Good morning and good evening, team. Thanks very much for taking my questions. First question's around U.S. growth rates that we might expect into calendar year 23 for Illuccix. We saw a 4th quarter volume of, you know, around the 11,000 scans for the quarter. What level of growth on this can we expect into calendar 23, please?
Well, I think, you know, the December's always a little bit of a, sort of a lazy month, in terms of taking volume. Not so much happens between Thanksgiving and Christmas. We did see growth, but there's a little bit of a slowdown, and we also have fewer, you know, fewer scanning days, in December as well. I think that, you know, going into Q1 and Q2, I don't really expect to see our growth abate all that much. You know, I think the good news is, you know, we will continue to see healthy growth in our top line over the course of 2023.
We aren't yet, David, as you know, in the stage where we're forecasting that, but I would imagine with sort of two to three more quarters of sales under our belt, as we see the reimbursement landscape kind of fleshing out in the United States, we're gonna be able to give a lot more color to that. Our expectation, frankly, David, is by sort of Q4 of this year that we'll start to see a penetrated market. What that means is the commercial dynamic over the next few quarters is gonna shift from kind of individual account acquisition, individual customer acquisition to more of a group purchasing national account type of dynamic. That's also a place where, you know, very large, you know, tracks of customer base could move around.
I think it's also fair to say, David, when we launched Illuccix, we focused on guideline equivalency. You know, our main message was because we were number two out the market, our main message was, we're available, we have great availability, access, scheduling, flexibility. Now we're really starting to focus on, from a selling perspective, you know, the clear clinical messaging that we have. We just have a better product. We have, you know, better sensitivity and specificity in our product. We have better clinical utility. We're able to detect very, very, you know, lesions with patients in very, very low PSA scores. You're gonna see a lot more clinically-directed marketing over the next couple of quarters. I think that's gonna have a big impact on our market share.
At least that's what our advisory boards are telling us.
Thank you. As a follow-up to that, do you think you saw an impact from Locametz in the fourth quarter?
Yeah, it's a great question. You know, generally speaking, across their radiopharmaceutical pipeline, Novartis have been having difficulty delivering. We don't see Locametz as a material player in the market, and that's consistent with Novartis' own guidance. You know, there are certainly delivery challenges with Pluvicto.
Where that happens, you know, you know, obviously the Sites are getting imaging in place, and we're getting plenty of customer engagement around using Illuccix for patient selection 'cause of the fact that it's indicated in the Novartis label. I think what's gonna happen is on the back of the PSMAfore study, which was, you know, an excellent outcome, I think everybody's expecting to see that sort of second line indication move in this year.
That's got the potential to add another 20-30 scans on an incidence basis. Remember, in the package insert right now, it only indicates a sort of a single scan. It's not repeat scanning. I think to model faithfully to the indication, it's one scan per patient, not multiple scans per course of therapy. Of course, we know that key opinion leaders are imaging patients as they go along because it's very instructive to therapy management. Assuming one scan per patient, you know, the progression of Novartis' business, assuming they sort out their supply issues, you know, that could add another 30,000 scans, 35,000 scans to the U.S. market, and we would expect to pick up probably 80% of that business.
Okay. My final question then I'll jump back in the queue is one for Darren, please. You know, steady-state gross margins for Illuccix, you've talked to low 60% in this quarter. You know, your competitors are more at the 70% number. What should we be thinking longer term in terms of gross margin from Illuccix, please? Thank you.
It's a good question, David. We don't typically give guidance, but there's probably a couple of things I can point to. You know, we have spoken in the past about the fact that we would see some continual improvements in our gross margin, moving up to probably around more of that traditional 65%. When we start talking about the margins, it becomes more about a question of selling price than it is around the cost of the goods sold and the delivery of those. What we'll see is that we've got a fairly pretty steady state in regards to costs.
The pricing levels will probably be more of a function as we move into a more penetrated market, and we get to a stage of how would you say, a more competitive pricing perspective to attain a better share or appropriate share of the market. I'd suggest that what we'll see is the margins start to kind of flatten out around that 65%. Obviously, there'll be a couple of percentage points variations around that on a quarter-by-quarter basis.
Yeah, I mean, if I can just add to that, I think Darren's perspective from an SG&A is spot on. You know, we are. Our competitor needs to invest in cyclotron networks to add, basically to capture additional market. We don't have that. We have this very scalable pharmacy model, but the trade-off there is that we have to manufacture a, you know, a vialed product, right, that with a shelf life that, you know, sits there in a nuclear pharmacy. However, this year we will be scaling up our manufacturing one more notch, and that production scale up in terms of kit production will also produce a few percentage points of COGS improvement as well.
I mean, certainly, both from an SG&A and a manufacturing perspective, David, there still is a bit of headroom. I think Darren's sort of advice to you is prudent, but I think we'll start to drift towards that 70% as we scale up manufacturing.
Understood. Thank you.
Your next question comes from Shane Storey with Wilsons. Please go ahead.
Morning, everyone. Happy New Year. I'm gonna return to David's question, please, just around the outlook for growth for Illuccix this year. It's an important question because as you know, I mean, the sales for the PSMA market are already way ahead of the indicative TAM that Telix put out one year ago. Maybe I'm gonna ask a different way and Chris, ask for your thoughts on how you think each of the two major settings for PSMA imaging, so hospitals and freestanding imaging centers, how both of those are tracking towards their target levels of awareness. I mean, intuitively, I would expect that the freestanding radiology segment has a long way to go. Would that be accurate?
No, I don't think so. I think proportionately... I mean, there's three markets, right? There's hospital-based, there's VA, and then there's IDTF. I think proportionately, they're tracking just exactly how we said we would. I mean, you know, we haven't been conservative. We've been conservative in our, in our TAMs, but we haven't, we haven't been particularly singling out any one segment where we're gonna be excellent. I mean, we've grown in all three. I think what we're seeing in terms of. I mean, our competitor, you know, every time they have a great quarter, they, you know, there's magically more prostate cancer patients available to treat. Whilst there's a degree of truth in that, I think part of it comes from some unexpected elements.
I mean, just to give you one example of that, you know, what we're seeing in terms of referral patterns on the high-risk men indication is, you know, some degree of re-scanning. You may have a scan in one setting on a referral basis, but then when you go in and have your prostatectomy, you know, you may get re-scanned again in an institutional setting. Obviously, that's a kind of a different, you know, that's a different clinical environment or can be a different clinical environment. We're seeing a bit of repeat scanning. We're also seeing patients that are probably from a guideline perspective, not strictly biochemical recurrence, but are sort of proximal to biochemical recurrence. You know, what would have been traditionally characterized as an M0 patient in the hormone sensitive setting.
I think that's a little bit of a market enlargement opportunity as well. You know, our competition is starting to talk more and more about, you know, but, you know, technically the label is sort of really medium to high-risk men. What does that medium really mean? You know, does that extend deeper from a Gleason score perspective? I think that's where some of the upside can come as well, is there's clear patient unmet need that's proximal to that label, and I think that, you know, we'll start to see a little bit more push into that earlier patient setting as well.
You know, the thing you got to remember, if you can visualize in your mind, and we used to put out a slide all the time that was like a. Or in fact, you can see it in the JP Morgan deck. There's, that's the PSA kind of wiggle slide, you know. We're just, you know, over the life of that prostate journey, you know, you see all the troughs and valleys of peaks and valleys of PSA levels. You know, we're just, you know, today with those two indications, we're just treating those two, that first hump. Like, we're just on either side of that first hump. You know, what we're starting to see is just more and more utility follow-up scanning, PSA levels rising, do a PSMA scan.
you know, put a patient on Pluvicto, do a PSMA scan. do a patient on, after their third dose of Pluvicto, do a PSMA scan. we're just starting to see the potential of where PSMA imaging is gonna fit all the way along that patient continuum. I guess the way to condense that is to say, look, today we're doing, I don't know, 1.2 scans per patient on an incidence basis, right? If you look at the, you know, if you go to the American Cancer Society guidelines, it means like sort of roughly 1.2 scans per patient. I think that, you know, as the field expands and the understanding of how this new modality impacts patient care, there's a clear pathway to get to 4- 5 scans per patient.
We've just got to do the clinical work, and build out those label claims, to support that broader utility.
Thanks. That's very helpful detail. The second question and last question I've got is in the clinical update, I noticed the inclusion of the interim analysis for ProstACT GLOBAL. I know this isn't a technical session, but maybe if you could describe that in a bit more detail and perhaps the effect size you have in mind there and how it impacts the overall stats plan.
Can you be a little bit more specific?
Sure. just I mean, are you looking for just the 120 patients, just how you came to that number and the effect size that you had in sizing that interim pool?
Yeah. While we haven't put out a full statistical plan, but, yeah, that's based on the target confidence that we're looking for in the study, and what we think that the interval separation is gonna be in the study. You know, there's an alignment between that interim analysis and also a futility analysis. It's about making sure that, you know, we're not plowing ahead with a trial that isn't gonna yield differentiation, if that makes sense.
Yeah, there's a number of touch points that feed into that number, but it'll be a statistically significant readout, but it's something that we think is good for both for the field to understand where we fit in, but also for investors to, you know, understand whether we are or are not on track from an expenditure perspective for this study.
That's all the questions I had. Thanks, everyone.
Your next question comes from Andrew Paine with CLSA. Please go ahead.
Hi, morning, and thanks for taking my question. Just trying to understand the R&D spend going forward. I think, Chris, you mentioned AUD 100 million a bit earlier. I'm not sure if that's what we should be expecting in the next few years. If you can provide any indication there, that'd be great.
Hi, Andrew. Thanks for your question. I think it's implied and manifests in our burn rate. If you know, if you look at our, I mean, obviously the cash flow is a little bit of an abstraction of a P&L, but I think it clearly indicates that we're doing, you know, of the order of, you know, I mean, it fluctuates up and down a little bit, but of the order of AUD 20 million-AUD 25 million a quarter on R&D expenditure. That's AUD 100 million on an annualized basis. You know, and it jumps around a bit.
Yeah, sure. That's great.
...what the pass-through costs are on a trial. I think the really important thing, you know, to demonstrate is we've been underpinning that expenditure. This is the second quarter that we've underpinned that expenditure from revenue. And I don't expect that it's gonna. I mean, you're not gonna see. We had a little sticker shock in the middle of the year because we were heavily focused on our top line and commercial launch, and I think people were unaware, you know, what our R&D expenditure creep was. You know, now we've had two quarters where there's been a consistent and very level expenditure. We expect to see that. I mean, it will increase slightly, but.
It increased moderately, but it's gonna be, there's not gonna be any great surprises from an R&D expenditure in 2023. Again, to reiterate, the important thing about it is that investment in our R&D is coming, you know, strictly from earnings. Let me put that another way. Our planned R&D expenditure for 2023 is financed by our earnings. It's not, it's not going to be financed by shareholder capital or new shareholder capital.
Sure. That includes entering a phase III for TLX591?
Correct. Our again, our I'll reiterate, our planned R&D expenditure for 2023 includes full speed on our phase 3 trial.
Okay, great. Thanks.
Yeah.
Just sticking on to TLX591.
Well, Yeah. I just wanna emphasize that because there's a lot of speculation out in the market. I don't know why, that we're out to raise capital, and we have no intention of doing that, just to be clear.
Sure. Thanks. Just staying on TLX591, just the timeline here, including when we could expect a potential phase III readout, assuming we can get some ethics approval.
Well, we're not really focusing on giving guidance for the readout. We'll recruit most, if not all of that interim readout by the end of this year. I mean, the corporate objective is to have that interim readout recruited by the end of the year. Then there's about a six month delay to getting that top line PFS data. You know, we're focused right now on obviously operationalizing the study, getting all the global sites online, getting the regulatory pieces in place. We already have TGA approval, of course, for that study in Australia, but getting U.S. and Europe online, and getting to that interim readout point, that's our priority right now.
That's great. Thanks very much.
Thanks very much.
Your next question comes from Dennis Hulme with Taylor Collison. Please go ahead.
Good morning. Thanks for taking my question. My first is in relation to the renal cancer imaging. On your slide on the market opportunity, you talk about incidental renal masses and also renal cancer diagnosis. Can you just give a little more color about what you mean there by its use for renal cancer diagnosis? You know, would that differ from the use that was made of it in the phase III trial?
Yeah. Thanks, Dennis. Nice to hear your voice. Look, basically we designed the ZIRCON trial really for two for two indications. The first is because patients were going into the operating theater to have a kidney resection, you know, the goal was to evaluate ground truth of clear cell renal cell carcinoma from a histologic collection. The way in which we did the data capture enables us to go back and use that data for surgical staging indication from a primary primary staging perspective. You know, that was kind of the crux of the study, so to speak.
What we also agreed with the FDA was that we would enrich the study, and we set specifications in this study for the so-called T1a lesions, which are lesions below 4 cm in size. The reason why we do that is because that's the lesion size classification that's most typically apparent in a incidental finding. An incidental finding is a patient that's had an abdominal scan for some other purpose, other than a renal scan. The radiologist will always do a fly-through of the major organs, it's estimated that one in every two adults above the age of 55 has some sort of a renal mass.
We can radiographically resolve a good proportion of those, but about half of renal cancer, new incidences of renal cancer, confirmed diagnoses of renal cancer come through from incidental findings, and that's how we get to that second indication. You know, to conclude, you know, conservatively there's about 150,000 patients a year in the United States that have an incidental finding. Of course, a proportion of those are able to be radiographically resolved, and we've sort of given credence to that in our TAM assessment. And then there's in total about 79,000-80,000 patients where you would then want to do a surgical staging workup. That's a different.
That has a different clinical, has a different kind of imaging purpose, and it's really the conflation of those two indications that get us to that addressable market that we've talked about. I think it's a very conservative number. I mean, you know, because of the excellent sensitivity and specificity that we've got, there's a pretty compelling clinical reason that if you have a mass, you're gonna wanna go and get it checked out. We do have to acknowledge that, you know, right now the standard of care includes clinical modalities that for some types of pathology, you know, you can do a reasonable job with, say a CT scan. Does that answer your question? Does that make sense?
Yes, that certainly makes sense. A little follow-on in relation to that. When you're talking about the surgical staging, does that mean that you're also being used in people with larger renal masses that are more at risk, but to check whether they have metastases before they undergo surgery? Is that what you?
Yeah.
Meaning with the surgical staging?
Absolutely, yeah. Yeah, that's right. To, you know, based on all the data that we've seen so far, including investigator-led trials and work that we've done in Europe, we estimate that about 45% of patients that have a CA9 scan prior to surgery have a change in staging. That means that a single focal lesion becomes multifocal or a multifocal lesion becomes a proximal metastasis, say to an adrenal gland. We definitely have some really compelling data that suggests that, you know, approximately one out of two patients going in for renal cancer surgery benefit from having a CA9 scan, having a 250 CDx scan. Yeah.
Right.
This is gonna be a pretty important thing to do for a patient before they go into OR.
Great. thanks very much. My second question is just on ProstACT GLOBAL. On the slide there, you talk about the running phase. Can you talk a little bit about that, whether the patients will be randomized and that point?
Oh, yeah. No, so yeah. Yeah. It makes no difference from the trial perspective. It's just about, whenever we do a new manufacturing process and, you know, as you're aware, Dennis, particularly in the United States, when you go in and do a phase III trial with a biologic, you really need to be using the manufacturing, you know, a more grown up manufacturing method. What we spent our time and energy in 2022 doing was sort of beefing up that manufacturing process so that we're in good shape on the back end of the ProstACT GLOBAL trial to get that asset to the stage where, you know, it really passes muster with both regulators and diligence partners. I think we have that now.
We've done a ton of work on the manufacturing package. What it means is that for a proportion of the patients going into that study, we'll use the new manufacturing method to be able to compare to the old data that we have or the preexisting data that we have, and it's just about providing regulatory continuity for the asset. Yes, those patients will be randomized, et cetera, just as they are for the remainder of the study.
Okay. Thanks very much for clarifying that. I'll step back into the queue.
Back into the queue? You mean you gotta ask more questions? I'm joking, Dennis. John Hester, I think you're up next.
Thanks, Chris. Just a quick one for Darren. Darren, back of the envelope sort of numbers on your receivables, it looks like it's about 30 days. Is that the number that we should expect sort of going forward, hoping to forecast balance sheets?
Hi, John. I actually just looked at that this morning just to make sure that I was across it. It's interesting. I looked at the end of September, we're at about 49 days for the end of December. And there's probably some stuffing there, but it's sitting around 41 days. The normal terms that we put in place are probably more around the 35- 40 days, it depends on the customer. We're running fairly close to that. It's rare that you beat the actual general terms and conditions that you put in place, but we're fairly close. Yeah.
Just to round that out, was there any element of one-off in those collections for the period, or was that just pretty much what we can expect going forward now?
Look, there's always going to be some variation depending on the timing of payments from customers. Well, we won't try. We'll be doing what we need to do to contain debtors within a reasonable limit. At this point in time, there's been no one-offs that has kind of.
Okay.
the performance either way.
Christian, just moving on there. Just looking at Lantheus' presentation from JPMorgan. One of the key points there was there's literally hundreds, 245 I think I counted, assets in development, and diagnostic assets, radiopharmaceutical diagnostics in development around the world. Now, where do you stand on M&A now? Would you look at opportunities if one presents itself in an area where you're not, where you don't have a presence, and is that a reasonable sort of thing you may look at for further growth?
Look, it's a fair question. I mean, Andrew, it's all, you know, it's, you know. Sorry, John. It's a slightly loaded question, and you. You realize that we built the company through M&A.
Yeah.
We're always looking at the opportunities that are out there. We also, you know, frankly, we're one of the few freestanding companies that has this kind of platform-agnostic viewpoint of the world. You know, we do antibodies. We do peptides. We do small molecules. We don't care. You know, we haven't sort of made F-18 a hill to die on. I think because we're a targeting agent agnostic, we're isotope agnostic, and we have a pipeline that goes from early stage to commercial and, you know, a fair bit of credibility now in commercialization, we're really a go-to. You know, no one's gonna go to Novartis anymore to, like, offload an asset. They really wanna go to a kinda more dynamic environment. I think we see a lot.
I mean, our business development team sees, I mean, I wouldn't be exaggerating, five new things a week. You know, we obviously, we do a lot of diligence. We look at a lot of these opportunities in depth. Some of them are really exciting. We have a big pipeline. I mean, there's no doubt that some of our shareholders would say that we've got enough to chew on. You know, if something really exciting comes along, particularly something that's later stage where we can see that it can generate revenue for the company in the sort of, I'd say three-year horizon, I think that that's something, you know, we would take a very serious look at.
Just moving along. On the renal cancer presentation at ASCO next month, should we be expecting a journal publication fairly shortly thereafter?
Oh, yeah.
The second part. Yeah.
Yeah.
Yes?
Yes. Unequivocally, unequivocally yes.
Okay. Quickly, just final question from me. You know, one of the reasons for Illuccix is, you know, rapid market uptake has been the NCCN guidelines. Where do you stand on that now with renal? Do you think that this data is gonna be sufficiently strong to support a similar sort of recommendation?
Well, we, you know, I mean, the NCCN guidelines didn't happen sort of accidentally. There were a lot of academic and commercial actors that contributed to that process, including us. You know, we've been very careful about our KOL engagement and our site selection and who we have been working with to generate the evidence for 250 CDx. We also, you know, we've talked about, you know, previously, and I certainly touched on it at JP Morgan, that we'll be launching very shortly our expanded access program, which is a requirement to breakthrough designation. You know, the purpose of that EAP is to really to build experience and to reinforce the clinical understanding of the utility of the product.
I think, you know, between peer review of the results, publication of the results, and then starting to work with, you know, the KOLs that drive practice guidelines over the course of the next 12 months, I think we're gonna be in a really good position. You're starting to see already some of the, some of the collaboration that we've done around building papers that look at the meta-analyses of the renal cancer imaging space and what works and what doesn't work. I think you can expect to see more of that clinical positioning over the next 12 months. You know, it's a path again, you know, across the whole aspect of the commercial launch from supply chain, to guidelines, to reimbursement. You know, we've been down the pathway before.
We know what we need to do, you know, I'm confident that we can make the renal cancer program as successful as the prostate cancer space has been.
Good news. Okay. Thank you very much.
Your next question comes from David Stanton with Jefferies. Please go ahead.
Sorry, I just had a follow-up, if that's okay. Just one from me. You know, I'd be interested in understanding your near-term views in terms of Illuccix's pricing in the U.S., as I said, over the near term. Again, you know, what should we be thinking in terms of pricing or manufacturer pricing at the end of the pass-through period, three years from or two and a half years from now? Thank you.
Well, first of all, I mean, we're not giving guidance on what it's gonna look like over the next 12 months. As you can imagine, when we get into a fully penetrated market, you know, pricing is an important tool for market capture, right? I can guarantee you there isn't gonna be a race to the bottom, but we are gonna see the possibility of some volume incentive pricing. That's, you know, that's not monster price erosion. I mean, that's, you know, that's single digit, you know, change, right? I think in terms of the end of pass-through. Look, honestly, investors have forgotten about the entire point of pass-through.
The entire point of pass-through was to take away the bureaucratic obstacle of waiting 18 months for a CPT code, and to enable some market pricing to take place. If you compare. And the price where an imaging agent is gonna land, I mean, there's no magic formula that says at the end of pass-through that the pricing falls into an abyss. It's going to be a function of clinical demand, and it's gonna be a function of competitive landscape, and it's gonna be a function, I think, most importantly, of clinical evidence. If you look at, for example, NETSPOT, when it went off pass-through, it dropped by about 15%. That's because it was a highly adopted, high clinical evidence, you know, agent.
Whereas if you look at Axumin, the drop was very significant. It was a 40% and beyond post-pass-through because there was no clinical evidence or very limited clinical evidence to support it. I mean, the FDA basically approved the product on the basis of a bundle of investigator-led studies. Really, you know, it's gonna be adoption, procedure volume and clinical evidence that's going to largely, not solely, but largely influence that price change after pass-through. You also have to remember, David, that economics underpins procedure utilization. The flip side to it is that when you have a lower bundle procedure cost for something as important as a PSMA scan, it's gonna drive clinical adoption.
What's really critically important for Telix and other companies over the next three years is to build out those indications to properly lifecycle manage our products. You know, we've got Illuccix 2.0 and Illuccix 3.0 in our development pipelines, you know, which can garner, you know, distinct 6 codes. I think the reality of it is that, you know, there's gonna be multiple waves of products that are gonna come through, and that's gonna continue to build value and continue to drive the top line of this business.
Thank you very much.
Always good questions, David. Thanks.
Thank you. There are no further questions at this time. I'll now hand back to Miss Williamson.
Yeah, thank you. Look, we've come to the end of the allotted time for the call. Really appreciate everyone dialing in and the thoughtful questions. We'll be releasing our full year results on February 27th and look forward to giving you an update then.
That does conclude our conference for today. Thank you for participating. You may now disconnect.