Dr Boreham’s Crucible: Telix Pharmaceuticals

Small Caps | Jul 31 2023

Oncology radiology leader Telix Pharmaceuticals is taking on the US, Tim Boreham reports.

By Tim Boreham

ASX Code: ((TLX))

Share price: $11.26

Shares on issue: 318,808,268

Market cap: $3.58 billion

Chief executive officer: Dr Christian Behrenbruch

Board: Kevin McCann (chair), Dr Behrenbruch, Dr Andreas Kluge (co-founder, currently on a leave of absence), Dr Mark Nelson, Jann Skinner, Tiffany Olson

Financials (June half 2023): receipts $195.3 million (up 2,560.1), net operating cash flow $13.3 million, cash balance $131.7 million (up 8.5%), drawn debt $6 million*

* The company also has an undrawn $15 million debt facility

Major shareholders: Gnosis Verwaltungsgesellschaft (Dr Kluge) 7.12%, Elk River Holdings (Dr Behrenbruch) 7.24%, Grand Decade (China Grand Pharmaceuticals) 3.44%

The home-grown oncology radiology leader, Telix Pharmaceuticals, last week confirmed the strength of its assault on the US market, posting a 21% leap in June quarter revenue that implies a lofty annualised run rate of $480m.

Derived from Telix’s approved prostate imaging tool Illuccix, the quarterly revenue of $121m marked the fifth consecutive quarterly increase since Telix imaged its first commercial dose to retired Indianapolis rail worker Larry Doone, in April 2022.

Telix has also been cash flow positive for the third successive stanza.

“Overall, it’s been a pretty compelling quarter,” purrs Telix co-founder and chief executive Dr Chris Behrenbruch.

Quixotic as ever, investors knocked up to -17% off the share price in their immediate response.

The company says the “price response does not reflect the state of the business” and there appears to be no smoking gun. The results more than met expectations, but perhaps investors wanted a little bit more given the shares had run up 77% over the preceding four months.

Management’s task is to maintain the momentum of its Illuccix sales while pursuing its busy development agenda - notably pending approval applications for renal (kidney) cancer and brain cancer diagnostics.

A potted history

Telix was founded in November 2015 by Dr Behrenbruch and Dr Andreas Kluge. Telix listed in November 2017 after raising $50m at 65 cents apiece.

Currently on personal leave, Dr Kluge founded the Dresden-based radio-pharmaceutical outfit Therapeia, which was acquired by Telix.

Dr Behrenbruch was also the executive director of the defunct Factor Therapeutics and was also on the board of Amplia Therapeutics. He also authored a punchy biotech newsletter called The ASX Long Tail, which proved to be a tad too spicy for the lawyers.

Telix is Melbourne-based, but most of its commercial activity is in the US. The company has also just completed a manufacturing mega facility in the Belgian (and beer) capital of Brussels.

In 2020, Telix inked a 10-year deal with China Grand Pharmaceutical, worth “up to” $45m. The Hong Kong-based entity became the exclusive partner in those parts for any approved Telix therapy.

The story to date

Telix is developing both imaging (diagnostic) and cancer therapies on its molecularly targeted radiation (MTR) platform.

While MTR is a new discipline there is nothing new about cancer radio-diagnosis, which dates back more than a century.

The Telix experience shows that in terms of their efficacy and ease of use, all isotopes - radioactive versions of an element - are not created equally.

While rival isotopes are produced in costly cyclotrons, Telix’s can be generated at any of the 200-plus ‘nuclear pharmacies’ in the US.

Given the time-sensitive nature of transporting the isotopes, Dr Behrenbruch reckons Telix is more of a logistics company than a health company.

We guess that makes Dr Behrenbruch the Lindsay Fox of the sector, although we are yet to see him clad in the trucker’s uniform of a blue singlet and Stubbies.

“We are hanging our hat not just on distribution and supply chain reliability, which we believe is best in the industry, but clinical reliability and dependency as well,” he says.

Better prostate imaging

Approved in the US, Canada and Australia, Illuccix is a kit for preparing gallium-68 gozetotide - more commonly known as a PSMA-11 injection - for positron emission tomography (PET) scans.

Illuccix is used for prostate cancer patients suspected of having either metastasized growths or a recurrence based on elevated PSA (prostate specific antigen) levels.

“This has been a seriously fun product to launch, we are impacting a lot of patients’ lives,” Dr Behrenbruch says.

The company spooked the market when it withdrew its European application in September last year, despite 56,000 Europeans having been injected up to that date. But the paperwork has since been resubmitted.

Dr Behrenbruch admits the company was “incredibly lucky” to achieve FDA consent (in November 2021) only because the agency at the time prioritized manufacturing site inspection for vaccine makers.

Telix is now confident of European and UK approval for Illuccix, while the tool is under regulatory review in several other jurisdictions.

In January 2023, the company dosed its first patient for a global prostate cancer imaging study, called Prostact, aimed at exploring “unmet medical need across the full prostate cancer treatment journey” from first recurrence to metastatic disease.

Kidneys next?

The next cab off the Telix rank is its second product TLX250-CDx.

TLX250-CDx would be the first imaging agent for the non-invasive assessment of patients with clear cell renal carcinoma, the most common form of kidney cancer.

In November last year, Telix outlined positive results from its phase III global trial called Zircon, which showed “unprecedented specificity and sensitivity”.

The trial enrolled around 300 patients scheduled for a partial nephrectomy (that is, the kidney lump is removed by a surgical urologist).

Dr Behrenbruch says Telix expects an FDA filing as a biologics licence application this calendar year. A recent pre-review meeting with the agency was “very satisfactory” - and he is not just talking about the tea and cookies.

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