Early and accurate diagnosis of diseases is one of the most important tools doctors and surgeons have in their arsenals. Because life-or-death decisions are made based on data from diagnostic scans like ultrasounds, x-rays and CAT scans, healthcare companies are continually looking for ways to make imaging as clear and complete as possible.
One application of radiopharmaceutical drugs, which contain radioactive isotopes, is to improve diagnostic results. Lantheus Holdings (NASDAQ: LNTH) is one of the leaders in the space with Pylarify, a radioactive diagnostic agent designed to help positron emission tomography (PET) scans detect prostate cancer in men.
Lantheus Holdings’ other main treatment, Definity, is an imaging agent designed to improve ultrasounds of the heart.
LNTH has been on a slow climb since its initial public offering in 2015. That positive trend drastically accelerated in 2022 after the company’s drugs hit the market and revenue started rolling in.
LNTH share price peaked at just below $100 in the 2nd quarter of 2023. While Lantheus Holdings shares have gained 231.1% over the past few years, the past 12 months haven’t been quite as kind.
Lantheus Holdings stock is down 8.8%, even as the company beat revenue and earnings estimates in each of the past four quarters.
As its drugs have gained market share, Lantheus has also moved from losing money to making money. The company even upgraded its guidance for 2024 after Q1, which gave LNTH stock price a momentary lift but didn’t bring it anywhere near its highs from a few years prior.
So is Lantheus Holdings stock a buy?
Why Did Lantheus Holdings Stock Go Up?
After Lantheus reported earnings for the 1st quarter of 2024 in early May, its share price jumped 16%. It has largely held onto those gains, mainly because they were well-deserved. The company reported $370 million in revenue, a 23% improvement over the 1st quarter of 2023. Management also reported that revenues beat estimates by nearly 6%.
The company’s $131.1 million net income was a welcome switch from the $2.8 million in net income from 2023. Diluted earnings per share came in at $1.87, which beat EPS estimates by 9.5%.
Lantheus Holdings’ revenue is still dependent on its twin pillars of Definity and Pylarify. Pylarify generated $258.9 million in sales in Q1, a 32.4% year-over-year jump from last year’s $195.5 million. That growth was driven by both adoption of the imaging agent by existing providers and the increasing use of PET scans.
Definity increased revenue by 11.2% in the first quarter, up from $68.8 million to $76.6 million.
The company had a positive operating income of $106.6 million compared to an operating loss of $9.3 million in 2023. Lantheus Holdings had free cash flow of $119 million and cash and cash equivalents on hand of $718.3 million.
It was a very strong quarter and demonstrated year-over-year improvement on nearly all fronts. That success spurred the company to increase its guidance for full-year 2024. It now expects $1.5 million to $1.52 billion in sales compared to earlier estimates of $1.41 billion to $1.45 billion.
Management also raised EPS guidance to between $7.00 and $7.20, up from a range of $6.50 to $6.70.
Will Lantheus Stock Keep Going Up?
Investors have perhaps been hesitant due to concerns that Lantheus could slow its incredible revenue growth, but there are no immediate signs that will happen.
Definity might lag Pylarify in sales, but the ultrasound agent just received FDA approval for use with pediatric patients.
While that may drive revenue, Lantheus also has a healthy pipeline of radiopharmaceutical treatments that are geared toward fighting cancer. For example, the company’s PNT2002 metastatic cancer treatment drug achieved its primary goals in Phase 3 trials in December 2023. The next readout for the drug should be available in the 3rd quarter of 2024.
One of the main ways the company expanded its prodigious pipeline was by acquiring a prostate cancer treatment drug from Perspective Therapeutics.
Lantheus paid Perspective $28 million upfront and bought 19.9% in equity of the company, equalling around $33 million in Perspective shares. However, Perspective’s drug is still in early clinical trials.
How High Will Lantheus Stock Go?
The highest analyst forecast for Lantheus stock estimates its share price will reach $128 over the next year. That translates to a 61.1% gain from where the stock currently trades.
In light of the healthy revenue increases the company has reported, newfound profitability, and a growing pipeline, Wall Street has bought in on the firm’s prospects with 10 of the 11 analysts rating it a Buy.
The average price target is $104.90, which reflects a 32% improvement over the next 52 weeks. There isn’t a Sell rating on the stock, and the final analyst rates LNTH as a Hold. If the lowest forecast proves correct, Lantheus has the potential to rise by as much as 20.8% over the next year to $96 per share.
Is Lantheus Holdings Stock Undervalued?
On a discounted cash flow forecast basis, Lantheus stock is fair valued around $79 per share.
The company’s price-to-sales multiple of 4.1 leans towards the high side. Fellow medical stock Haemonetics Corporation has a 3.9x multiple, while Hologic has a multiple of 4.6x.
Pharma giant Johnson & Johnson also has a P/S multiple in the same range, with a 4.1 P/S ratio. It’s a strong indication, at least, that Lantheus Holdings shares aren’t overvalued. It also doesn’t indicate the stock is particularly cheap at this price point.
Is Lantheus Holdings Stock a Buy?
For LNTH to continue its recent upward drive, the company needs to do more of the same. If it can continue to drive revenue from Pylarify and enjoy new sales from the pediatric approval of Definity, investors will likely respond.
The company made a strong play to strengthen its already formidable pipeline with the Perspective Therapeutics drug acquisition. If PNT2002 stays on track for FDA approval, the Perspective drug may well follow in its footsteps.
Lantheus Holdings become profitable in the first quarter, driven by increasing sales of its two most popular offerings. A continued streak of exceeding expectations is likely to reward shareholders handsomely.
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