Investors are cheering a proposed rule that could boost Lantheus’ revenue.
Shares of Lantheus Holdings (LNTH 36.65%) were skyrocketing on Wednesday, up 34% as of 11:20 a.m. ET. The big gain came after the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that would boost the Medicare reimbursement rate for diagnostic radiopharmaceuticals.
In the past, CMS has bundled the costs of diagnostic radiopharmaceuticals in with the payment for related nuclear medicine tests. The agency said that in some cases, this payment doesn’t fully cover the cost of the associated diagnostic radiopharmaceuticals. CMS is proposing to pay for diagnostic radiopharmaceuticals with a cost greater than $630 per day separately from the nuclear medicine tests.
What the Medicare change could mean for Lantheus
Roughly 70% of Lantheus’ total revenue in the first quarter of 2024 came from its diagnostic radiopharmaceutical products. Pylarify, the company’s radioactive diagnostic agent for prostate cancer imaging scans, generated most of its diagnostic radiopharmaceutical sales.
CMS’ proposed change would increase hospitals’ reimbursement for using diagnostic radiopharmaceuticals such as Pylarify. This should result in more hospitals using Lantheus’ products and drive its sales higher.
Is Lantheus Holdings stock a buy?
Although CMS’ proposal won’t become a final rule until November, it’s likely that reimbursement changes for diagnostic radiopharmaceuticals are on the way. I think this makes Lantheus much more attractive. With a forward price-to-earnings ratio of only 11, revenue and earnings growth that’s already strong, and the prospects for higher revenue in the near future, this stock appears to be a good pick.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.