Never put off until tomorrow what can just as well be done the day after tomorrow.”- Mark Twain
Today we take a first look at Lantheus Holdings (NASDAQ:NASDAQ:LNTH). I had a decent sized position in Progenics Pharmaceuticals (PGNX) before its acquisition by Lantheus. I also have a decent amount of Lantheus in covered call positions initiated when shares were trading at just over $60 per share in the spring of this year. These holdings appear to expire deep in the money in November. Should I initiate a new covered buy position in LNTH now that they are over $80.00 per share? An analysis follows below.
Lantheus Holdings is based just outside of Boston. The Company is focused on the development and commercialization of diagnostic and therapeutic products that aid clinicians in the diagnosis and treatment of heart, cancer and other diseases worldwide. Currently, the stock is trading at just over $85.00 per share and has an approximate market capitalization of just over $6 billion.
The company has several imaging agents on the market. The two most prominent are Pylarify, a recently launched prostate-specific membrane antigen (PSMA) targeting positron emission tomography (PET) imaging agent, and DEFINITY, an ultrasound imaging agent.
Second quarter results:
The company released second quarter numbers on August 4, and they were impressive. The company generated 89 cents per share in non-GAAP earnings as revenue soared just over 120% year-over-year to $223.7 million. Both numbers easily beat analyst consensus. GAAP net income was $43.1 million, compared to a GAAP net loss of $26.7 million in the prior year period.
Revenue growth was fueled by the recent launch of Pylarify, which generated just over $130 million in sales in the second quarter, compared to just under $93 million in the first quarter of this year. DEFINITY accounted for most of the rest of the sales in the quarter, with revenue up 4% from a year ago.
The rest of the company’s product portfolio saw sales decline for a variety of reasons.
Management has also strengthened guidance as you can see below, both for the third quarter and for the year.
Analysts’ comments and results:
Since the second quarter earnings release, SVB Securities ($110 price target) and Truist Financial ($100 price target) have maintained their buy ratings while B. Riley Financial ($102 price target ) launched the stock as a new buy citing the company’s growth trajectory due to the launch of Pylarify.
Approximately four percent of LNTH’s outstanding float is currently held short. Many insiders took profits throughout 2022 on the stock’s beautiful rally. They have sold nearly $6 million worth of shares in total so far in the third quarter.
The company’s balance sheet is in good shape with just over $170 million in cash and marketable securities available at the end of the first half of 2022. The company also had $68.3 million in free cash flow as of second trimester. Lantheus has long-term debt of just over $150 million.
According to current consensus analysts, the company is earning just over $3.55 per share in fiscal 2022, with revenue growing more than 110% to nearly $900 million. Sales growth is expected to slow to teen lows in fiscal 2023, but as earnings rise to $4.05 per share according to the analyst community.
The company is showing impressive results primarily from the rollout of Pylarify, which management says represents a potential market of approximately $1.2 billion. DEFINITY has an 80% market share in what the company estimates is a $600 million annual market.
Pylarify is expected to be approved in Europe soon and will also be included in most late-stage trials in the United States for PSMA-targeted therapies. The company also has other imaging agents in various stages of development.
That said, sales growth will slow significantly in fiscal 2023 as comps become much more difficult. We are in an extremely uncertain economic environment and rising interest rates are putting pressure on growth stocks. There has also been significant insider selling in this equity recently. The stock is trading at about six times next year’s sales and more than 20 times next year’s forecast earnings.
That means I’m probably not a LNTH long because my options expire if the stock is trading at current levels. However, if an overall market pullback brings the stock back into the $70-$75 range when my options expire, I will likely pick up even more LNTH via covered buy orders.
You can delay, but time won’t.-Benjamin Franklin