Perspective Therapeutics Inc

We previously presented our results in two segments: Drug Operations and Brachytherapy. Due to the divestiture of all of the brachytherapy segment to GT Medical and the classification of the assets and operations of the brachytherapy segment as discontinued operations in our condensed consolidated financial statements, we have now determined that we operate in only one segment. As a result, the following does not include a discussion of the results of our discontinued operations. For additional information regarding our discontinued operations, see Note 4, Discontinued Operations, to the condensed consolidated financial statements in this Form 10-Q.

The following table sets forth our results of operations for the periods presented (in thousands):

Grant Revenue

Our alpha-therapy business is pre-revenue and, accordingly, none of the revenues reflect sales of any of these products which are still under development. Grant revenues of $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively, are derived from our work for the National Institutes of Health.

Operating Expenses

Research and development

Research and development expenses consisted primarily of the costs related to employee and third-party research and development activities. Contributing to the increase of $4.1 million from $3.3 million for the three months ended March 31, 2023 to $7.5 million for the three months ended March 31, 2024 were the increased costs related to the development of our TAT drug programs gained through the merger with Viewpoint.

Management believes that research and development expenses will increase as we continue to invest in the development of new drugs and products in the alpha-emitter space and to expand our manufacturing capabilities through additional facility acquisitions.

General and administrative expenses

General and administrative expenses consist primarily of the costs related to the executive, finance, human resources and information technology functions of the Company.

General and administrative expenses for the three months ended March 31, 2024 were $5.9 million, compared to $6.7 million for the three months ended March 31, 2023, a decrease of $0.8 million. The decrease of general and administrative expenses in the first quarter of 2024 relates to the Merger expenses incurred in the first quarter of 2023, offset by increased personnel costs and professional fees related to corporate legal and consulting services. Management believes that our general and administrative expenses will continue to increase as we increase our headcount to support the continued development of our program candidates.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. We have historically financed our operations primarily through selling equity to investors. During the three months ended March 31, 2024, we entered into various agreements and raised approximately $177.2 million in gross proceeds. The following table summarizes our cash flows for the periods presented (in thousands):

Cash flows from operating activities

Net cash provided by operating activities in the three months ended March 31, 2024 was primarily due to amounts received pursuant to the Option Agreement of $28.0 million, partially offset by a net loss of approximately $12.3 million, net of approximately $0.6 million for non-cash activities, such as share-based compensation, depreciation expense and accrued interest on short-term investments, and a decrease of $2.6 million in accrued expenses and accounts payable.

Net cash used in operating activities in the three months ended March 31, 2023 was primarily due to a net loss of approximately $0.4 million, net of approximately $8.9 million in adjustments for non-cash activity such as share-based compensation, depreciation and amortization expense, accretion of asset retirement obligation, loss on property and equipment disposals and changes in deferred taxes. Changes in operating assets and liabilities contributed approximately $0.4 million to the cash used by operating activities; decreases in inventory and increases in accrued protocol and accrued vacation were offset by decreases in prepaid expenses and other current assets, accounts payable and accrued expenses, accrued payroll and related taxes and accrued radioactive waste disposal.

Cash flows from investing activities

Investing activities for the three months ended March 31, 2024 consisted of short-term investments in U.S. treasury bills and additions to property and equipment. Investing activities for the three months ended March 31, 2023 consisted of transactions related to the purchase of fixed assets and proceeds from the maturity of short-term investments in U.S. treasury bills and cash acquired as part of the merger with Viewpoint.

Cash flows from financing activities

Financing activities in the three months ended March 31, 2024 included cash provided by the various agreements we entered into on March 4, 2024, January 17, 2024 and January 8, 2024, in which we received aggregate gross proceeds of approximately $177.2 million. For additional information regarding the cash we raised, see Sources of Liquidity below.

Financing activities in the three months ended March 31, 2023 included costs related to common stock issued in exchange for Viewpoint common stock and repayment of notes payable.

Sources of Liquidity

On April 11, 2024, we sold shares of our common stock that is currently available pursuant to that certain At Market Issuance Sales Agreement (ATM Agreement), dated as of November 17, 2023 and declared effective by the SEC on December 14, 2023 (File No. 333-275638), by and among us, Oppenheimer & Co. Inc., B. Riley Securities, Inc. and JonesTrading Institutional Services LLC. The sales resulted in gross proceeds to us of approximately $49.5 million. For additional information regarding the ATM Agreement, see our Form S-3 filed on November 17, 2023 and Form S-3/A filed on December 7, 2023.

On March 4, 2024, we entered into an investment agreement with certain accredited institutional investors pursuant to which we agreed to issue and sell, in a private placement (March 2024 Private Placement), 92,009,981 shares of our common stock, par value $0.001 per share (Common Stock), for a purchase price of $0.95 per share, representing the closing price of the Common Stock on March 1, 2024. The closing of the March 2024 Private Placement occurred on March 6, 2024. The gross proceeds to us from the March 2024 Private Placement were approximately $87.4 million, before deducting fees and other estimated transaction expenses. We intend to use the net proceeds from the March 2024 Private Placement for general corporate and working capital purposes, which may include research and development expenditures, preclinical study and clinical trial expenditures, manufacturing expenditures, commercialization expenditures, capital expenditures, acquisitions of new technologies, products or businesses and investments.

On January 8, 2024, we entered into an investment agreement (Lantheus Investment Agreement) with Lantheus Alpha Therapy, LLC, a Delaware limited liability company and wholly owned subsidiary of Lantheus Holdings, Inc. (Lantheus), pursuant to which we agreed to sell and issue to Lantheus in a private placement transaction certain shares (Lantheus Shares) of our Common Stock. The closing of the purchase and sale of the Lantheus Shares to Lantheus by us (Lantheus Closing) was subject to us raising at least $50.0 million of gross proceeds (excluding Lantheus’ investment) in a qualifying third-party financing transaction, which occurred on January 22, 2024. The number of Lantheus Shares sold was 56,342,355, representing 19.99% of the outstanding shares of Common Stock as of January 8, 2024. Pursuant to the Lantheus Investment Agreement, we agreed to cooperate in good faith to negotiate and enter into a registration rights agreement with Lantheus, obligating us to file a registration statement on Form S-3 with the SEC to register for resale the Lantheus Shares issued at the Lantheus Closing. We filed the Form S-3 on March 29, 2024, and the SEC declared it effective on April 9, 2024 (File No. 333-278362). The Lantheus Investment Agreement also contains agreements between us and Lantheus whereby Lantheus is provided certain board observer and information rights of us, as well as standstill provisions prohibiting Lantheus from taking certain actions for a specified period of time, subject to certain exceptions.

On January 17, 2024, we entered into an underwriting agreement (Underwriting Agreement) with Oppenheimer & Co. Inc., as representative of the underwriters named therein (Underwriters), in connection with our previously announced underwritten public offering (Public Offering) of 132,075,218 shares (Public Shares) of our Common Stock and in lieu of Public Shares to certain investors, pre-funded warrants (Pre-funded Warrants) to purchase 30,086,944 shares of Common Stock. The price to the public for the Public Shares was $0.37 per Public Share, and the price to the public for the Pre-funded Warrants was $0.369 per Pre-funded Warrant, which represents the per share price for the Public Shares less the $0.001 per share exercise price for each such Pre-funded Warrant. Under the terms of the Underwriting Agreement, we granted the Underwriters an option, exercisable for 30 days, to purchase up to an additional

24,324,324 shares of Common Stock at the same price per share as the Public Shares, which such option was fully exercised by the Underwriters on January 18, 2024. The Public Offering closed on January 22, 2024.

The gross proceeds to us from the Public Offering were approximately $69.0 million, before underwriting discounts and commissions and estimated expenses of the Public Offering. We intend to use the net proceeds from the Public Offering for general corporate purposes, which may include research and development expenditures, preclinical study and clinical trial expenditures, manufacturing expenditures, commercialization expenditures, working capital, capital expenditures, acquisitions of new technologies, products or businesses and investments.

The Public Offering was made pursuant to our shelf registration statement on Form S-3 (File No. 333-275638), declared effective by the Securities and Exchange Commission on December 14, 2023, a base prospectus dated December 14, 2023, and the related prospectus supplement dated January 17, 2024.

The Pre-funded Warrants are exercisable at any time after the date of issuance. The exercise price and the number of shares of Common Stock issuable upon exercise of each Pre-funded Warrant are subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock as well as upon any distribution of assets, including cash, stock or other property, to our stockholders. The Pre-funded Warrants will not expire and are exercisable in cash or by means of a cashless exercise. A holder of Pre-funded Warrants may not exercise such Pre-funded Warrants if the aggregate number of shares of Common Stock beneficially owned by such holder, together with its affiliates, would beneficially own more than 4.99% of the issued and outstanding shares of Common Stock following such exercise, as such percentage ownership is determined in accordance with the terms of the Pre-funded Warrants. A holder of Pre-funded Warrants may increase or decrease this percentage not in excess of 19.99% by providing at least 61 days’ prior notice to us.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance and expand preclinical activities, clinical trials and potential commercialization of our program candidates. Our costs will also increase as we:

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continue the development of our clinical-stage metastatic melanoma tumor and neuroendocrine tumor assets, including VMT01 and VMT-α-NET;

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continue the development of our other program candidates;

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continue to initiate and progress other supporting studies required for regulatory approval of our program candidates;

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initiate preclinical studies and clinical trials for any additional indications for our current program candidates and any future program candidates that we may pursue;

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continue to build our portfolio of program candidates through the acquisition or in-license of additional program candidates or technologies;

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continue to develop, maintain, expand and protect our intellectual property portfolio;

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pursue regulatory approvals for our current and future program candidates that successfully complete clinical trials;

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continue to build our manufacturing capabilities through facility acquisitions;

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support our marketing and distribution infrastructure to commercialize any future product candidates for which we may obtain marketing approval; and

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hire additional clinical, medical and development personnel.

At March 31, 2024, we had cash, cash equivalents and short-term investments of $180.6 million. We believe our cash, cash equivalents and short-term investments will be sufficient to fund our current operations and capital investments into the first quarter of 2026. On April 11, 2024, we sold 35,352,461 shares of our common stock under the ATM Agreement at an average price of approximately $1.40 per common share, resulting in gross proceeds of approximately $49.5 million. Monthly operating expenses are budgeted to increase for research and development and general and administrative expenses in 2024 as management works to implement our strategy to advance our two clinical assets, VMT-α-NET and VMT01, in our clinical trials and to progress our preclinical assets towards clinical trials. Management anticipates a significant increase of expenses, particularly in research and development, as we undertake these activities in 2024 and beyond.

We expect we will need to raise additional capital until we are profitable, which may never occur. If no additional capital is raised through either additional public or private equity financings, debt financings, strategic relationships, alliances and licensing agreements, or a combination thereof, we may delay, limit or reduce discretionary spending in areas related to research and development activities and other general and administrative expenses in order to fund our operating costs and working capital needs.

We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approvals for our product candidates, we expect to incur commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize or whether we commercialize jointly or on our own.

Because of the numerous risks and uncertainties associated with research, development and commercialization of our program candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

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the scope, progress, results and costs of researching and developing our program candidates, and conducting preclinical studies and clinical trials;

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the costs, timing and outcome of regulatory review of our program candidates;

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the costs and timing of hiring new employees to support our continued growth;

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the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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the extent to which we acquire or in-license other program candidates and technologies; and

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our ability to generate cash, and successfully obtain additional working capital, to fund our operating, investing and financing activities.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, strategic alliances, licensing arrangements, outright sales of product candidates or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we will be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Capital expenditures

Management is reviewing all aspects of research and development and general and administrative functions to evaluate the most efficient deployment of capital to ensure that the appropriate materials, systems and personnel are available to support and drive clinical trials and preclinical activities.

Financing activities

When we do require capital in the future, we expect to finance our cash needs through sales of equity, possible strategic collaborations, debt financing or through other sources that may be dilutive to existing stockholders. Management anticipates that if it raises additional financing that it will be at a discount to the market price and it will be dilutive to stockholders.

Other Commitments and Contingencies

We presented our other commitments and contingencies in our Form 10-K for the period ended December 31, 2023. There have been no material changes outside of the ordinary course of business in those obligations during the three months ended March 31, 2024, other than those disclosed in Note 10, Commitments and Contingencies, to the condensed consolidated financial statements in this Form 10-Q.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.