Lantheus Holdings: May Be Time To Buy After Big Correction

Summary

• After two years of continuous upward movement in its share price, Lantheus Holdings finally started to correct, dropping by about $33 per share in under 3 months.
• With a solid quarter and recent good news, I think, for the most part, investors considered everything already priced in and started taking profits.
• Even including the recent announcement it entered into a licensing deal with PNT for PNT2002 and PNT2003, it failed to support the stock.
• With the company's prolonged upward growth trajectory and insiders selling off a lot of shares, I think the market is waiting to see if it has any gas left in the tank.

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Lantheus Holdings, Inc. (NASDAQ:LNTH) has been on a tear over the last couple of years, bottoming out at about $9.00 per share in early November 2020, and from there going on a sustainable upward run that culminated in it soaring to a 52-week high of $87.49 on September 14, 2022, before correcting to around $54.00 per share. Since then, it has rebounded some, but hit up against a triple ceiling of $59.00 per share from November 10 to November 15, 2022.

From a technical point of view, $59.00 per share is where the company needs to convincingly break through to resume an upward growth trajectory. From a performance point of view, I think it'll have to outperform in the quarters ahead based upon the tougher comps it faces year-over-year.

The recent licensing deal with POINT Biopharma Global (PNT) concerning "selling licensing rights to radiopharmaceutical cancer drug candidates PNT2002 and PNT2003 to Lantheus" may be the catalyst that gives the company the tailwind it needs to regain momentum.

Recent insider selling, uncertainty surrounding the economy, higher interest rates that disproportionately impact growth companies, and tougher comps are going to make it difficult for the company to gain traction in 2023, based upon expected slower growth.

In this article we'll look at some of its recent numbers, the outlook for 2023, and what if any impact the licensing deal will have on LNTH over the next year or so.

Some of the numbers

Revenue in the third quarter was $239.3 million, an increase of 134.4 percent year-over-year.

GAAP net income in the reporting period was $61.2 million, up from the GAAP net loss of $13.4 million in the same quarter of 2021.

GAAP fully diluted net income was $61.2 million, or $0.86 per share in the reporting period, over five times the GAAP fully diluted net loss per share of $0.20 in the third quarter of 2021.

Earnings per share for the third quarter came in at $0.99 per share, an increase of $0.91 from the earnings per share of $0.08 in Q3 2021. Net cash from operating activities was $93.6 million in the reporting period, and free cash flow was $87.5 million in Q3 2022. For the first nine months of 2022 free cash flow was $162.8 million.

Guidance for 4Q 2022 revenue was from $243 million to $247 million, with EPS from $0.95 to $0.98.

Full-year revenue guidance was projected to be in a range of $915 million to $919 million, upwardly revised from the $885 million to $905 million in full-year revenue guided for on August 4, 2022.

Full-year EPS is estimated to be from $3.80 to $3.83, up from the EPS guidance of $3.50 to $3.60 on August 4, 2022.

Share price movement and taking profits

I have found some shareholders and potential investors in LNTH surprised by the recent correction in the company's share price, even after its big two-year move.

And since it really started taking off in February 2020, from approximately $28.00 per share, it was past due to take a breather when it hit its 52-week high of $87.47 on September 12, 2022.

TradingView

There has been the usual citing of specific numbers and strengths of the company related to its performance, but in light of the high interest environment and its impact on growth stocks like LNTH, it's surprising it ran that high for that long before finally correcting.

Shareholders that had been in for a while obviously took some profits, including insiders that did the same before the inevitable correction came, which when combined with economic uncertainties in 2023, the share price could remain under pressure until another catalyst emerges, since I think much of what drove the share price of the company has been fully priced in.

In regard to catalysts, there are a couple that have the potential to boost the value and share price of the company if they work out for LNTH.

Two potential big catalysts

The first potential catalyst for LNTH is its collaboration with GE Healthcare in the ongoing clinical trial of their investigational radiotracer, flurpiridaz, which "has met its co-primary endpoints of exceeding a 60 percent threshold for both sensitivity and specificity for detecting Coronary Artery Disease (CAD)," according to a press release.

The study included over 600 patients ln Canada, Europe, and the U.S., which was assessing the "diagnostic efficacy of flurpiridaz in detecting CAD."

CAD is the is the leading cause of death around the world and represents a gigantic market. According to the press release, over 120 million people are affected by CAD annually. In the U.S. about 20 million adults have CAD and it was responsible for close to 383,000 deaths.

Since GE Healthcare led the financing and development of flurpiridaz, it would have global commercialization rights to the diagnostics. Because LNTH collaborated on the development of flurpiridaz, it will receive royalties based upon commercial sales.

Nothing is guaranteed yet, but it looks promising, and if it goes forward this is going to be a nice tailwind for the growth of Lantheus.

A more recent development that should drive the performance of LNTH is the acquisition of the rights for radiopharmaceutical cancer drug candidates PNT2002 and PNT2003 from Point Biopharma Global.

When the deal is closed LNTH will hold exclusive rights to the two drug candidates with the exception of certain territories.

LNTH will pay $260 million upfront for the two agreements, and up to $1.8 billion more if the U.S. Food and Drug Administration (FDA) approves the drugs, along with net sales and commercial milestones included in the agreement.

Lantheus will also pay royalties of 15 percent for PNT2003, and 20 percent in royalties for PNT2002.

PNT will continue to fund the PNT2002 trial until it's completed, and afterwards, along with LNTH, will file for a new drug application with the FDA. Taking into consideration one or both of these deals are approved and go forward, they will be more than enough catalysts to drive the share price of LNTH much higher, along with the value of the company.

Conclusion

As the company stands today, it still has some gas left in the engine, but it's not enough to drive the growth of the company in the way it has in the recent past.

I think in the best-case scenario, excluding the deals mentioned above, it would continue to moderately grow, with the caveat it could experience some setbacks associated with interest rates and a weak economy in the near term.

Even without the two potential catalysts listed above, it would probably, over time, reward shareholders, assuming they have a decent cost basis to work from.

I think any time there are significant corrections it would be worth taking a position in LNTH if you're holding for the long term; especially if you're able to grab shares at a discount, taking into account the stock remains very volatile and subject to any type of bad news that eliminates or delays catalysts that would drive the company forward. Lantheus is a solid company with visible revenue drivers, but it could be painful for those getting in at high prices that could result in them being underwater for a prolonged period of time.

But for those that believe in the company, holding for the long term, with the visibility we have today, should result in making a decent profit over time.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.