Also an article in todays AFR - Telix on $1b spending spree to build US radiopharmacy network

for those outside the paywall ...

Telix Pharmaceuticals has agreed to buy a big radiopharmacy network in the United States as part of a $1 billion acquisition spree over the past two years designed to establish it as a major supplier and distributor of medicines used to treat cancer.

The cancer diagnostics specialist said it would acquire Florida-based RLS for $388 million as part of a strategy to become a dominant player in the market for drugs that contain radioactive forms of chemical elements called radioisotopes.

Telix shares hit a record $20.70 before closing 1.6 per cent higher at $20.64 on Monday. Shares, which floated on the ASX in 2017 at 65¢, have doubled in value this year, giving the company a market capitalisation of around $7 billion.

The agreement to purchase RLS was the latest in a string of acquisitions by the fast-growing company, which has now spent half the $650 million it raised in convertibles notes in July. It has spent almost $1 billion on acquisitions in the past two years.

RLS owns 31 radiopharmacies in the US, which Telix will use to manufacture and distribute therapeutic and diagnostic isotopes, building on its existing network.

RLS also has 10,000 square metres of licensed expansion space that Telix said would meet future production demand. The radiopharmacies were previously owned by GE Healthcare, which sold its nuclear medicine business to private investors four years ago.

Telix already has distribution agreements with Cardinal Health in the US and its own manufacturing facilities in Belgium and California.

Telix chief executive Christian Behrenbruch, a biomedical engineer, wants to build the company’s North American network to avoid supply problems experienced by other radio pharmaceutical companies over the past two years.

In 2022, Novartis was forced to suspended supply of Pluvicto, a drug to treat prostate cancer, due to manufacturing problems. In June this year, US giant Bristol Myers Squibb suspended one of its radiopharmaceutical clinical trials due to isotope supply issues.

“Our vision is to build a radiometal production and distribution network fit for the future,” Dr Behrenbruch said.

He and co-founder Andreas Kluge each own a 7 per cent stake in the company.

Analysts said Telix’s acquisition would set it up as a major pharmaceutical developer with control over key supply chains for cancer-busting nuclear medicines.

Telix’s Illuccix, used in the detection and diagnosis of prostate cancer, was approved by the Therapeutic Goods Administration and the Food and Drug Administration in 2021. The company is also developing Zircaix, a product for diagnosing kidney cancers.

Longer-term opportunity

“This is another step toward Telix becoming a US isotope manufacturer,” Jefferies analyst David Stanton said. “We believe that with this acquisition, Telix has the longer-term opportunity to buy isotope production facilities (including cyclotrons and generators) to then become a manufacturer of relevant isotopes.”

Wilsons Advisory analyst Shane Storey said Telix was patiently building a network instead of making speculative bids on crowded takeover targets that other big pharmaceutical companies in the sector were doing.

Telix believes demand for radiopharmaceuticals, now used to treat some neuroendocrine tumours and prostate cancer, will grow as their use is expanded for treatment in other cancers.

Controlling distribution networks is important because nuclear medicines degrade quickly, which means products must be transported on time and in the right location, or else they are useless.

RLS will continue to operate as an independent business. Telix has paid the majority of the purchase price up front, although there is another $US20 million ($29 million) if the business hits certain financial and operational targets, it said.

Telix’s growth has been driven by demand for its diagnostic solutions for prostate and kidney cancers, although it has pulled plans for a US listing announced earlier this year.

Telix said in August it expected revenue in the financial year to fall within a range of between $US490 million and $US510 million. It updated its guidance following a 55 per cent lift in second-quarter revenue due to higher sales of Illuccix in the US.