The federal government is proposing raising the reimbursement rate for specialty diagnostic radiopharmaceuticals — agents that help identify disease in medical scans, observes Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.
While the final decision won’t come until later this year (and could take effect next January), it promises to be a huge boost to Lantheus Holdings Inc. (LNTH).
The rule would increase the amount paid for Lantheus’ Pylarify, a diagnostic agent used in PET and CT scans of prostates, as well as Pylarify AI, which is an AI-based analysis and reporting of those scans. Research shows that doctors assisted by AI that have been trained on thousands of x-rays do a better job of identifying cancerous growths.
The system is used in every academic hospital in the US and is accessible to 90% of patients who have insurance coverage for it. Pylarify just hit the market a couple of years ago but it’s been a hit, accounting for $259 million in revenue in Q1, up one-third from last year.
The new reimbursement proposal probably turbocharges the revenue the company can make by nearly doubling the top price paid under specific circumstances. Before this, Wall Street started having concerns Pylarify would see market share shrink due to a current billing cap and the emergence of a competitor, Blue Earth, that’s priced closer to that cap.
Even though Blue Earth’s results are inferior to Lantheus’, the expectation was that a segment of clinicians would move toward the less-good, but fully paid, option.
Still, even before the Medicaid/Medicare fee proposal, Lantheus was expecting 2024 to reflect strong momentum, projecting sales up 17% for the full year to about $1.5 billion, with earnings around $7 per share.
The longer-term outlook no doubt improves with the pricing revamp. Lantheus also dominates in an ultrasound enhancing agent for echocardiograms, called Definity. It generated $77 million in revenue last quarter, up 11% year over year, but the big draw is Pylarify.
