Inside Telix’s pandemic project that sent revenues and share price soaring

When cancer-focused biotech Telix couldn’t run clinical trials on its main game during Covid, it gave staff another project that has since paid off to the tune of $100m.

Telix chief executive Christian Behrenbruch oversaw a “pandemic project” that sparked an “explosion” in the company’s revenue and a doubling in its share price.

And analysts at UBS, which initiated coverage in May, say its near-term assets are not fully priced into its share price, believing it can still rise from $11.12 to $14 in the next 12 months.

The bullishness stems from Telix’s prostate cancer imaging product Illuccix, which can detect tumours more accurately and quickly – in some cases by as much as three years – than conventional CT scans.

In the March quarter, Telix’s revenue surged to $100m from $3.7m in the previous corresponding period, while its earnings before interest, tax, depreciation and amortisation swung to $37m from a $17m loss.

Telix’s share price has soared more than 101 per cent in the past 12 months, giving it a market value of $3.6bn. This compares with a 9.5 per cent gain across the broader sharemarket.

Illuccix launched in April last year after it gained approval in Australia, the US and Canada. The company expects regulatory approval in other key markets, including the UK and Europe, South Korea and Brazil, fuelling further momentum.

While Illuccix has been touted as a game changer in the treatment of prostate cancer, it only has a shelf life of about four hours.

A doctor and patient examine CT scans. Telix’s Illiccix can detect prostate cancer more accurately and earlier. Picture: AFP

Sales of the product therefore rely on a supply chain working like clockwork, and Dr Behrenbruch concedes if he knew how badly the pandemic would batter logistics, he probably wouldn’t have founded the company.

But during the depths of lockdowns and as Covid-19 swept across the world, halting clinical trials – a disaster for any biotech – Dr Behrenbruch says he retained all his staff and directed them to a new project.

The task was ensuring that Illuccix could be delivered to most of the US population within 20 minutes.

“Although we’re a biotech company, a pharmaceutical company, commercial stage sales people and everything – really what we are is a logistics company,” Dr Behrenbruch said.

“We have the most amazing information technology platform that really underpins our business. And not only that, but we don’t sell our product to a distributor in the US. We work with companies like Cardinal Health – a Fortune 20 company – they compound and deliver doses for use under contract.

“That means we can deliver a product on demand basically from seven in the morning until eight o’clock at night, seven days a week to 99.6 per cent of the US market. That took probably 50 people and two years to do it, it was a pretty good pandemic project.”

Telix manufactures Illuccix at 210 locations around the US and while it has become a rockstar at the company, Dr Behrenbruch maintains Telix is a therapeutic not a diagnostics company.

“The diagnostics business is a really big ramp up for us. But we’re not a diagnostics company, we are a therapeutics company that believes in precision medicine.

“And so for every one of these diagnostic agents where you can look at the entire signature of cancers, from your toes to your nose, we have a therapeutic program that mirrors that. What the diagnostics gives us is the ability to plan optimal therapy for the patient.”

The therapeutics side of Telix’s business is radiopharmaceuticals, the global market of which is worth about $US6bn and forecast to hit $US35bn by 2035. Radiopharmaceuticals work by travelling through the blood to deliver radiation or chemotherapy directly to cancer tumours, rather than the conventional broadspectrum approach.

It acquired UK-based medical device company Lightpoint Medical last month to provide radiopharmaceutical-based surgical guidance – or technology that allows doctors to detect cancer in real time during surgery.

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‘Whenever a CEO of a biotech company sits in front of you and says ‘we’ve got a cure for cancer’ you really should take that with a big pinch of salt’

Telix chief executive Christian Behrenbruch

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While it is seen as the next big disruptor in cancer treatment, along with immunotherapy and personalised vaccines, Dr Behrenbruch is loath to call it a cure.

“Whenever a CEO of a biotech company sits in front of you and says ‘we’ve got a cure for cancer’ you really should take that with a big pinch of salt because there isn’t really a cure for cancer and late stage disease.

“Once you have a large burden of disease – I’m not saying we won’t ever cure cancer in that setting – but it’s really tough. Once you’ve got a couple of kilos of bone metastases in your body, the toxicity involved in just even clearing that bad tissue is really significant. So the number one goal in cancer is early detection, because when you have a low burden of disease, you can cure every patient – even the most aggressive pancreatic cancer when it’s the size of a grain of rice.

“But when you have a large burden of disease, it’s almost impossible, so the truth of the matter is, we don’t really cure, we can’t cure patients at the end of life. All we can do is stabilise their disease and eliminate pain.”

Telix spent 21 per cent of revenue, or $21m, in the March quarter. Like Illuccix, radiopharmaceuticals have a limited shelf life, requiring Telix to have a robust logistics network that can deliver products to key global markets within 24 to 48 hours.

UBS analyst Laura Sutcliffe said while Telix is facing competition in prostate cancer screening, it is taking share in a market she believes will hit $US2bn.

Dr Sutcliffe said Telix’s current share price – which has surged from 65c when it listed on the ASX in 2017 to $11.13 – suggests peak global sales of $1.3bn versus UBS’s forecast of $1.8bn.

“Another diagnostic, TLX250-CDx for RCC (kidney cancer), should launch in 2024 and we see $240m peak sales, but it looks largely outside the share price,” Dr Sutcliffe wrote in a note to investors.

“Biotechs reaching profitability are fairly rare and we see positive EPS for Telix this year.

“Telix has a pipeline of therapeutic assets. If these turn out to be commercially meaningful, we think upside could be substantial given price differentials versus diagnostics and the company would look different from others in the radiopharma space. The most advanced projects are TLX591 (prostate cancer) and TLX250 (RCC). Both aim at competitive areas, so clinical niche matters and we think efficacy data at the chosen doses are needed for investors to assign value.”

Illuccix makes up 85 per cent of UBS’s valuation for Telix, with its kidney cancer treatment comprising 10 per cent and early stage assets the remainder.