PNT - Lantheus Holdings: Building A Sales Juggernaut

2023-05-04 15:43:07 ET

Summary

• Today, we circle back on Lantheus Holdings, Inc., a midcap radiology diagnostic company that is turning into a sales growth juggernaut.
• The company reported stellar quarterly results once again this morning for Q1 2023 and raised guidance significantly as well.
• With today's rally, is the stock still in the "buy zone"?  An updated investment analysis follows in the paragraphs below.

If I cannot do great things, I can do small things in a great way "? Martin Luther King Jr.

Today, we circle back on cancer imaging agent concern Lantheus Holdings, Inc. ( LNTH ) for the first time since we posted an article on this fast-growing company back in mid-September. We concluded that piece on Lantheus with the following summation about its stock:

I am probably not a buyer of LNTH as my options expire if the stock trades at current levels. However, if an overall market pullback brings the stock down into the $70 to $75 range when my options expire, I will probably pick up some more LNTH via covered call orders once again. "

LNTH stock dipped under $50 earlier this year, providing another solid entry point, and the shares have quickly advanced from that oversold level to the low $80s once again. Since our last look at Lantheus, the company has posted a couple of impressive quarterly earnings reports, including first quarter results that hit this morning. Therefore, it seems a good time to update our analysis on this name. An updated investment thesis follows below.

Company Overview:

Boston-headquartered Lantheus Holdings, Inc. is focused on developing and commercializing diagnostic and therapeutic products that assist clinicians in the diagnosis and treatment of heart, cancer, and other diseases. The stock currently trades around $90.00 a share and sports an approximate market capitalization of just north of $6 billion.

The bulk of the company's recent revenue growth is being driven by Pylarify, which was launched in the Spring of 20221. Pylarify is a radioactive diagnostic agent used for positron emission tomography or PET imaging and is given via intravenous injection. Most of the rest of Lantheus sales come from DEFINITY, a leading, ultrasound enhancing agent.

The company has several other compounds in development as one can see above. Late last month, the company garnered Fast Track designation for its metastatic castration resistant prostate cancer candidate Lu-PNT2002 it is developing with partner POINT Biopharma ( PNT ) . Lantheus also is focused on growing its pipeline. Some key recent events in that area are outlined below.

Recently Quarter Results:

Lantheus Holdings reported fourth quarter numbers on February 23rd. The company delivered a $1.37 a share in non-GAAP profits, more than 40 cents above the consensus. Revenues soared just over 100% on a year-over-year basis to just over $263 million, more than $17 million above expectations.

Pylarify accounted for $160.6 million worth of sales while DEFINITY contributed $63.6 million to the ante. Leadership provided initial guidance for FY2023 as well. It saw $1.14 billion to $1.16 billion in revenue and $4.95 to $5.10 a share in profits. The consensus was at $4.22 a share of earnings on $1.04 billion in revenue at the time.

Today, the company reported its 2023 first quarter numbers . The company posted a non-GAAP profit of $1.47 a share, 18 cents above estimates. Revenues rose 44% from the same period a year ago to just over $300 million, an impressive $20 million above the consensus.

Leadership has also bumped up full FY2023 sales guidance to $1.23 billion to $1.27 billion and EPS of $5.45 to $5.70 a share.

Analyst Commentary & Balance Sheet :

Since fourth quarter earnings hit the wires, six analyst firms including Mizuho Securities and Truist Financial have reiterated Buy/Outperform ratings on the stock. Price targets proffered range from $102 to $120 a share. Expect more Buy recommendations and upward price target revisions in the days ahead given today's results and guidance.

Approximately five percent of the outstanding shares in the stock are currently held short. Insiders have been notable sellers so far in 2023. Collectively, they have disposed of just over $20 million worth of stock through the end of April.

As of FY2022, the company had cash and cash equivalents, net of restricted cash, of just over $415 million. Lantheus also has access to a new $350 million undrawn bank revolver. The company delivered just over $100 million worth of free cash flow in 4Q2022 and just north of $108 million in the just reported 1Q2023. One can assume the company ended 1Q2023 with just over $500 million given that cash flow, although I don't see that number being reported yet.

Verdict:

The current analyst consensus has the company making $4.95 a share in FY2023 on 24% revenue growth to $1.16 billion. Revenue growth is projected to accelerate just past 40% in FY2024 and profits to rise to $5.56 a share. Look for these numbers to be taken up some in coming weeks based on today's first quarter ' beat ' by Lantheus.

The company is obviously operating on all cylinders. I have only a few caveats with a prospective investment in LNTH at these levels. The first is that Lantheus Holdings, Inc. is still having small GAAP net losses. Leadership does provide guidance because

" The Company is unable to predict with reasonable certainty business development and acquisition related expenses, purchase accounting fair value adjustments, and any one-time, non-recurring charges. These items are uncertain, depend on various factors, and could be material to results computed in accordance with GAAP. As a result, it is the Company's view that a quantitative reconciliation of adjusted fully diluted EPS on a forward-looking basis is not available without unreasonable effort ."

Recent insider sales are notable as well.

More importantly, Lantheus Holdings, Inc. shares are approaching more reasonable valuations thanks to the rally in the stock through most of 2023 including today. At $90, the stock trades at over five times forward sales and approximately 16 times forward earnings. Not outrageous valuations by any means, but Lantheus Holdings, Inc. shares are no longer deep in oversold territory as they were to open the year. I am comfortable given today's earnings numbers moving my " buy zone" up to the $75.00 to $80 a share range. If the stock gets to those levels during the next " hiccup" in the overall market, I will add to my holdings there.

We should not judge people by their peak of excellence; but by the distance they have traveled from the point where they started."? Henry Ward Beecher.

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