FWIW - as expected UBS released their updated report for TLX later in the day

USD2.3b+ US PSMA scan market estimate supports our Buy thesis

Greater appreciation of TAM for PSMA scans?

Despite pre-releasing key numbers (sales, gross margin) on 19th July and adjusted EBIT per today's 1H23 release (ex- non cash charges for contingent consideration liability revaluation for Illuccix) - close to consensus, TLX shares were up c.6% at the time of writing. The company outlined a larger potential total market for PSMA scans in the US (i.e. for Illuccix / similar products) than previously (USD2.3b+ vs USD1.5b). Our estimates already assume USD2b+ because they include monitoring after treatment and imply Illuccix is worth c.AUD12 per share. We have not changed our US Illuccix assumptions but illustration of expanding potential perhaps serves to reassure. We have updated our company model for the information provided today and changes are minor in absolute terms bar including the revaluation. Our AUD14 Price Target is unchanged and we continue to see upside from Telix's next commercially relevant asset TLX250-CDx (kidney cancer diagnostic), due for FDA filing in November. Buy

Use case for TLX250-CDx is our next question

Telix management previously commented on the possibility that TLX250-CDx could be as big as, or bigger than, Illuccix (so, an AUD1b+ product). TLX250-CDx has outstanding data but our peak sales forecast is very conservative at AUD240m, because we only factor in use for a narrow group of patients. We think a firmer outline of expected use patterns is the next step towards shareholders becoming comfortable attributing value to this asset which is outside the share price at current levels, in our view

Contingent consideration

Telix saw an AUD37m contingent consideration revaluation charge in 1H23 to reflect greater potential for Illuccix. Illuccix attracts cash payaways against this liability via the cashflow statement but if it is revalued in its own right up/down then this charge/ payment appears in the P&L (as with other biopharma companies with certain types of acquired asset). Revaluations are removed from core earnings in every case we can think of, so we do the same. We note that the increase in valuation of the liability is almost identical in % terms as the rise in potential TAM detailed above. Our conversations with the company indicate that whilst periodic revaluations take place, larger ones like this are threshold based and therefore we do not expect another big move near term

Valuation: Unchanged AUD14 Price Target

We value Telix using an NPV SOTP. Ex contingent consideration revaluation, updates are minor: 1) slightly higher tax in 24/25 and 2) a modestly quicker sales ramp ex-US