Thank you for standing by, and welcome to the Telix Pharmaceuticals Limited FY 2023 Results Call. [Operator Instructions]. I would now like to hand the conference over to Ms. Kyahn Williamson, Senior Vice President, Investor Relations and Corporate Communications. Please go ahead.
Kyahn Williamson Senior Vice President of Corporate Communications & Investor Relations
Thank you. Thank you, everybody, for joining our call this morning. You'll have seen that we have lodged our annual report and full year results on the ASX after market closed yesterday. Joining me today on the call is Chris Behrenbruch, our Managing Director and Group Chief Executive Officer; Darren Smith, our Group Chief Financial Officer; and Dr. David Cade, our Group Chief Medical Officer. If you could just turn to Slide 4, please. Just a few introductory remarks. I mean, it's been a very exciting year here at TLX and a lot of hard work, which has led to a lot of achievements. It's been our first full year of commercial sales with reimbursement of Illuccix in the U.S., and that's delivered a 214% growth in revenue to achieve a total revenue of just over $0.5 billion. It really shows the strength of demand for Illuccix, but has also demonstrated our ability to build a highly effective and profitable commercial business. In the operational highlights we've achieved this year are really driving towards our next phase of value creation. We are preparing to launch 2 new additional diagnostic imaging agents, subject to regulatory approval, by the end of this year, and that will allow us to layer in new revenue streams and also, particularly in the case of Zircaix, further strengthen our offering to the urology field as a perfect follow on product to Illuccix.
Kyahn Williamson Senior Vice President of Corporate Communications & Investor Relations
You'll also have seen that momentum is really starting to build across the therapeutic pipeline. Notably, ProstACT GLOBAL is now enrolling patients and we're preparing to roll it out into International sites. Our reputation for innovation has paved the way for several important acquisitions, notably Lightpoint, Dedicaid and QSAM, which further enrich and differentiate our pipeline and end-to-end offering with targeted radiation at every step of the patient journey. Vertical integration of supply and manufacturing is a key focus for us as a business. The addition of Optimal Tracers and opening our Brussels South production facility further expands our capability and capacity in production, manufacturing technologies and research and development. With that, I'd like to hand over to Chris to talk briefly about the financial metrics and other highlights for the year.
Christian Behrenbruch Co-Founder, MD, Group CEO & Executive Director
Thank you, Kyahn. A great summary. So, moving to the next slide, Slide number 5. This slide is a fairly self-explanatory slide and demonstrates what a transformational year 2023 was for Telix. Our record revenues of $512 million, over 200% higher than 2022 were in line with or actually slightly ahead of analyst consensus. Notwithstanding a significant year of investment in our clinical programs, readiness for 2 further product launches from a manufacturing and regulatory perspective, and some pretty significant technology and infrastructure investments, we have really turned the corner in terms of our earnings, operating cash flow, and of course, and very importantly, our first profit. To reiterate the company's execution strategy, our commercial activities, which are currently centered around Illuccix, but soon to be a multi-product, multi-geography landscape, is there to fund our pipeline, particularly our therapeutic pipeline. We also invested heavily in our infrastructure and supply chain, as Kyahn mentioned last year, to be able to be ready for those additional revenue streams when they come on later this year. As such, our investment decisions are not passive decisions. They're based on a significant risk management, competitive landscape and shareholder value creation strategy that's centered on a game plan for growth. Given the significance of our near-term commercial opportunities and our long-term value creation to our best-in-class or first-in-class therapeutic pipeline, we believe this investment is highly defensible and justified and represents the best use of our earnings.
The leverage we offer our shareholders is significant. If I can have the next slide, please. I've mentioned manufacturing infrastructure and this was also a big area of investment focus in 2023 and will continue to be a focus in 2024. This investment focused not only on supply chain and partnership readiness for Pixclara and Zircaix launch, these are our follow-on glioblastoma and renal imaging products, but also scale up our therapeutics development and delivery infrastructure. I'm pleased to particularly note that our South Brussels or Seneffe site as it was formerly known, has now completed buildout and is now a commissioned hot site and is preparing for regulator inspections to properly go live later this year. This site significantly underpins our initial launch of our therapy programs globally as well as servicing the European market for Illuccix, Zircaix and other products when the requisite approvals are in place. Complementary to our Sacramento innovation location, we are also building out hot lab and development infrastructure near our corporate headquarters in Melbourne to be able to facilitate clinical trial activity in the APAC region, which is of strategic importance to the company.
We are continuing to work towards a high degree of development and clinical self-sufficiency alongside carefully selected strategic manufacturing, isotope supply and nuclear pharmacy partners. Finally, just as a side note, we've commissioned our AlphaLab, as we call it, at the Seneffe site. This lab, alongside the relevant investment in cyclotron infrastructure, enables us to internally explore future isotope production technologies around actinium, astatine, lead-212 and ytterbium. This is bolted onto the back of our extensive R&D infrastructure at the Seneffe site and includes 2 dedicated GMP lines that facilitate manufacturing scale-up. This will be initially used for clinical trials but in time will also be available for commercial use. This is really world-class infrastructure that most companies in our space can really only dream about on paper. Next slide, please. Finally, on the Illuccix front, you can see we continue to enjoy significant growth for Illuccix in the U.S. market. We had an excellent second half in terms of growth with clear demonstration that we are taking market share sitting at over 30% on a volume basis. We continue to capture significant oncology accounts evidenced in our payer mix. As you can see from those 2 pie charts, we've seen stable pricing across all reimbursement categories.
We have also implemented a price adjustment for 2024. So I think from a perspective -- revenue growth perspective, we're in really good shape. Most importantly, we are seeing just how challenging it is for new entrants to capture any meaningful market share. To take a piece of this market, it's not just about making a product and hopefully having a supply chain and these are clearly both critically important, but also having a sufficient commercial infrastructure in place to effectively engaged. 2024 will continue this trend of growth and we'll speak to our guidance later in this presentation. We are progressing our European and other jurisdiction submissions on track and in line with process in each jurisdiction. So there's no surprises there. We have disclosed the existence of an Illuccix lifecycle management program that will deliver further innovation for our customers in 2024 and 2025, and it really demonstrates our commitment to being at the forefront of urologic oncology imaging. In short, our customer base continues to grow because of our performance, our innovation and our supply chain. These attributes are pretty hard to beat and we'll continue to capture further share this year and beyond. Darren, over to you to provide further financial commentary.
Darren Smith Group Chief Financial Officer
Okay. Thank you, Chris. Now turning through to Slide 9, where we look at our revenue and adjusted EBITDA. 2023 represents Telix's first year as Illuccix sales following its commercial launch in April '22. Since then, and as you can tell by the graph, we have achieved significant month-on-month and quarter-on-quarter growth in revenue by continually taking market share in the U.S. We estimate that we currently have about 34% of the market volume. As a result, Telix's total Group revenue is $502 million, a $340 million improvement on the prior year. At Telix, we're not only focused on driving the top line, but we also aim to optimize the contribution of the commercial business and what it generates. We do this by assessing the commercial earnings before our investment into our asset development pipeline. As you can see in the graph, our EBIT before R&D has continued to improve in line with our growth in revenue. The commercial business, obviously, is a key funding source for the business. We then have 2 choices of how we spend these funds. We can either keep the earnings and pay taxes and a dividend, or we can reinvest them back into Telix's deep theragnostic pipeline to create future value for the business and shareholders. As Chris has previously talked about, we have decided to do the latter. But turning to Slide 10, in the Group profit and loss. We can see that in 2023, Telix has delivered its inaugural tax -- profit after tax of $5 million, which is a $109 million improvement on the prior year.
Most importantly, this result demonstrates that the company has built a self-sustaining business where strong performing commercial business is funding a significant investment into the company's late-stage diagnostic and therapeutic assets. Closer attention to the P&L highlights that Telix's financial performance has improved not only on the top line, but across all investment categories. Gross margin has improved to 63% compared to 59% last year, reflecting control of its manufacturing costs and optimization of its distribution network. The company has also continued to invest into its commercial capability to grow sales and ensure that we have the infrastructure to support a larger business. As can be seen in the resulting sales growth has outstripped our increase in investment, thus reducing our expenditure as a percentage of sales, improving profitability and leveraging the P&L. This performance permitted Telix to invest $128 million into our pipeline. This supports 1/3 of our workforce that is dedicated to developing the product pipeline, along with $86.3 million invested with our external development partners. Now turning to the cash flow on Slide 11. At the end of 2023, Telix has achieved 5 consecutive quarters of positive operating cash flow, resulting in the ASX no longer requiring us to lodge our quarterly cash flow and activities reports. It has signaled Telix's maturation as a sustainable commercial business.
This has permitted Telix to self-fund its product development through its commercial business while maintaining its cash-on-hand position. This has been supported by a continual focus on customer cash collections and a sound working capital management. It is worth noting that the positive operating cash flow was maintained during the second half of the year despite including its first annual payment of $16.3 million for the ANMI contingent consideration. Also the filing fee for Zircaix of $5.9 million in funding the commercial manufacturing process qualification and validation for Zircaix and Pixclara. On Slide 12 -- sorry, just a sec. On Slide 12, we can see the detail of the profit contribution from the commercial operations. It also -- you can see this in Note 3 of the financial accounts, which is our segment reporting. Clearly, the numbers presented speak for themselves and validate Telix's commercial strategy and its execution with a growing top line and expenditure reducing as a percentage of sales. The significant sales growth and the continued market share gains is a result of Telix's directed investment into promotional marketing and growth programs. The establishment of 226 strong radiopharmacy distribution network providing proximity to customers, and the buildout of a professional sales force and technical support services team that has enabled us to build deeper relationships with our customers. This investment will be further utilized when we bring to market our next products in Zircaix FDA willing during this year.
Now turning to Slide 13, and our R&D investment. During the year, Telix invested $128 million into product development to create future value. As can be seen in the pie graphs on this slide, the investment was across 3 important components. The first bit relates to Zircaix and Pixclara in our lifecycle management product development activities. 42% was directed to delivering these 2 late-stage diagnostics to commercial launch. This involved commercial manufacturing process qualifications and validations, the preparation of the U.S. Food and Drug Administration filings and the commercial launch -- in preparing for the commercial launch, including the starting of early access programs to prepare the market for the launch. A further 25% was directed towards our late-stage therapeutic assets for the preparation and commercial commencement of a large Phase III randomized clinical study, ProstACT GLOBAL, and for the related clinical manufacturing processes to support the trial. The final 33% relates to Telix's internal assets, which is its development teams that are responsible for delivering the development of Telix's pipeline towards commercialization. In summary, Telix could be considered a biotech with a deep theragnostic pipeline that we have derisked by building a successful commercial business that is growing and taking market share while funding our pipeline program development. I'll now pass you over to Dr. David Cade to take you through the pipeline. Thank you.
David Cade Group Chief Medical Officer
Thanks, Darren. Always a pleasure to talk clinical. Moving on to Slide 15, please. So this is our core pipeline that I think most investors are familiar with this. However, there's a number of key takeouts that I would like to highlight. If you look across the imaging portfolio, there's a significant momentum for Illuccix beyond the U.S. commercial performance, which Darren and Chris have talked about, I think reflecting the truly global nature of the company. And specifically, the global rollout of Illuccix is currently awaiting a European approval decision, which we anticipate this year. And of course, over in the Far East, our registration enabling Phase III trial in China is recruiting very strongly and it's on track to complete recruitment in the second half of the year. And that really does reflect the very strong and close collaboration with our partner, China Grand Pharma. What I'm really excited about is the momentum behind the first-in-class imaging agents, Zircaix for kidney cancer and Pixclara for glioblastoma in the brain, and getting these into the hands of our extraordinarily capable U.S. sales force. So I'll go into the market opportunity for these assets shortly, as well as some of the highlights of the progress the company has made across the therapeutic programs. Next slide, please. So when we look back over 2023, it really is quite astonishing what our development teams have achieved. From new data generated from the therapeutic programs, to the efficient recruitment of patients into ongoing and new trials, and to the regulatory filings to the FDA for the registration of new products, this really truly is a huge amount of activity across the company's portfolio.
If we look at the ProstACT program, the ProstACT SELECT study generated really valuable safety data towards the end of last year. And together with the CUPID study of Telix's targeted alpha therapy program, it's going to generate further clinical data including some early efficacy data during 2024. With ProstACT GLOBAL, which I'll give some more color on in a moment, it really was pleasing to see this Phase III pivotal registration trial commence recruitment here in Australia. And I do look forward to opening this highly anticipated study in North America and other countries over the coming months. Turning to the CAIX program, it was very pleasing to file the first part of our BLA for Zircaix with the FDA in late 2023. And naturally, the target CAIX is expressed on a range of cancer types that have a poor prognosis. And we've seen some very what I'd call encouraging data emerging from the OPALESCENCE study in women with triple-negative breast cancer. While on the therapeutic front, CAIX is a very active program with the STARLITE-2 trial progressing very well and we're expecting some initial data from this trial before the end of this year. Moving to the Glioma program, it's pleasing to see the company make such rapid progress in this disease state.
It's a disease that continues even in 2024, to have a very grim prognosis. With Pixclara for the imaging of glioblastoma, we've had extensive interactions with the FDA and we have, I think, what we believe to be a clear path to an NDA filing for this, our third asset. And on therapy front, we continue to develop TLX101 in both the frontline and the recurrent disease settings in the IPAX family of studies. And in IPAX-2 with TLX101 where it's used in the frontline setting together with conventional radiation therapy and chemotherapy following surgery, this study is a dose escalation study that aims to identify the optimal dose for TLX101 for us to take into Phase II and ultimately registration enabling trials, which we do plan to do and initiate these towards the end of the year. I won't spend too much time on the rare diseases program. Suffice to say, our early-stage assets for soft tissue sarcoma and bone marrow conditioning will be heading towards the clinic for human studies this year. Moving to Slide 17, this is the design of our multicenter international randomized trial, known as ProstACT GLOBAL, in up to 400 patients, which recently commenced recruitment in Australia. That was November of last year when we started that. So in this pivotal study, patients with metastatic castrate-resistant prostate cancer who've progressed on a prior androgen receptor pathway inhibitor or a chemotherapy agent such as docetaxel that have PSMA-positive disease, they're going to be randomized on a 2:1 basis to receive either the standard of care with their second ARPI or docetaxel plus TLX591, which is the investigational agent or the standard of care alone, with a very standard and highly used primary endpoint, radiographic progression-free survival as the primary outcome measure.
And what I would like to get across is that we've done a huge amount of homework in designing this trial, which has had considerable patient input into its design, and it's really seen as a compelling study from both leading clinicians in this therapy area and importantly, patients as well. Next slide, please. So, staying in the realm of prostate cancer, Telix recently completed, entered into an agreement, soon to complete, to acquire QSAM Biosciences based in Austin, Texas, and that company's investigational bone-seeking agent known as Samarium-153-DOTMP, which for simplicity's sake, I'll call it DOTMP. And the reason for that is that it's the chelator that is critically differentiated in this asset. The reason we acquired this asset is because ultimately, virtually all patients with advanced metastatic prostate cancer will progress. And we see this as a highly complementary asset to our existing portfolio, given that the need for specific palliation of bone pain is truly such a hallmark of late-stage prostate cancer. So really there are 2 major potential applications of the asset in the clinic. Firstly, palliative management of bone pain caused by bony metastases from prostate cancer, but also from breast cancer and lung cancer, amongst others, that tend to exhibit skeletal involvement.
And then secondly, it could be applied for the treatment of primary osteosarcoma or bone cancer, including in the pediatric population. Moving on to the imaging portfolio, I'd like to give a little bit more color around TLX250-CDx, which we called Zircaix. So, next slide, please. This is how we view the U.S. market opportunity for Zircaix in renal imaging, which we've shown before, and it really amounts to a total addressable market value of $500 million. That's U.S. dollars in the first instance, with the potential to expand this through new indications and the evolution of clinical practice guidelines. So Zircaix is the first-in-class imaging agent for renal cancer that I believe may do for the staging and treatment decision-making around kidney cancer, as what PSMA-PET imaging has done over the last 2 years to 3 years for prostate cancer. And while we anticipate FDA approval for Zircaix towards the end of the year, we've put in place an expanded access program to ensure ongoing patient and physician access to the asset prior to the FDA's formal marketing approval and the commercial launch of the asset towards the end of this year. So on the left-hand side, really there are 2 main clinical settings in which Zircaix may be used. Firstly, for the characterization of a renal mass that's been found in a patient as either renal cell carcinoma or not.
In other words, yes, as a surgeon, I'll need to take it out, or no, the patient may be suitable for more conservative management and active surveillance. And then secondly, in patients with known renal cell carcinoma, to accurately stage their disease, or for patients who've undergone surgery for renal cell carcinoma to provide longitudinal surveillance with imaging to enable the detectional of recurrence of their disease, particularly in those patients with high-risk disease. And on the right-hand side, I won't go into too much detail. We've presented this before, but our initial market opportunity amounts to over 100,000 Zircaix scans a year, with very rich potential to bring the benefits of zirconium-89 PET imaging to adjacent indications. Moving on to Pixclara. This is our brain cancer imaging, and this is how we view the U.S. market opportunity for Pixclara for the imaging of brain cancer, which amounts to a total addressable market value of over USD 100 million from launch, but again with significant potential to expand this through new indications. So we're getting very close with the FDA to filing the NDA package and we're currently implementing an expanded access program again for this asset, so that patients can have access to it prior to the official commercial launch. So on the left-hand side, I think it's worth explaining how it may be used. We've outlined here 3 main clinical settings in which Pixclara would be able to provide clinical utilities. So firstly, in patients with glioma, for which surgery and radiation therapy are the mainstays of treatment.
Today, MRI is not able to distinguish in up to 40% of patients whether the patient's disease is responding to the treatment or whether it is recurred. So in this setting, Pixclara is better able to distinguish between what we call pseudoprogression, which is an artifact of treatment or true disease progression. And that's a critically important decision because these patients need to be actively treated. They don't have a long prognosis. Secondly, Pixclara, by defining where glioma is most biologically active, could provide valuable information for radiation treatment planning. And then there's a third clinical application, potentially where many other cancers have a predilection for metastasizing to the brain. So we believe Zircaix may have a role in the future in characterizing the status of the cerebral component of these diseases. And then on the right-hand side, our initial market opportunity amounts to over 20,000 scans with Pixclara a year and that's based on the annual incidence of 20,000 patients being diagnosed with a glioma. And unfortunately, these patients have quite a grim prognosis, typically a median survival of 12 months to 15 months. So really critical for the physician to understand whether their disease is responding to treatment or progressing. So with that, I hope that gives an oversight of the second and the third cabs off the rank in terms of commercial assets. And with that, I'll hand back to you, Chris.
Christian Behrenbruch Co-Founder, MD, Group CEO & Executive Director
Thanks very much, David. Moving on in the package to Slide #23. So this is our inaugural guidance to the market as we transition to a rather different operating basis as a profitable company. We think it's appropriate to give forward-looking guidance. So our expected revenue for 2024 will be in the range in U.S. dollar terms of $445 million to $465 million. That's AUD 675 million to AUD 705 million at current exchange rates. This represents a 35% to 40% increase over last year. I want to make it very clear that this guidance is based on worldwide sales of Illuccix in jurisdictions in which we currently have regulatory approval. So it's not based on speculative or future approvals, it's based on approvals that we have today. There is, of course, upside in these numbers from the approval of Zircaix and Pixclara, which are reasonably expected this year, as well as further territory approvals for Illuccix over the course of the year. And as we get those additional product and jurisdictional approvals, we will then update guidance appropriately and accordingly. Additionally, we expect to invest around 40% to 50% more in R&D compared to last year. This includes both, and you can see this from the little charts on the right, both the internal staffing and headcount and infrastructure, as well as external manufacturing and R&D costs.
We expect to fund the entirety of our R&D activities through operating cash flow and broadly in line with this revenue growth as you can see. I think if you take a look at the allocation of R&D investment going forward, you can see that there's a greater focus on therapeutic programs. And while we will continue to make further investments in our imaging programs, really what you're seeing now is a transitional trajectory towards investment in our therapeutic pipeline. But I think for those shareholders that look at Telix's outlook as a healthcare company, clearly expanding our indications for our existing commercial programs, Illuccix lifecycle management to maintain our presence in the market and to continue to innovate that platform is still a meaningful investment for the company. Our 2024 R&D activity is really summarized in 3 major buckets. As David said, really getting the market launch in place for our 2 follow-on products. And you can see that the commercial opportunity of those products can certainly eclipse our current sales of Illuccix. Second of all, we're pleased to be operationalizing our Phase III trial, and that includes very shortly the U.S. as well. And we expect to also add European and additional APAC sites later this year. So really that's a significant part of that therapeutic investment allocation to the right. And of course, the broader pipeline still remains important as well in terms of progressing ahead. And then finally, clearly the lifecycle management of Illuccix and ongoing indication expansion and really maximizing our competitiveness for our core money earner right now is a key focus for the business. Moving on to the next slide. So just to summarize, I think this is a very comprehensive viewpoint of Telix that summarizes the prospects of the company very nicely. We have a fantastic pipeline of late-stage therapeutic programs that are making tremendous progress. And I think David really eloquently articulated all of the clinical progress that we are making. We're recruiting patients every day and every week and every month into those programs, and we have a ton of data readouts over the course of the year. So I encourage you to go back and have a look at the pipeline slide and look at the milestones that are associated with each asset. This year, our commercial team is going to be super busy with the launch of 2 further products and geographic expansion of Illuccix.
And we are currently commercially active in 4 jurisdictions as an approved product. I expect that we will be active in over 20 jurisdictions by the end of the year. So this is really a massive year of geographic expansion and of course revenue derisk. And of course, we continue to make sure that our lead program is the best product cancer imaging agent in the market. We also have our future pipeline, the Telix in 5 years pipeline coming in behind. We're going to have some exciting opportunities to talk about our next-generation products, particularly our alpha programs over the course of the year. And we will continue to invest where appropriate and where it's complementary to our existing partnerships in vertically integrating our supply chain and manufacturing activity. And I think everybody on the line knows that's a critical activity for a radiopharmaceutical company, particularly one of our size and stage of commercial development. So I'll leave it there. That's the last slide in the presentation, and I'd be pleased to open it up to the floor for questions from analysts.
TLX Price at posting:
$12.44 Sentiment: Buy Disclosure: Held
(20min delay)