Good morning, good afternoon for those overseas, welcome to the 2022 full year results presentation from Telix Pharmaceuticals. Today, I have on the line Dr. Christian Behrenbruch, our Group CEO and Managing Director, Darren Smith, Group CFO, and Colin Hayward, our Chief Medical Officer. My name is Kyahn Williamson. I'm SVP of Investor Relations and Corporate Communications. If you just move to the opening slide, please. You'll notice that we've changed the practice and lodged our full year results and report appendix for investor presentation at the close of market yesterday in Australia. This is really reflecting our increasing global investor base, and allowing people some sufficient time to review those documents. Thank you for tuning in. Just by way of introduction, 2022 has been a really outstanding year for Telix.
You know, notably, we've had the successful launch of Illuccix and the completion of the ZIRCON phase III study. I think what this slide shows you here is the achievements of the year really show what Telix is capable of and why we're uniquely positioned to lead in this fast growing sector of radiopharmaceuticals. Few companies have the depth and breadth of theranostic pipeline and the expertise across the spectrum of product development from identification of assets to commercialization. We have a very clear vision to deliver further value through our diagnostic and therapeutic assets and as we regenerate the pipeline with new targets. We will talk you through about this in the context of our growth strategy today. Next slide, please. Here our key results in Australian dollars.
We finished 2022 in a very healthy financial position, and the metrics here really demonstrate the maturation of our business. Since launching Illuccix in April 2022, we delivered excellent month-on-month growth, resulting in a 20 x increase in revenue. Chris will talk through that a bit later. Over the course of the year, and in particular in H2, we've delivered an improvement in growth margins, and we've seen key expenditure items reduce as a % of revenue. We finished the year with a strong cash balance sheet and a healthy cash balance of AUD 116.3 million. The loss position reflects the year of investment in scaling up the organization to support commercial launch and increased clinical development activity. Considering that last year we also had the benefit of an AUD 18 million R&D tax credit, and we have maintained the status quo.
If you could move on to the next slide, please. Darren will take you through these in more detail later. As I mentioned, we do have a very clear growth strategy. This slide, I'm not gonna read it out in detail, really outlines the intent behind each of those building blocks designed to maximize value for short, medium, and long-term. Next slide, please. This summary here really shows how we've delivered against each aspect, and Chris and Colin will take you through this in more detail. It's a pertinent reminder that while much emphasis has been placed on the launch of Illuccix and the ZIRCON readout, there's many other achievements that are happening along the pipeline and behind the scenes in the business.
This includes a number of clinical milestones, data readouts and patient dosings across the clinical programs and some excellent outcomes in our R&I programs as well. We've also expanded our clinical manufacturing and process development capabilities with the acquisition of Optimal Tracers, and we'll have our own commercial manufacturing operation in Europe in 2023. Next slide, please. I think with that, just a reminder of the core pipeline. I'll hand over Chris to take you through the operational highlights for the year.
Yeah, thanks, guys. I hope that my audio is nice and clear. You know, this slide is really just a reminder of the breadth and depth of our core theranostics pipeline. You know, as you'll be familiar, we have a key focus in urologic oncology with the prostate cancer and the renal cancer program in particular. We'll also talk a little bit later on about our progress in glioblastoma as well. I think, you know, what's exciting to note for 2023 is that not just the commercialization of our diagnostic pipeline, but just a lot of clinical activity and readouts around the therapeutic pipeline as well.
It's, I think, you know, really excited to be able to report that progress as it takes place over the course of the year. The next slide, please. This is a kind of a snapshot, I think, of really what 2022 looked like from an Illuccix perspective in the U.S. You know, our first quarter was really a partial quarter. We had our first dose delivered around mid-April, so really only six weeks in that quarter, and that was a pre-reimbursement quarter as well. You know, really the Q3 of last year, calendar Q3 was the launch point for that program from a reimbursement perspective. We had a great launch quarter followed by a very healthy Q4, which we've previously reported on.
We see no abatement of this trajectory over the next few quarters. It's clear that the prostate cancer market is much bigger than we all anticipated. We expect to see these growth rates largely continue, and we certainly see strong dose demand across both our existing customer base and new customers as well. You know, this is a market that's evolving really rapidly. Of course, we all associate PSMA with prostate cancer, but there's potential in other indications as well. I think this is really an exciting time for PSMA and Illuccix is a well-respected product that's getting great customer traction. Next slide please.
From a kind of commercial trajectory perspective, when we launched the Illuccix program, we really focused on our core differentiation, which is, you know, scheduling flexibility and availability. The nuclear pharmacy model is a model that's unique to Illuccix, and it's one that we think offers our customers-
A lot of benefits, again, to reiterate, it's really around that service delivery and flexibility as is a mission-critical activity. With a nuclear medicine product, the melting ice cube. It's always about that critical delivery nexus between manufacturing and the customer. I think our business model really provides a, you know, a strong advantage there. We have focused on growing our pharmacy footprint. We're now at well over 190 nuclear pharmacies. That means roughly two out of three commercial nuclear pharmacies in the U.S. are dispensing the Illuccix product, which gives us an enormous amount of coverage, both in the major metropolitan areas as well as in secondary markets. We have plenty of capacity in that network to continue to grow and make availability of products.
We are having customers that are expanding their imaging hours, so they're going into weekends. We're providing stat doses on a regular basis where our competition fails to deliver to a customer. We really feel again that this business model is giving a lot of flexibility to customers, and this is increasingly recognized in our dose demand. If you move on to the next slide. I'm gonna get Colin to talk a bit more about this, but I think one of the things that I'm really excited to present to you is that when we launched Illuccix, we focused very much on guideline equivalency. Part of that rationale for that was the regulatory process that we undertook for the product, but also because we think that guidelines matter.
Coming out of the gates with Illuccix, you know, it was convenient for us to focus on guideline equivalency and use service differentiation as our platform. What we've been able to see over the last 12 to 18 months, a lot of new data has come out. There's a lot of great research being done, both led by our key opinion leaders and others. Now we're in the fortunate position where we're really able to focus on clinical differentiation as well. You know, being able to present that clean and clear marketing message that Illuccix is a strong product that's got significant clinical advantages over our competition is part of the story. Part of it is that we've invested heavily in our sales and marketing team. I think we've really upgraded our commercial infrastructure.
You know, we transitioned from startup company to kind of grown-up company and really replumbed our commercial team. I think that the quality of the people that we have now in sales and marketing and also on the clinical support side of things is just very, very strong. That's one of the key weapons that we have going into 2023. maybe Colin, I'll hand over to you on the clinical content perspective.
Sure. Thanks, Chris. We've also expanded the medical team, of course, and some of the feedback that I've been getting from them is the importance of having true positives and not being able to identify true positives out in the field. You know, this was put to me in context last week at the ASCO GU Cancers Symposium when I had oncologists coming to me saying they've been referred patients who they had equivocal results on 18F-based products and that they really wanted to see, understand what the result was before putting this patient on a course of therapy that could be a metastatic course of therapy versus potentially a curative therapy. That is very important in terms of that clinical difference and seeing some equivocal results with 18F-based products in terms of the positivity.
If we can go to the next slide. What I want to do is just remind everyone of the importance in terms of the clinical impact that Illuccix has on patients. Here's an example of a patient at initial staging with a low Gleason score of around six, coming in, but still, having a scan that's identifying that they have metastatic disease, and so really being able to change the therapy accordingly. Just listening to urologists and oncologists talking about this really is making a difference in terms of being able to understand the extent of disease earlier. We see the same in the next slide with a biochemical recurrent patient. Of course, this tool, Illuccix imaging, PSMA imaging, is really becoming standard of care for patients throughout their pathway.
We'll be looking as we continue the year to validate new indications, looking at areas where we can improve the care of patients both in early prostate cancer and throughout their prostate cancer journey. Thank you.
Thanks, Colin. I mean, I think it's very clear, it's very fair to say that, you know, when you think in your mind about the life cycle of a prostate cancer patient, you know, they're often depicted as that sort of, you know, undulations of PSA score from early detection or initial detection all the way out to advanced disease. You know, we're really only treating that first hill. We're only really addressing that first opportunity. I think there's plenty of scope for us to continue to grow this market and grow this opportunity to the benefit of patients. I think it's a very exciting time. Moving on to the next slide, and maybe just as, again, a segue back to Colin.
You know, there are a number of specific objectives that we have this year as a company, I'll summarize those at the end of this update. You know, the two next frontier to the business are clearly the approval for the renal cancer program, for which we just had a very exciting ASCO. I'm not gonna steal Colin's thunder. I'll let him take that one. We've had an amazing response to the data that we've received out of the ZIRCON trial.
I think I speak on behalf of all of the 2H team that it was finally great to get that study done with all of the challenges that we had during COVID and to finally get to the end of that study and to have such a stellar result was just very gratifying. Now, from a company perspective, our main focus this year is with that BLA submission to be in a position to do real commercial launch in the early part of next year, certainly initially in the United States and then eventually in other territories as well. We also have a second product this year that we are gunning towards an approval for, which is TLX101. It's our brain imaging product. It's a PET-CT. This is a standard of care modality in a lot of countries.
It doesn't yet have commercial availability in the United States. It's the companion diagnostic to our therapy program, and we think that this has is a nice potential revenue stream to layer on top of prostate cancer and renal cancer. You know, the team, we've scaled up the regulatory and clinical and quality teams to be able to really now address these two additional regulatory filings this year. We're making great progress towards getting those filings in place. Colin, maybe just onto the next slide, you wanna have a just a quick recap of ASCO and the results and outcomes.
Sure thing. Thanks, Chris. I mean, ASCO GU is very exciting for me. It was, as a company, our first big oral presentation of data at a major oncology congress, and hopefully the first of many going forwards. I'm sure many of you heard the meeting with Brian Shuch or listened to the results directly and just were, like me, first impressed with the very high sensitivity and specificity that we saw in this study. The other thing, of course, was the very consistent results between readers, and we see as well in the small masses, the ones that are seen most prevalently, those less than four centimeters, very consistent results with the overall results. In an analysis we've done is, in the less than two centimeters as well.
Again, very consistent in this, and this is the area that we see the most often in clinic. ASCO GU was fantastic as a company to see all these people coming to us, coming to our booth to talk about the clinical utility of this product and excited by the clinical utility of how this is gonna be able to change their management in practice. You know, whether it's a small mass being able to understand that it is clear cell renal cancer or not, or a larger mass to be able to characterize that clear cell renal cancer and really understand the extent of disease. You heard earlier about the PSMA sensitivity and specificity.
Well, the sensitivity here really smashes it out of the park, honestly, in terms of being able to identify a patient who is truly positive for clear cell renal cancer or contradictively truly negative for clear cell renal cancer, and then following an alternative management strategy. If we go to the next slide. Thanks. Here's just a couple of case studies. These are important because this really does exemplify the clinical utility of this product. Now, if, like me, you're over 50%, 40% of you have a renal cyst. If you were to have imaging, this will be found. Now, a lot of the cysts are very simple cysts and can be diagnosed on normal imaging, but some that are more complex, this is where our imaging is gonna have a major difference and a major impact on patient management.
If we go to the next slide, as I mentioned, you know, those less than 2 cm masses, well, this is a less than 1 cm mass or a 1 cm mass that was identified on imaging. This would normally be a management dilemma for the urologist. We can see that what would they do? Perhaps a biopsy, but a biopsy is only gonna have a certain accuracy in this population with this size of mass. It's not without complications. We can see that it was a positive image, and it was clearly a clear cell renal cancer on histology from a partial nephrectomy later. Really making management decisions and being able to help patients understand whether they have clear cell renal cancer or not, and characterize the extent of that clear cell renal cancer.
Just moving on to TLX101 CDX and brain imaging. We've seen how accurate and better management, better diagnosis in prostate cancer. We're understanding how better diagnosis with clear cell renal cancer can help patient management overall. Here as well is in glioblastoma, glioma as a whole, we understand using amino acid-based imaging throughout Europe is currently standard practice. In the U.S., it can only be done under an IND in certain institutions. Where is it particularly valuable? Well, yes, in newly diagnosed patients to understand clear margins, the extent of disease. This will also give us a bit of an understanding of the grade of disease, be able to guide biopsies, for example.
The real benefit compared to existing structural imaging is in those patients who have recurrence or not, and really being able to differentiate between that pseudo-progression, which could be inflammation or necrosis that is very difficult to tell on MRI imaging, and absolute true progression, and therefore, again, really making management changes. Just wanna change tack and talk about the prostate cancer program on the next slide and give you a progress update there. Here we can see some images from the SELECT study that continues to recruit strongly. I think you can see a patient here with low and with high tumor burden, how that activity with a much lower dose of lutetium than a small molecule, how that activity with an antibody stays and is retained in the tumor for a long period of time.
We also have in the early biochemical recurrence setting, the TARGET study up and running, and we're scaling up the manufacturing right now so that we can begin the ProstACT Global. We've just modified the trial design slightly, not so we keep with the same number of patients, but to give us an interim analysis opportunity so that we can communicate that readout earlier. We're making good progress on this program moving forwards with ProstACT. Very quickly, I'd love to move on to TLX101 on the next slide. Excellent. Thank you.
Now, we have the readout of the original phase I of the IPAX study with those 10 patients hitting an overall survival of 13.1 months in that recurrent setting, which is pretty good, but I'm not here to make any claims about a phase I study other than we saw good tolerability to move on. Now, with TLX101, we know that we have potential synergistic activity with external radiation, which is used most commonly worldwide in that early treatment setting in patients who've had surgery in the newly diagnosed, going on to have the standard protocol with radiation and temsirolimus. That's the area where we want to study in a, in the follow-on phase I, the IPAX-2 study, and that is the sites are opened up now, and we'll be recruiting our first patient very soon into that study.
We also have to complement that, the IPAX-L in the recurrent setting, an investigator-initiated study in Austria. In addition, we've submitted for the IND in China to progress TLX101 there as well. Really excited by this program, a potential impact in an area which really doesn't have true new standard of cares coming in, and there's a lot of interest as well. I think this is probably an area where I get a lot of emails from investigators asking, "When can we move this forward? When can they get to join in these studies?" Handing back to you onto that slide, Chris.
Thanks, Colin. I think it looks a bit all of the programs are progressing really nicely. As Colin has alluded, we'll have many opportunities over the course of this year for clinical data points and hopefully, you know, meaningful data. Also with the plan to enroll the interim readout for ProstACT Global this year as well, we would expect at some stage towards the back end of next year to have some interim data on the ProstACT Global study as well. I think it's fair to say that, you know, we're all firing on all cylinders and getting these key programs moving ahead. I just wanna make a little bit of a comment.
Kai mentioned in the opening comments about manufacturing. This is an area where we continue to focus a lot. We've got great partners, a really critical part of our commercial strategy is of course to tap into the network of isotope supply chain and drug product manufacturing partners that are out there and growing as this field matures. Really, you know, any company that purports to commercialize radiopharmaceuticals really has to have a clear strategy and game plan for managing the supply chain. This past 12 months, we've made some really important progress. First of all, not to supplant key partners and vendors that we use, but we now have some in-house process development capability on sensitive projects.
Particularly, we're collaborating with, say, a pharma partner, and we'd like to keep a little bit more of a lid on what we're doing. You know, so that was, you know, part of the driver for acquiring the Optimal Tracers platform. We also made amazing progress in the last 12 months at our South Brussels or what we used to refer to as the Cinet site. We stopped calling it Cine 'cause nobody knew where it was. Now we call it South Brussels. Basically, that site is now largely built out. We're just about ready to go into the commissioning phase, and I expect around May or June of this year that that site will be active from a regulatory perspective. We've been granted the radiation license for the site now.
That's just a very key asset for the company and underpins our ability to deliver product in Europe. A very exciting progress. In fact, if you go to the next slide, I think there's a little bit of a, little bit of a picture there. You know, this is a sort of a jewel in the Telix crown. As I said, really underpins our ability, not just to deliver product in Europe, but to do some really next generation R&D. We don't really like to be a fundamental research company. That's why, as Kyahn referred to it, R&I, research and innovation, that we like to take things that are clinically fairly well established and take them to commercialization. That's really the company's strategy from a product pipeline perspective.
Alpha therapies, you know, with things like actinium and astatine, this is a big future frontier. The vast majority of people dabbling in the alpha therapy space don't have a place to actually do the work. The research environment and the equipment and the facilities that you need to really do scale-up work with alpha doesn't exist plentifully on the planet right now. I think that the infrastructure that we've built in Cinet to South Brussels, to kind of very stealthily, get into that space, is gonna be a great asset to the company going forward. Just a lot of interest in that capability. Moving on to the next slide, please.
Maybe just on the topic of research and innovation, or as we call it, R&I, just to kind of, you know, again, de-emphasize the fact that we don't like to do a lot of fundamental research. We like to take ideas that have some clinical merit and commercialize them and scale them up. We have five research areas that you're gonna see really manifest themselves over the next 12 months into some interesting new opportunities for the company. We've got clinical trials running in combination with immuno-oncology, where we believe that we'll be able to show that targeted radiation is really a fundamental platform technology for immuno-oncology.
You know, our goal and Colin's team goal is to demonstrate that we can improve complete response rates for immunotherapy patients by doing good patient selection and doing good targeting of radiation. We've got, as I mentioned, with respect to the South Brussels facilities, we've got a very active R&D program in targeted alpha. We've also acquired pipeline around understanding the tumor microenvironment, and you're gonna see more of that. That's really how do we use non-invasive methods to really understand how that tumor works and what are the mechanisms that are likely to elicit a response. We have a healthy program in AI. I think this is an area where more and more attention is being given in our field.
Clearly, to make the imaging results have impact on the therapeutic deployment, we have to connect those dots. AI and image analysis and machine learning are a key way of achieving that objective. Then unsurprisingly, if you look at the Illuccix label, particularly the high-risk patient prior to prostatectomy, if you look at the outcome of the ZIRCON study, which is really a preoperative interrogation of the disease, surgery and particularly the urologist as a surgical stakeholder, is something that we have more and more of a focus on. So we're starting to ask really interesting questions about how do we bring radiopharmaceuticals into the operating theater? How do we make it possible to be better intraoperative guidance, whether that's using radiation or fluorescence.
We have a pretty exciting R&D program, including with some partner companies, where we're actively interrogating this question in clinical trials and in clinical development. It's a really exciting potential area to develop the depth of relationship, particularly with neurology. Moving on to the next slide, please. One of the things that you may have noticed when we gave our JP Morgan presentation earlier this year, beginning of this year. For the first time, what we've done is we've bifurcated what is our core pipeline. This is really the assets where we believe we have the clinical data to support commercialization, and then now really to start to showcase what our research pipeline is. I don't think that there's a good understanding of just the depth of R&D pipeline that we have.
What's exciting is by the end of this year, we are going to have clinical data in all of these programs. By the end of this year, I mean, some of them are clinically active already, but what we really are going to understand by the end of 2023 is, you know, today we've got those four key asset areas in the core pipeline. That's essentially the Telix commercial pipeline in, let's say, 2025. What this slide represents is what's the Telix pipeline look like in 2028-2029. I think it's great that we have the ability to take that long-term view of how we're gonna be a leader in this field, how we're going to life cycle manage our products. That's really what this R&D pipeline gives us.
We'll be very judicious, of course, on how we expand this pipeline. We've got a lot on. I think some investors would say, "Well, maybe we have even a little bit too much on." When we do expand the pipeline, we'll be very cautious about the merits of doing so, but it's great to have that future pipeline for the business. Next slide, please. Just as a little showcase example, and then I'm gonna hand it over to Darren to go into the finances, but I think this is a kind of a capstone in this presentation. One of the exciting clinical trials that's just about to launch for us, is called the STARSTRUCK trial.
It's based on the work that we've been doing for the last approximately two years with Merck Darmstadt on DNA damage repair inhibitors in combination with targeted radiation. We now are starting to really understand how to use this combination. There's a bunch of combos in our pipeline which are exciting. There's the immuno-oncology ones. Obviously, there's androgen deprivation combination in prostate cancer. We when we look at 250 program, when we look at carbonic anhydrase IX as a target, we see that as a multi-cancer, pan-cancer target, we look at the ability to give ultra-low dose radiation in combination with a DNA damage repair inhibitor, you really start to see why Telix is so committed to an antibody-based approach.
What we are able to do is deliver very, very efficiently radiation to the tumor, very low dose radiation, so we have no major toxicity concerns. The ability to combine that with a DNA damage repair inhibitor for efficacy is just really exciting. What you can see in this graph here is this would be a subtherapeutic dose of radiation. When you, when you align it up with a DNA damage repair inhibitor, this is obviously in animal models, but we're excited to see whether or not the same feat can be achieved in humans. We think this is really a transformative pathway for, you know, for targeted radiation.
I don't know, Colin, if you wanna add anything before I transition off this slide, but it's probably one of our most exciting R&D programs.
Yeah. Look, I really like to integrate our products with existing and new oncology paradigms in terms of the treatment. I think that's important for our future. You know, whether we can show the immune priming effect in the STARLITE studies or a combination with potential other agents like PARP inhibitors or this DNA damage response inhibitor is gonna be really important. Just to highlight what you said, but delivering lower levels of radiation to the tumor, and you saw from the earlier SELECT slide how long that radiation actually stays and lives in that tumor.
Exactly. Yeah. Sorry, and just to, maybe just to round this slide off and then hand over to Darren. You know what you actually have here in this graph is a pretty cool thing. You inject the targeted radiation, and as Colin said, it sits there, residualizes in the tumor. It sits there for a couple of weeks. Instead of the traditional approach where you send a patient in every day or every other day to get fractionated radiotherapy, what you're doing is that you're giving them 1 shot of radiation and then giving them an oral drug. They're taking that oral drug every day for 14 days in order to achieve or for 28 days in order to achieve that fractionated radiation effect.
This is really a game changer in the way you think about delivering and fractionating and sensitizing the patient to radiation. Again, because of carbonic anhydrase IX's pan-cancer utility, it really is a multi-cancer, you know, a very large proportion of late stage cancers that have a poor prognosis are carbonic anhydrase IX expressing. We see this as something that's potentially able to solve and address a lot of unmet medical needs. You know, we've got to do more clinical research so that'll prove it, but it looks really, really interesting. All right. That's enough on the clinical and the R&D snapshot. I just wanted to give you a sense of really where the company is thinking from an innovation perspective. Darren, you wanna take the lead then on running through the financial bullets?
Yeah, sure, Chris. As you've already heard today, 2022 has been a successful year for Telix, both in operational and in financial terms. Looking back following the U.S. FDA approval of Illuccix back in late last year of 2021, Telix commenced 2022 by raising $175 million to fund its commercial launch of Illuccix and the continued funding of our promising portfolio of diagnostic and therapeutic assets. In April 2022, Illuccix successfully launched in the U.S., becoming a commercial phase organization. On the 1st of January, Illuccix's transitional passthrough payment status became effective, improving Telix's ability to progressively grow sales through the second half of the year.
This, plus our continued build-out of our radiopharmaceutical network across America, has resulted in a 20 x increase in Telix's global revenues to AUD 160 million, mainly out of the US, which achieved $150 million. I'll just get to you to turn to the next slide, please. Thanks, Dan. Great. To build a sustainable business, sustainable commercial business that has the capability and capacity to support a rapid growth that Illuccix has achieved, Telix has needed to invest in its commercial infrastructure ahead of the curve. In the first half of the year, Telix invested it in its sales and marketing capability, its manufacturing capacity, and established a supply chain and distribution network before it could even sell a dose.
This had the obvious impact on our expenditure as a percentage of sales during that period, as you can see in that graph in the bottom. As we look at the second half of the year and with sales growing month-on-month, the Illuccix commercial business returns a return on sales and has improved it significantly. As you would have saw in our Q4 results, when we presented them, it permitted Telix to move to a cash neutral perspective at the end of 2022. As a result, we are now in a position where we can fund our current research and development pipeline program out of our own generated funds. Turn to the next page. Thanks. In this income statement summary, clearly this shows the transition the business has made from 2021 to 2022.
It's gone from being a biotech investing in a promising portfolio of diagnostic and therapeutic assets to a commercial phase business supported by continuing growth of Illuccix revenue and the ambitious investment strategy. This strategy includes growing the Illuccix franchise, investing in bringing late-stage diagnostic products to market for both renal and brain cancer, and investing in the companion therapeutic assets such as in the prostate clinical studies. This requires Telix to invest in its people, infrastructure and R&D program. Interestingly, as can be seen in that half on half comparison on the abbreviated P&L, the continued growth of our Illuccix revenue is driving improvement in our bottom line, even as we actively invest into the future of Telix.
Continued revenue growth and active management of our expenditures as a percentage of sales has permitted Telix to improve its second half performance by AUD 42 million over the first half of the year. I'm turning to the next slide 28. This improvement in the PNL has also seen a progressive improvement in Telix's operational cash flow to a cash neutral positive position in the final quarter of 2022.
This places Telix in a sound financial position for the start of 2023, with a healthy cash balance of AUD 116 million, sound management of our working capital as reflected in the cash flow, an outlook of continued revenue growth and controlling operating expenditure as a percentage of revenue, thus improving the margins of this. Resulting in a commercial business that will support Telix's investment into its late-stage diagnostic and therapeutic assets. I'll pass back to Chris to take you through the focus for the year ahead.
Thanks, Darren. Much appreciated. I think just to summarize, you know, the mission that we had when we raised that capital last year was to make that commercial transition. I think we've clearly demonstrated that. If you factor in the R&D tax credit that we didn't get this year, as Kyahn said, it was really a par year in terms of R&D expenditure. Of course, we invested on the commercial team, and we continue to do that. I think it's from a financial trajectory perspective, it's a very encouraging place to be.
As I said, we see no abatement in our opportunity for Illuccix and then to have the follow-on revenue streams that we anticipate over the next 12 to 18 months is a really strong place for the company to be. Yeah, just very good outcome for 2022. You know, just to wrap up and then I'll let Kyahn sort of close out the session. We have, you know, to recap, we have four major focus areas and I hope when you read our annual report, which really summarizes all of the activity in 2022, you can see that we've laid down the groundwork for these four focus areas. Clearly, we will continue to grow Illuccix.
You know, we have indication and label expansion plans for Illuccix. We see lots of opportunity with Telix. If you look at our pipeline, we have a very deep commitment to prostate cancer imaging for the long term. It's gonna be a multi-year, you know, a decadal commitment to prostate cancer imaging. We really think that we have the best pipeline to offer and to the, you know, to be part of defining standard of care. That's that continues to be a key area. Then by the way, we invest about 20% of our R&D in Illuccix, right? R&D is not just about blue sky pipeline expansion therapy programs, but it's about making sure that we are building all the depth that we possibly can within Illuccix.
Clearly, we've got two more drug approvals to file this year. Obviously the focus is U.S. market, but we are a globally active company. You know, we continue to run clinical activity globally for these assets and to a large extent, particularly for the 250 program, that is something that we, you know, we intend to roll out globally. Big year ahead. We've scaled up our regulatory quality and clinical teams to be able to deliver on that. And, you know, that's a really exciting activity to work on. All goes well. According to plan, early next year, we'll have more than one product generating revenue for the company, which is, you know, which is super exciting. Particularly given that the renal cancer product is the same customer call point.
We're out talking to the same referral physicians as Illuccix. That means that that SG&A investment that we have in our US sales force is something that we get to kinda double down on, from a product efficiency perspective. Last of all, you know, I certainly get a lot of feedback from shareholders and investors that, you know, you know, there's sympathy for the supply chain and distribution realities of coming out of COVID. We are as impatient as everybody else is to have ProstACT Global fully operationalized. We made tremendous progress last year in laying the manufacturing and distribution framework for that, and I'm really excited to have those trials. We have two of the three trials, obviously fully operationalized.
To be able to recruit U.S. and some European patients into that study, this year for the ProstACT Global Study is gonna be a big milestone for the company. I think one that's as anticipated by the company as it is by shareholders. You know, again, great progress made last year, and Colin's team will deliver the fruits of that labor, this year in terms of clinical activity. Yeah, big, big activities. I think for the average company, any one of those dots would be something that would command plenty of effort and attention. We've got a big year ahead and we're excited to keep you abreast of our progress as we move those things ahead. All right, last slide, please.
Kyahn, maybe, if you wanna summarize and wrap up.
Looks at just the closing remarks. We've taken you through the four key focus areas for the 2023, but you know, there's a lot of additional catalysts and milestones, as you can see mapped out here. We'll look forward to keep you informed as we progress. We'll now open up the call to question and answer. We'll take questions from the phone first, and then go through webcast. Thank you.
Thank you. If you do wish to ask a question, you can register by pressing star then one on your telephone and waiting for your name to be announced. If you wish to cancel your request, please press star and then two. If you are on a speakerphone, please pick up the handset to ask your question. If you wish to ask a question via webcast, please enter it into the Ask a Question box and click Submit. Our first question comes from David Stanton at Jefferies. Please go ahead.
Good morning, team, thanks very much for taking my questions. One on timelines and then a couple for Darren, if I may. Timelines for the European Illuccix resubmission, please. You know, when should we expect sales in Europe, you know, reimburse sales in Europe for that product, please?
We are getting ready right now. We have the package ready for resubmission. We're just getting ready to submit. The expectation is that we will still do that by the end of this quarter, as we've previously guided. We will not be able to give clear, firm timelines yet on what the approval looks like because it depends a little bit on some nuances of that resubmission process. Obviously, as soon as we have that information to share, we will. We would expect to have at least a positive opinion by the end of the year. I think, you know, this year is really about that resubmission process, and 2024 is likely to be the revenue consequences of that regulatory process.
Understood. Thanks. Questions for Darren, please. You know, gross margins improved through the year. You know, can you give us an idea of, you know, what you're expecting for a gross margin percentage for Illuccix in F 23 and beyond, please?
As you know, David, we don't normally give guidance on where the numbers are going, but we have spoken kind of generally in regards to gross margin. I think Chris and I have an active debate about gross margin and where it's headed, you know. As an organization, we believe there is an opportunity to move that up to, you know, in that range of 65% to 70%. But obviously there's a couple of key issues within the market dynamics as it's gonna influence where that finally falls. As you know, gross margin is not just about a cost and operation side, it also takes in what's happening in the market in regards to pricing.
You know, so we kind of see that there are opportunities within our cost structure where we can actually make some changes, but that's more tweaking that cost of goods. And that's where we'll see some of that uplift coming through. Some of the downside pressures will be on as the market moves towards fully penetrated, we should see, you know, we, we believe that there will be some active kind of negotiations with some of the larger groups within the market, such as the GPOs, which could put some price pressure on it. But obviously that is in trade-off for larger volumes or share of that market. Those two things together will then determine where the end, where it finally ends.
Yeah. I mean, if I could just chime in on two comments. I mean, first of all, as Darren exactly says, we are optimizing our manufacturing cost of goods, and that does function, that does scale as a function of volume. There's a few points of optimization there. You have to remember that part of that gross margin bucket right now includes our active investment in sales and marketing functions through our network, right? You know, it's not, it's not reasonable to just treat it purely as a cost of goods. It's actually an investment in growing our market share. I think at the moment, you know, from a company perspective, you know, we're sitting on roughly 65%, 64%, 63% gross margin.
It's a highly cash generative business, and I think we're comfortable that we can, you know, over the next few years that, we'll continue to have that cash generative business.
Final one from me, if I may. Any ideas about what should we be thinking for R&D spend for F 23 as well, please?
Yeah, we haven't given guidance. There's no particular reason for our R&D expenditure to accelerate. You know, it's, it's obviously always a little bit chunky because, you know, you've got clinical trials and manufacturing activity that you gotta do. You know, there shouldn't be any sticker shock on R&D for 2023. It, and it will be funded through earnings, it will not be funded through a capital increase.
Thank you.
Thank you. Your next question comes from Steve Wheen at Jarden. Please go ahead.
Yeah, good morning. Chris, I was just wondering, you mentioned, just picking up on a comment on the growth rates and the sustainability of those growth rates. Could you clarify what the growth rates are you're referring to? What, across which base? Are you talking like the consecutive improvement in growth?
Well, I think I was just pointing out that, you know, we had, we have had 2 quarters of sales post reimbursement, and, you know, we don't, we don't see any reason for that sort of nice linearity of sales profile to not continue. We see lots of headroom left in the market. There are some clear white space market segments. We are capturing market share from our competition. I think that, you know, we should continue to see good quarter-on-quarter sales. That said, we've also been very transparent in our view that by sort of Q4 of this year, we should see a largely penetrated market.
I think what's gonna happen over the next kind of nine months is a transition from acquiring individual accounts to much more of a group, you know, IDN type of purchasing environment. We are, we are also gearing our sales and marketing activity to address that. Frankly, you know, Steve, we think that we have a strong advantage there. You know, we have, you know, excellent nuclear pharmacy network partners that command a very significant share of that market, right? Of that GPO, IDN market already, for other products. I think we're really well-positioned to, you know, to move the needle on that as a commercial strategy for the business. Does that make sense?
Yep, that makes sense. Then just as part of that, I just wonder what your sort of visibility is as to what Novartis has been up to since they've been able to achieve reimbursement. Certainly from channel checks, it doesn't look like they've, you know, that they've been making too much inroads, particularly with regards to the diagnostic, but just curious as to what your observations have been of them in the marketplace.
I think we've talked about this a lot, you know, both privately and publicly. I think that, you know, the most important. I mean, I'm not the CEO of Novartis, so I can't speak for what their strategy is. What it appears to be, and I think it's a reasonable, you know, statement, is that, you know, they're very much focused on delivering therapeutic outcomes to their patients. You know, that's. It's a topic that's garnered a lot of attention, and it certainly reinforces the importance of supply chain and distribution. You know, I think it's fair to say the whole industry is gunning for Novartis to be successful. The flip side to that is for ProstACT to be successful, ubiquitous PSMA imaging has to be there.
I think it's pretty clear that Novartis and is taking a, you know, every patient scanned is a win for Novartis kind of approach. The fact that Novartis is not particularly emphasizing a commercial diagnostic business and is supporting, you know, us and Lantheus and potentially others to make sure that no matter where you live, no matter what your social demographic is, you have access to PSMA imaging. I think that really kind of speaks to their focus and their strategy.
Yep, understood. Last one from me, just for Colin, if I may. With regards to the ProstACT trial and the early readout, are there implications for introducing that early readout in terms of confidence levels of the final data? I'm just curious as to what the implications are and the benefits of being able to have that early readout. Is that more about a go or no-go decision to continue? Or is it, you know, what's the decision tree around that data readout?
Yeah. Look, thanks for that. With the study as it's currently designed, with the round about 400, just under 400 patients, we know to see the difference in radiographic progression-free survival, we want to see that that's pretty overpowered. I think really the question says that if we do this, will it affect the overall power of the study? No, of course not. We will keep with the same sample size, and this will give us an opportunity to have, you know, even more confidence in the data going forward, as well as being able to communicate that.
Yeah. I mean, I think if you don't mind me adding into that, Steve. I mean, I think, you know, there's a clinical value in terms of understanding, you know, at that time, where does our asset performance lie in the spectrum of potential products that are gonna follow on behind ProstACT. We think we have a very compelling value proposition in terms of the dosing schedule, in terms of what we expect out of patient efficacy, in terms of what we expect. I think it's become very obvious that supply chain utilization is key, right? Because we're having challenges right now in getting lutetium doses out to market at the volume and scale that's required.
You know, we can potentially, with our product, multiply the number of patients by six or seven that you can get out of the supply chain. I think that's a really important consideration. I think the market is starting to understand that whenever you talk about radiopharmaceuticals, that supply chain question needs to be buttoned down and well understood. I think what it also does is aside from that clinical confidence, it gives us that data point that we really need to commence, you know, to really consummate those partnering discussions that we have. This field has a ton of interest.
I think it's fair to say that the top 20 global biopharmaceutical companies are all looking at radiopharma as the next frontier area, we need to have that interim readout to show where we stand in the pack when it comes to partnering. You know, with the imaging indications, we have no different, you know. Diagnostic imaging is a very compact market. There's probably 60 KOLs that matter. You know, distributing a product is not that challenging. It's still a large volume product, but from a sales and marketing perspective, it's very compact. Clearly, when the time comes for us to push out a therapeutic prostate cancer product, you know, that's gonna require a go-to-market partner. We need that data point.
There's a commercial rationale for it as well as a clinical one. Does that make sense?
Absolutely. Yeah. That's very helpful. Thank you, guys.
Thank you.
We just have a couple of questions from the webcast. The first is just asking for an update on the European regulatory filing for Illuccix.
An update on what, Kyahn?
Just a question on the European filing for Illuccix, the status of it.
I've already answered that question.
Mm-hmm.
yeah, we are on track to file at the end of next month.
The final question we have is, with TLX250 for therapy, what's the likely timeline for the readout of the STARLITE studies, and what happens beyond that? Do you go into phase III? A second question here on that same sub-subject is, given your comments on the Merck collaboration and expanding the scope of imaging of CAIX expressed tumors with STARBURST, long term, do you see the therapy going the same way?
Well, Colin, maybe do you wanna tackle the second one? Because that's right up your alley with STARBURST. Maybe I'll answer the first one from a commercial perspective.
Yeah. Sorry, Kyahn, my Zoom just cut out in the middle of that STARBURST. Could you repeat that one?
Yeah.
Mm-hmm.
The question is, given your comments on the Merck collaboration, you're expanding the scope of imaging of CAIX expressed tumors with STARBURST. Long term, do you see the therapy going the same way?
Right. Yeah. Of course, as you know, CAIX is expressed in a number of other tumors, head and neck cancer, esophageal cancer, to name but a few, including a number of rare cancers as well, in which there's really unmet medical needs. The opportunity with the STARBURST study is looking at a widespread across all of these indications and others where the literature shows us that the histology has a high rate of CAIX expression. Also looking at, of course, those tumors that have very limited treatment options going forward. The STARBURST study will certainly give us an indication of potential for CAIX as a target. Of course, like in ZIRCON, we will be seeing the antibody going to that area or not.
I'm very excited about that and looking forward to seeing our first images coming out in the next month or so.
Yeah. Thanks, Colin. I think the great thing about a theranostic strategy is you always use the imaging to scout for therapeutic opportunities, and I think that's what we're really doing there. Then there's the Merck work and by the way, other combinations that we are also working on with other drug franchises. Really about looking at how do we build kind of depth into that therapeutic pipeline longer term, because the whole goal of the company is to run therapeutic studies where Rather integrating the standard of care instead of doing head-to-head studies, which, you know, don't necessarily pave the way for, you know, commercial success. I think that's really about aligning the clinical and commercial strategy in an effective way. Then just to answer the first part of that.
You know, the STARLITE studies were designed to give us continuous data points. They're open label trials, so we can report on them. They give us the ability to generate papers and case studies and understand the science. They're really studies. They're not really trials designed to elucidate a specific endpoint. What I think, you know, will happen is, by the end of this year, we'll have a good understanding of how targeted radiation and immunotherapy in renal cancer really does work. That will enable us, in combination with what we're doing on the STARBURST study, to really then map out what is the pivotal trial strategy for that asset.
you know, I think the trials that we have commercially this year are really there to lead to that pivotal trial design, and to give us the best shot at getting an accelerated pathway for the TLX250 program. You're gonna see by the end of this year, our therapy programs are really gonna be moving to the next level. The investment that we made in 2022 is gonna pave the way for that. Kyahn are there any other questions come through on the webcast?
Yep, we just have one final one, which is, will staff costs continue to accelerate as the business scales into multiple streams in calendar year 2023?
Well, I can answer that or Darren can. In short, we are continuing to grow the business, but the growth is a function of revenue. Yes, we are, you know, we are internationally expanding Illuccix sales. We are also. You know, we've done a, I think, a really great upgrade to our sales and marketing team. You know, we've triaged our sales team as a function of commercial performance, and we brought on new marketing firepower, which is really, again, is part of that growth and maturation. I think 2022 was sort of an ugly teenager year for the company. You know, when you're in a hyper-growth environment, people have a short duration of contribution to make, and then you rapidly outgrow.
I think we're at the stage now where we have a commercial team that's a good, solid, steady state commercial team that we can incrementally build on as we need it. As Colin mentioned before, we have invested in clinical and regulatory resource because there are a lot of clinical trials running. Again, that's a modest increase, but it's still nonetheless an increase. I don't think you're gonna see any... you know, 2022 was a dramatic growth year for the company. 2023 is a much more modest ramp-up, and it's a ramp-up that's a function of commercial success, I think in a nutshell. Darren, you wanna add anything to that?
No, I think that's a good overview, Chris. Obviously from an organizational perspective, given that there is that growth going on within the commercial business, that's where the focus will be, making sure that we have an appropriate size team to make the most of the opportunity that exists with Illuccix, and then also the coming products that we see coming through from a diagnostic perspective. The other areas of the business around the programs and more head office will probably be a lot later on in a growth perspective. Obviously, just filling gaps that may appear. Overall, what that provides us is an opportunity to leverage the P&L. Sales growth will definitely outstrip our expense growth and including that of employment costs.
Definitely. Yeah. All righty. I think, looking at the question list, that seems to be it for today. Kyahn you wanna wrap up?
Yeah, thank you. We will make a playback of this available, and seeing some of you over the coming week, at various briefings. I think as we summed up, 2022's been a pretty outstanding year, and I think 2023 even more in store. We look forward to keeping you abreast of our progress across the diagnostic and the therapeutics and the other business developments. Thank you so much for listening today.
Thanks for your time.
Thank you. That concludes our conference call today. Thank you for participating. You may now disconnect.