Caution Regarding Forward-Looking InformationNOTE REGARDING COMPANY REFERENCES 

Unless the context requires otherwise, references to “Perspective,” "the Company,” “our company,” “we,” “us” and “our” refer to Perspective Therapeutics, Inc., and, as the context requires, its subsidiaries. References to “Viewpoint” refer to Viewpoint Molecular Targeting, Inc., a wholly owned subsidiary, and references to “Isoray” refer to Isoray Medical, Inc., a wholly owned subsidiary.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

In addition to historical information, this Form 10-K contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA)("PSLRA"). This statement is included for the express purpose of availing IsorayPerspective Therapeutics, Inc., Inc. of the protections of the safe harbor provisions of the PSLRA.

All statements contained in this Form 10-K, other than statements of historical facts, that addressregarding our future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,”financial condition, results of operations, business strategy and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans strategies and objectives of management for future operations; anyoperations, industry trends and other future events are forward-looking statements. In some cases, you can identify forward-looking statements concerning proposed new products, services, developmentsby terminology such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “may,” “could,” “might,” “plan,” “project,” “should,” “will,” “would” or industry rankings; anythe negative of these terms and other similar expressions, although not all forward-looking statements regarding future revenue, economic conditions or performance; anycontain these identifying terms. Forward-looking statements of belief; and any statements of assumptions underlying any of the foregoing. in this Form 10-K include, among other things:

These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described underas updated in this Form 10-K in Item 1A – Risk Factorsunder the heading “Risk Factors” beginning on page 2534 below that may cause actual results to differ materially.

Consequently, all of the forward-looking statements made in this Form 10-K are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company’s views as of the date the statement was made. The Company undertakesmade (or any earlier date indicated in such statement). While we may update certain forward-looking statements from time to time, we undertake no obligation to publicly update or revise any forward-looking statements,do so, whether as a result of new information, future events or otherwise.otherwise, except as required by applicable law.

PART I

As used in this Form 10-K, unless the context requires otherwise, “we” or “us” or “Isoray” or the “Company” means Isoray, Inc. and its subsidiaries.Summary of Risk Factors

As usedInvesting in this Form 10-K, unless the context requires otherwise, “fiscal year” or “fiscal” means the Company’s financial year that begins on July 1 and ends on June 30our common stock involves significant risks. Some of the following year (for example: fiscal year 2021 is equivalentprincipal risks related to our business include the following. These risks are discussed more fully under “Item 1A - Risk Factors” of this Annual Report.

Risks Related to Our Business, Financial Results and Need for Additional Capital

Risks Related to Our Business and Industry

Risks Related to Our Discontinued Brachytherapy Industry and Operations

Legal and Regulatory Risks Related to the year ended June 30, 2021).Our Operations

Risks Related to Ownership of Shares of Common Stock and Public Company Status

PART I

ITEM 1 – BUSINESS

GeneralChange in Fiscal Year

Isoray, Inc. (formerly known as Century Park Pictures Corporation) was incorporated in Minnesota in 1983,As previously reported, on February 6, 2023, we changed our fiscal year end from June 30 to December 31, effective December 31, 2022. This Annual Report on Form 10-K ("Annual Report" or "Form 10-K") is for the 12-month period from January 1, 2023 through December 31, 2023.

Overview

Perspective is developing the next generation of precision-targeted alpha therapies (“TAT”) for oncology that have the potential to treat a large population of cancer patients across multiple tumor types, including those with metastatic disease. By leveraging its proprietary TAT platform, Perspective aims to develop alpha-emitting radiopharmaceuticals that can be attached to targeting peptides to deliver the radioactive payload directly to difficult-to-treat tumors. The foundation of Perspective’s TAT platform is its Pb-specific chelator ("PSC") and reincorporatedpeptide linker technology, which is designed to Delaware on December 28, 2018. On July 28, 2005, Isoray Medical, Inc.enable Perspective to connect Perspective’s alpha-emitting isotope of choice, Lead-212 (“Medical”²¹²Pb” or “Pb-212”) became a wholly-owned subsidiary of Isoray, Inc. pursuant, to a merger. Medical was formed under Delaware lawdesired targeting peptide to deliver radiation directly to cancer cells. Unlike commercially available chelators and linkers, Perspective’s proprietary PSC and peptide linker have shown in preclinical studies the differentiated ability to promote enhanced clearance of the non-tumor localized ²¹²Pb payload without sacrificing the uptake of the alpha particle into the tumor. Rapid clearance of the alpha-emitting isotope from normal tissues is important to enhance tolerability and widen the therapeutic window of Perspective’s program candidates. Perspective is also developing complementary diagnostics that utilize the same targeting peptide and imaging isotopes such as Lead-203 (“²⁰³Pb” or “Pb-203”), Gallium-68 (“⁶⁸Ga” or “Ga-68”), or Copper-64 (“⁶⁴Cu” or “Cu-64”) to provide the opportunity to understand which patients may respond to its targeted therapy.

Perspective’s platform generates TATs that are comprised of three components: (i) a targeting peptide that is designed to selectively target ligands that are unique to, or preferentially expressed on, June 15, 2004cancer cells throughout the body; (ii) the alpha-emitting medical isotope ²¹²Pb designed to kill cancer cells; and (iii) Perspective’s proprietary linker that attaches the targeting molecule to the radioactive payload.

Perspective utilized its TAT platform to discover, design and develop its initial programs, VMT-α-NET and VMT01, which are currently in ongoing Phase 1 clinical trials, and Perspective plans to continue to leverage its platform to assess the potential of, and develop, multiple additional pipeline programs. Using our proprietary platform technology, VMT-α-NET and VMT01 are engineered to target cancer-specific receptors on Octobertumor cells. [²¹²Pb]VMT-α-NET is a TAT in development for patients with unresectable or metastatic somatostatin receptor type 2 ("SSTR2")-expressing tumors who have not previously received peptide-targeted radiopharmaceutical therapy, such as Lutathera, a beta-emitting therapy marketed by Novartis. [²¹²Pb]VMT01 is a TAT in development for second-line or later treatment of patients with progressive melanocortin 1 2004 acquired two affiliated predecessor companies that began operations in 1998. Medical, a Delaware corporation, develops, manufactures and sells isotope-based medical products and devicesreceptor ("MC1R")-positive metastatic melanoma.

Our Strategy

Perspective’s goal is to advance innovative precision medicines for the treatment of cancer by developing and other malignant diseases. Medical is headquartered in Richland, Washington.commercializing its TATs. The key elements of its strategy are to:

Isoray International LLC ( “International”Advance its initial drug candidate, VMT-α-NET, through clinical development for the treatment of neuroendocrine tumors expressing SSTR2. [²⁰³Pb]VMT-α-NET is in an ongoing diagnostic Phase 1 clinical trial in patients with SSTR2-positive neuroendocrine tumors ("NETs"),. Perspective has received FDA's permission to enter into an open label Phase 1 therapeutic trial to assess [²¹²Pb]VMT-α-NET safety, tolerability and pharmacokinetics as well as to identify the maximum tolerated dose and the recommended Phase 2 dose in patients with SSTR2-positive NETs who have not received prior radiotherapy. Secondary endpoints assess efficacy using imaging criteria, best and overall response, progression-free survival and overall survival. This trial includes patients with NETs of gastrointestinal, pancreatic and lung origin, as well as pheochromocytoma and paraganglioma. Perspective has received a Washington limited liability company, was formedFast Track designation from the FDA under this investigational new drug ("IND") application. Perspective intends to leverage this accelerated approval pathway to design and seek approval for an adaptive registrational trial as data becomes available in the dose escalation study. This strategy, which is commonly employed for drugs showing effectiveness in life-threatening oncological disease states, has the opportunity to provide a path to a new drug application and commercial approval in one more NET cancer subtypes without first executing a traditional Phase 3, double-blind, randomized and placebo-controlled clinical trial. As information on November 27, 2007the tolerability and radiation exposure to normal tissues is defined in its Phase 1/2a study, Perspective intends to seek approval for expanding its indication to patients who have received prior radiotherapy and are experiencing recurrence.

Advance its second drug candidate,[^203/212Pb]VMT01, through clinical development for the treatment of melanoma tumors expressing MC1R. [²⁰³Pb]VMT01 and [⁶⁸Ga]VMT02 imaging tracers are in an ongoing diagnostic Phase 1 clinical trial in patients with stage IV metastatic melanoma. Perspective has received an IND "safe to proceed" letter from the FDA to evaluate the therapeutic [²¹²Pb]VMT01 in patients with advanced and progressive melanoma. Perspective has begun enrollment and has completed the first cohort in October 2023. The second cohort is currently enrolling. The opening study under this IND is a wholly-owned subsidiaryPhase 1/2a trial utilizing a modified 3+3 dose-ranging design to evaluate approximately 30 subjects with previously treated inoperable stage III and stage IV melanoma. The primary endpoints of this study are safety and tolerability, determination of a recommended dose for subsequent study and tumor targeting as determined by imaging. Secondary endpoints assess efficacy using imaging criteria, best and overall response, progression-free survival and overall survival. Perspective may design and seek approval for an adaptive registrational trial in refractory or uveal melanoma as data becomes available in the Company. Internationaldose escalation study. However, [²¹²Pb]VMT01 has enteredshown strong synergy with immune-oncology drugs including PD-1 and CTLA-4 inhibitors in preclinical studies. Perspective intends to present this information to the FDA in a Fast Track Application for use of [²¹²Pb]VMT01 in combination with one or more immune oncology drugs as first-line therapy of inoperable stage III or stage IV melanoma, thus creating opportunity for parallel paths to approval.

Continue to leverage its TAT platform to expand its pipeline of program candidates. Perspective’s technology allows it to create novel TATs by combining ²¹²Pb encased within its Pb-specific chelator ("PSC") with a wide variety of targeting peptides and other delivery vehicles. Targeting molecules can come from discontinued programs, novel molecules currently in development, approved molecules or other proprietary targeting agents. As such, Perspective is continuously evaluating opportunities to acquire or in-license additional new targeting molecules such as those recently licensed from the Mayo Foundation for Medical Education and Research ("Mayo Clinic") and Stony Brook University that Perspective believes can be utilized with its platform to create a potent alpha therapeutic agent. Perspective is leveraging its platform to progress its existing program candidates into various international distribution agreements.clinical development for additional indications, including breast and pancreatic cancers, as well as the development of new program candidates.

Available InformationExpand the potential of its program candidates in additional indications and as combination therapies in current and additional indications. SSTR2, the molecular target of [²¹²Pb]VMT-α-NET, is overexpressed in a number of cancers that are not classified as NETs, including meningioma and neuroblastoma. Both of these cancers can be difficult to treat when advanced and inoperable, but this is especially true for advanced neuroblastoma, a rare and orphan pediatric disease that is one of the most morbid of pediatric cancers. Perspective intends to prioritize seeking regulatory approval to test [²¹²Pb]VMT-α-NET in advanced pediatric neuroblastoma as soon as adult experience in NETs provides a basis for determining safety and tolerability. Perspective will leverage the unique capability of [²⁰³Pb]VMT-α-NET quantitative imaging to arrive at individualized [²¹²Pb]VMT-α-NET starting doses for the children by calculating the expected radiation delivery to the tumors and normal tissues before treatment begins.

Our website addressIn preclinical studies, Perspective also observed a synergistic effect on anti-tumor activity when its TATs are used in combination with approved checkpoint inhibitors. Perspective believes that the synergies it has observed could expand the addressable patient populations for [²¹²Pb]VMT01 and allow for potential use in earlier lines of treatment, if approved, after completing the initial evaluation of [²¹²Pb]VMT01 in a relapsed or refractory patient population. Perspective is www.Isoray.com. Informationcurrently evaluating [²¹²Pb]VMT01 in preclinical studies in combination with approved checkpoint inhibitors and deoxyribonucleic acid ("DNA") damage response inhibitors, such as poly-ADP ribose polymerase inhibitors. Perspective may also explore other combination therapies that it believes may improve response rates in immune oncology-responsive tumors as compared to monotherapies of approved oncology therapeutics across Perspective's development pipeline.

Utilize a precision medicine approach by leveraging its imaging diagnostics. In order to enrich the patient population for its trials, Perspective created an imaging analogue of each of its program candidates by replacing ²¹²Pb with the radioactive imaging isotope ²⁰³Pb while retaining the same targeting peptide. This allows Perspective to assess the uptake of the imaging isotope into the targeted tumor and radiation doses to key organs. Using this data, Perspective is able to enroll only those patients who meet predefined tumor uptake and dosimetry standards and are, therefore, more likely to respond to treatment. Perspective believes this strategy will allow it to enrich the patient population of its clinical trials and enable the use of a precision medicine approach for the treatment of multiple tumor types.

Continue to strengthen and scale its internal manufacturing capabilities. Perspective believes the quality, reliability and scalability of the manufacturing process for its program candidates will be a core competitive advantage and better enable its long-term success. Perspective has developed its proprietary VMT-α-GEN isotope delivery system (generator) to deliver its therapeutic isotope ²¹²Pb for supply to patients. Perspective has a license to possess radioactive materials and distribute our radiopharmaceuticals from the Iowa Department of Health and Human Services, Radioactive Materials Program at our Coralville, IA site. In January 2021, we entered into a 10-year feedstock contract with the National Isotope Development Center of the Department of Energy's ("DoE") Isotope Program. Perspective has scaled manufacturing of the supply of VMT-α-GEN systems for research purposes and is developing its supply capabilities in an effort to support the clinical development of its drug candidates. Perspective believes that by controlling its own therapeutic isotope supply, Perspective can solve the many supply chain risks that have slowed alpha-particle therapy clinical adoption to date. In March 2024, Perspective acquired the assets and associated lease of Lantheus Holdings, Inc.'s ("Lantheus") radiopharmaceutical manufacturing facility in Somerset, NJ. This site has three production suites that Perspective intends to utilize to supply drug product for the northeastern half of the United States. Perspective plans to continue to invest resources to further develop its internal manufacturing process and capabilities in addition to collaborating with contract drug manufacturers.

Background of Radiation-Based Therapies and Radiopharmaceuticals

External beam radiation, or ExB, is one of the most widely used treatments for cancer, with approximately 50% of all cancer patients receiving radiation therapy during the course of treatment. To deliver ExB, a radiation therapy device is used to aim a beam of ionizing radiation into the tumor to kill cancer cells. Based on advances in radiation technology, ExB is highly effective in killing cancer cells and this websitetreatment modality contributes towards approximately 40% of curative treatment for cancer. However, despite the successes of ExB treatment, only a limited number of sites in the body can be irradiated at any time by this treatment due to the off-target effects of radiation that can damage normal tissues. In addition, not all types of cancers can be treated with ExB, as certain organs or tumor types may be difficult to access with radiation beams. As a result, ExB use has generally been restricted to treating localized tumors and is not typically used as a monotherapy to treat patients who have metastatic disease.

Radiopharmaceuticals have been developed to precisely apply the tumor-killing power of radiation to a wider array of cancers, including for patients who have metastatic disease. Radiopharmaceuticals are drugs that contain medical isotopes, which are unstable elements that emit radiation and can be used to diagnose and treat cancers. To create radiopharmaceuticals, radiation-emitting medical isotopes are typically attached to targeting molecules and administered via intravenous injection. Once administered, the radiopharmaceuticals selectively target tumor antigens that are unique to, or preferentially expressed on, cancer cells throughout the body. Currently available targeted radiopharmaceuticals have demonstrated the ability to simultaneously bind to and kill multiple tumors. By precisely delivering alpha radiation directly to cancer cells, Perspective believes the power of radiotherapy can be realized while reducing the off-target effects.

Targeted radiopharmaceuticals are drugs that contain a radionuclide payload and a targeting moiety, which are unstable elements that emit radiation and can be used to diagnose and treat cancers. To create targeted radiopharmaceuticals, radiation-emitting medical isotopes are typically attached to targeting molecules, which are then administered via intravenous injection. Once administered, the radiopharmaceuticals selectively target tumor receptors that are unique to, or preferentially expressed on, cancer cells throughout the body. There are two main classes of therapeutic radiopharmaceuticals, which differ based on the types of particles that are emitted - beta-emitting isotopes and alpha-emitting isotopes. Beta-emitting isotopes kill cancer cells primarily by creating free radicals that damage cellular machinery and cause single-stranded DNA breaks, which can be repaired by the cell. In contrast, alpha particles cause greater physical damage to cancer cells than beta particles, including multiple double-stranded DNA breaks, which are highly lethal. Alpha particles are larger (over 7,000-fold greater atomic mass) and have higher energy transfer rates than beta particles. This higher energy transfer rate allows alpha particles to deposit a greater amount of tumor-killing energy over a short distance of one to five cells (<0.1 mm), compared to the relatively long distance of up to 200 cells (12 mm) for beta particles, allowing alpha particles to cause damage only to cancer cells in close proximity while reducing off-target radiation risk.

Targeted radiopharmaceuticals as a class have achieved clear clinical benefit over non-radioactive standard-of-care agents in the treatment of gastroenteropancreatic neuroendocrine tumors and castration-resistant metastatic prostate cancer and they possess characteristics that many believe may improve upon the profiles of current antibody-drug conjugates ("ADCs").

Perspective is leveraging its proprietary TAT platform to build on the successes of currently available radiation therapies and create the next generation of precision oncology alpha radiopharmaceuticals. Perspective’s TATs are comprised of three components: (i) a targeting peptide, that is designed to selectively target receptors that are unique to, or preferentially expressed on, cancer cells throughout the body; (ii) the alpha-emitting medical isotope ²¹²Pb, designed to kill cancer cells, that is encased in its proprietary lead-specific chelator; and (iii) its proprietary linker that attaches the targeting molecule to the radioactive payload.

Perspective believes that its TAT platform and program candidates, if approved, could provide several potential advantages over currently available radiopharmaceuticals, including:

Perspective believes the multiple mechanisms of action of its TATs may give them the ability to treat hard-to-treat tumors and the potential to work synergistically with other approved oncology therapies. The primary mechanism of action of ²¹²Pb is direct cell damage through the induction of multiple double-stranded DNA breaks. A secondary mechanism, which would likely expand the effective direct cell kill range of the alpha particles, is referred to as the Bystander Effect. This effect has been shown to be as significant to the overall efficacy in killing cancer cells as the direct DNA breaks. The Bystander Effect has been shown to propagate alpha particle-induced cell death from irradiated dying cells to kill adjacent non-irradiated cells up to 1,000 µm away in a three-dimensional solid tumor model.

Alpha vs Beta Radiopharmaceuticals

There are two main classes of therapeutic radiopharmaceuticals, which differ based on the types of particles that are emitted - beta-emitting isotopes and alpha-emitting isotopes. Historically, due to the readily available supply of beta-emitting isotopes and the better understanding of their chemistry and biology, they were more widely used than alpha-emitting isotopes. As a result, first-generation-targeted therapeutic radiopharmaceuticals were based on beta-emitting isotopes, which kill cancer cells primarily by creating free radicals that damage cellular machinery and cause single-stranded DNA breaks, which can be repaired by the cell. As a result, certain cancers are refractory to beta particle-based radiopharmaceutical treatment. Products based on beta-emitting isotopes have been developed successfully, but as the development of radiopharmaceuticals continued to evolve, a deeper understanding of the potential of alpha-emitting isotopes for treating cancer has emerged.

Compared to beta particles, alpha particles cause greater physical damage to cancer cells, including multiple double-stranded DNA breaks, for which there is no viable resistance mechanism, unlike in the case of single-stranded DNA breaks. Rather, double-stranded DNA breaks are highly lethal, with even a single double-stranded break being sufficient to cause cancer cell death. Alpha particles are over 7,000 times more massive than beta particles with an approximately 4,000-fold higher energy transfer rate, providing alpha particles the advantage of depositing a high amount of tumor-killing energy over a short distance of one to two cells, compared to the relatively long distance of up to 12 mm for beta particles. The amount of energy produced by alpha particles is high enough such that only a small number of alpha particles are required to cause cell death. This feature, when combined with their short path length, enables alpha particles to cause damage only to cancer cells in close proximity, reducing the risk of off-target radiation and normal cell damage that can occur with beta particles. However, because of the short travel distance, alpha particles need to be delivered into or on the surface of tumor cells to achieve the desired therapeutic effect.

The graphic below is management’s illustration of the comparison of the key differences between beta particles and alpha particles.

Commercially Available Radiopharmaceuticals

Two of the earliest antibody-targeted radiopharmaceuticals, Bexxar, marketed by GlaxoSmithKline, and Zevalin, marketed by Acrotech Biopharma, LLC, are beta-emitting therapies whose market acceptance was hampered by several issues, including handling and administration difficulties, supply chain challenges and reimbursement complications. Next-generation radiopharmaceuticals that have overcome the challenges faced by first-generation radiopharmaceuticals have since been developed and approved. One such approved, next-generation targeted radiopharmaceutical therapy is Lutathera, a beta-emitting therapy marketed by Novartis. Novartis reported that fiscal year 2023 sales revenue from Lutathera was $605 million, up 28% from fiscal year 2022, despite only being approved for a subset of neuroendocrine cancers that affect the pancreas or gastrointestinal tract, known as GEP-NETs. Recently, in March 2022, Pluvicto, a beta-emitting radioligand therapy marketed by Novartis, was approved to treat progressive, prostate-specific membrane antigen ("PSMA") positive metastatic castration-resistant prostate cancer. Pluvicto is being further developed by Novartis for other prostate cancer indications. Novartis reported that fiscal year 2023 sales revenue for Pluvicto were $980 million, up 262% from fiscal year 2022.

Over the past decade the global radiopharmaceutical market has been growing rapidly. Radiotherapeutics have been projected to grow at a compound annual growth rate ("CAGR") of 39.0% from 2022-2032, and radiodiagnostics have been projected to grow at CAGR of 7.2% from 2022-2032 (Source: 2023 MEDraysintell Nuclear Medicine Report).

Perspective's TAT Platform

Through the use of proprietary, specialized targeting peptides, Perspective is able to diagnose and then deliver a powerful alpha-particle radiotherapy directly to the tumor, while potentially limiting damage to healthy tissue. Utilizing a radioactive imaging agent that emits gamma rays, ²⁰³Pb, connected to a specific targeting peptide, Perspective has the ability to diagnose the tumor. Following diagnosis, Perspective links its alpha-particle radioactive isotope, ²¹²Pb, to the same targeting peptide to treat and potentially kill the tumor. This two-step, personalized medicine approach, as depicted below, offers the ability to understand which patients may respond to its therapy and potentially improve efficacy while minimizing toxicity associated with many other types of cancer treatments.

Perspective’s image-guided TAT leverages a specialized targeting peptide to deliver cancer-killing ²¹²Pb directly to the tumor. Targets are carefully selected to ensure they are overexpressed in cancer cells and minimally expressed on normal healthy cells. When the peptide is radiolabeled with ²⁰³Pb, the patient can be imaged (i.e., single-photon emission computed tomography ("SPECT") and computed tomography ("CT")) to reveal cancer cells in the body. When the peptide is radiolabeled with ²¹²Pb, the target-peptide binding delivers powerful, yet locally deposited, cancer-killing alpha-particle radiation directly to cancer cells. This targeting mechanism allows for maximized therapeutic effects while minimizing off-target toxicities and may be used as a monotherapy or in combination with other precision treatments, such as targeted intracellular pathway inhibitors and immune checkpoint inhibitors.

Perspective’s TAT platform is highlighted by research and insights into the underlying biology of alpha-emitting radiopharmaceuticals as well as its differentiated capabilities in target identification, candidate generation, manufacturing and supply chain, and the development of imaging diagnostics. Perspective’s TAT platform was primarily developed over 15 years at the University of Iowa. Perspective believes that its TATs have the potential to be broadly applicable across multiple targets and tumor types and transform the treatment landscape of radiopharmaceuticals for the treatment of cancer.

Perspective’s next-generation radiopharmaceutical technology has been recognized by many prestigious organizations and has received numerous awards and grants. Over the past 10 years, through December 2023, approximately $13 million has been awarded to Perspective and over $4 million to Co-Founder Michael Schultz’s laboratory at the University of Iowa. Grant support has been for the Company’s TAT development activities, including the advancement of preclinical diagnostic and therapeutic studies for both VMT-α-NET and VMT01, Phase 1 diagnostic clinical trials for both VMT-α-NET and VMT01, and its VMT-α-GEN in-house radioisotope production technologies. These grants have been received primarily from the National Institutes of Health ("NIH"), National Cancer Institute ("NCI") and state-funded programs.

²¹²Pb (Lead-212)

Although there are many alpha-emitting isotopes, Perspective believes that the ideal therapeutic isotope should emit alpha particles in rapid succession in order to maximize damage to cancer cells and increase efficacy. Alpha particles kill tumors through multiple mechanisms. The primary mechanism of action is direct cell damage through the induction of multiple double-stranded DNA breaks. As alpha particles traverse the nucleus of a cell, they create a linear track of direct chromosomal damage, leaving behind multiple clusters of double-stranded DNA breaks. These direct alpha particles can kill cells up to a distance of 100 µm, which is equal to a depth of a few cells. A secondary mechanism, which would expand effective direct cell kill range of the alpha particle, is referred to as the Bystander Effect. This effect has been shown to be as significant to the overall efficacy in killing cancer cells as the direct DNA breaks. The Bystander Effect has been shown to propagate alpha particle-induced cell death from irradiated dying cells to kill adjacent non-irradiated cells up to 1,000 µm away in a three-dimensional solid tumor model. A third mechanism by which alpha-particle therapy enhances the body’s own anti-tumor immune response is less well understood but has been widely observed and reported. In Perspective’s own preclinical studies, Perspective has observed a vaccine-like effect that prevented the regrowth of tumors upon re-challenge. This is an area of ongoing investigation by Perspective and the international scientific community. Our findings are reported by Perspective senior scientist Dr. Mengshi Li, et.al. in the peer-reviewed journal Cancers 2021, 13: 3676, 2021.

Perspective believes ²¹²Pb is an optimal therapeutic isotope as compared to currently commercially available radiopharmaceuticals as well as other alpha therapies in development. With a half-life of 10.6 hours, ²¹²Pb is ideally suited to deliver powerful alpha-particle therapy to cancerous tumors, while representing a lower risk for off-target unintended effects. The decay properties of the ²¹²Pb isotope and the rapid excretion of drug that has not bound to the tumor target provide the potential for treatment on an outpatient basis.

²¹²Pb is an alpha-emitting nuclide that acts as the therapeutic in Perspective’s innovative theranostic approach. The higher linear-energy transfer of alpha particles, compared to beta particles, results in an increased incidence of double-stranded DNA breaks and improved localized cancer-cell damage. Perspective believes ²¹²Pb half-life of 10.6 hours provides many significant advantages over other radiotherapies, including faster clearance and the potential for reduced off-site toxicity. Its decay chain includes the short-lived isotopes bismuth-212, polonium-212 and thallium-208, which all emit either alpha or beta during decay over about another hour. The end of the decay chain is the stable element lead-208.

In order to maximize the potential clinical benefit of radiopharmaceuticals to patients and minimize potential toxicity issues, Perspective believes that TATs must selectively localize and remain within the tumor while the portions of the TAT that are not localized within the tumor are rapidly cleared from the body. Nearly 15 years of work by Perspective’s co-founder, Dr. Michael Schultz, and colleagues at the University of Iowa and Perspective resulted in Perspective’s proprietary TAT, PSC and peptide linker technology to enable the delivery of isotopes to tumor cells while simultaneously promoting enhanced clearance of the non-tumor localized isotopes.

Due to the short half-life of ²¹²Pb and the small size of the compounds, when Perspective’s TATs are not bound to targeted cancer cells, they rapidly clear from the body through the urinary system, along with any isotopes bound to the linker. This results in lower total body radiation exposure when compared to radiopharmaceuticals designed with longer lived isotopes or larger molecular weight targeting moieties such as antibodies or antibody fragments. Perspective believes that its TAT's ability to promote clearance without compromising the tumor’s uptake of the alpha particle overcomes a longstanding challenge of radiopharmaceutical drug development.

Perspective’s Chemistry and Biology Expertise with ²¹²Pb

Perspective believes that its experience working with alpha-emitting radiopharmaceuticals positions it to build on the success of currently approved radiopharmaceuticals. By utilizing the advantages of ²¹²Pb and its proprietary chelator, Perspective has the ability to develop next-generation radiopharmaceutical therapies. ²¹²Pb has complex chemistry and requires extensive experience and expertise to develop and properly characterize ²¹²Pb radiopharmaceuticals with regard to the required tumor targeting, shelf-life, in vivo stability and potential for commercial-scale manufacturing. For example, the high energy emitted from ²¹²Pb can cause program candidates to prematurely degrade. Perspective believes it has the experience and know-how to develop molecules and formulations of ²¹²Pb to maximize the shelf-life of its program candidates and allow for regional production and distribution. In addition to a deep understanding of the chemistry of ²¹²Pb, Perspective has differentiated knowledge of the underlying biology of ²¹²Pb and its mechanisms of directly damaging the DNA of tumors through single- and double-stranded DNA breaks, causing the Bystander Effect and using the immune system’s adaptive response to attack non-target expressing tumors in order to stimulate a vaccine effect.

Imaging Diagnostics – ²⁰³Pb (Lead-203)

For each of its program candidates, Perspective creates an imaging analogue that utilizes the same linker and targeting molecule but replaces ²¹²Pb with the radioactive imaging isotope ²⁰³Pb. This allows Perspective to assess uptake of the imaging analogue into the targeted tumor and to determine radiation doses to key organs. The imaging analogue versions of Perspective’s program candidates are leveraged in both preclinical and clinical development and are used to enrich the patient population in its clinical trials by identifying the patients and tumor types more likely to respond to therapy.

²⁰³Pb is a gamma-emitting nuclide that acts as the diagnostic in Perspective’s innovative theranostic approach. ²⁰³Pb has a long enough half-life to facilitate radiopharmaceutical preparation and gamma-ray imaging (e.g., SPECT or planar gamma camera) at time points up to 24 hours and, potentially, 48 hours post administration. The ability to collect data on the biodistribution of ²⁰³Pb over this period allows for a more detailed understanding of tumor and other organ accumulation, retention and clearance that can be used as part of a treatment planning process for determining appropriately administered radioactivity levels of ²¹²Pb for alpha-particle therapy.

Perspective’s Pipeline

Perspective is leveraging its TAT platform to advance a pipeline of alpha-based therapeutic programs to treat various cancers. The figure below details its current pipeline of TATs. To date, Perspective has retained global development and commercialization rights to all its program candidates. In January 2024, Perspective announced it had entered into a strategic agreement with Lantheus whereby in exchange for an upfront payment of $28 million (less certain withholding amounts), Lantheus obtained an exclusive option to negotiate for an exclusive license to Perspective's [²¹²Pb]VMT-α-NET and a right to co-fund the IND-enabling studies for early-stage therapeutic candidates targeting PSMA and gastrin-releasing peptide receptor and, prior to IND filing, a right to negotiate for an exclusive license to such candidates.

The table below shows Perspective’s two lead programs in clinic and its broad proprietary pipeline:

Perspective anticipates multiple near-term data readouts on its clinical and preclinical assets as follows:

Programs

VMT-α-NET: A Targeted Alpha Therapy Targeting SSTR2 

Overview

Perspective is leveraging its TAT platform with one of its two initial program candidates, VMT-α-NET, that is currently in Phase 1/2a clinical trials. Perspective designed VMT-α-NET to target and deliver ²¹²Pb to tumor sites expressing somatostatin receptor subtype 2 ("SSTR2"), a protein that is overexpressed in neuroendocrine tumors ("NETs") and other cancers. Using our proprietary platform technology, VMT-α-NET and VMT01 are engineered to target cancer-specific receptors on tumor cells. [²¹²Pb]VMT-α-NET is a TAT in development for patients with unresectable or metastatic SSTR2-expressing tumors who have not previously received peptide-targeted radiopharmaceutical therapy, such as Lutathera. [²¹²Pb]VMT01 is a TAT in development for second-line or later treatment of patients with progressive MC1R-positive metastatic melanoma.

NETs are a group of rare, heterogeneous tumors that develop in different organs of the body and arise from specialized cells in the neuroendocrine system. Both the incidence and prevalence of NETs have continued to rise globally over several decades, primarily due to improvements in the diagnosis and surveillance of disease. The worldwide incidence of NETs is projected to reach 118,475 new cases in 2024 (source: Global Data). In the U.S. alone, the incidence of NETs has increased more than 6-fold over the last four decades to an anticipated 34,592 new cases in 2024 (source: Dasari A, Shen C, Halperin D, et al. Trends in the Incidence, Prevalence, and Survival Outcomes in Patients with Neuroendocrine Tumors in the United States. JAMA Oncol. 2017;3(10):1335-1342. doi:10.1001/jamaoncol.2017.0589). Earlier detection has not only given rise to an increase in localized disease diagnoses but also improvements in staging, disease classification, management and survival. Despite these advancements, delayed diagnosis is still common due to asymptomatic presentation or nonspecific symptoms. Gastroenteropancreatic NETs, or GEP NETs, represent the most common NET subtype, comprising 55–70% of all NETs followed by lung (22-27%) (source: Patel N, Benipal B. Incidence of Neuroendocrine Tumors in the United States from 2001-2015: A United States Cancer Statistics Analysis of 50 States. Cureus. 2019;11(3):e4322. Published 2019 Mar 26. doi:10.7759/cureus.4322). Current prevalence of NETs in the U.S approximates at 170,000 patients per year. As NETs display a wide variety of biologic behavior, the prognosis differs immensely between indolent limited disease grade 1 tumors and widely spread grade 3 carcinomas.

The median overall survival also varies widely in the highly heterogeneous NET populations and is based on site, stage and grade of disease. It is estimated that 80% of NETs over-express SSRT2. For this reason, somatostatin analogues are a cornerstone of the treatment of most NETs. In addition to SSTR2 analogs, low-grade and/or localized disease is amenable to surgical intervention and carries a good prognosis in terms of five-year overall survival (>90%), but there remains recurrence risk (source: Chan H, Zhang L, Choti MA, et al. Recurrence Patterns After Surgical Resection of Gastroenteropancreatic Neuroendocrine Tumors: Analysis From the National Comprehensive Cancer Network Oncology Outcomes Database. Pancreas. 2021;50(4):506-512. doi:10.1097/MPA.0000000000001791). High-grade and/or distant disease is more difficult to treat and carries lower median survival rates typically measured in months (source: Das S, Dasari A. Epidemiology, Incidence, and Prevalence of Neuroendocrine Neoplasms: Are There Global Differences?. Curr Oncol Rep. 2021;23(4):43. Published 2021 Mar 14. doi:10.1007/s11912-021-01029-7). Radioligand therapy has emerged as a promising therapeutic option for GEP NETs in late stage and is being evaluated for earlier lines of treatment. Perspective believes there is additional opportunity for radioligand therapy in earlier lines of treatment and other somatostatin-expressing NET indications, such as lung and pheochromocytoma/paraganglioma NETs, where there remains significant unmet medical need. Worldwide sales for systemic NET treatments are estimated to reach $3.2 billion by end of 2025, of which the U.S. sales represents over 60% (source: Global Data).

Using a specialized peptide, VMT-α-NET is designed to target and bind to the SSTR2 on tumor cells. As a diagnostic, Perspective links ²⁰³Pb, a radioactive imaging agent that emits gamma rays, to its SSTR2-targeting peptide. Through the use of imaging scans, Perspective is able to characterize the tumor to confirm the patient’s cancer expresses SSTR2. This confirms the patient may be a candidate for treatment. As a therapeutic, Perspective links ²¹²Pb, its alpha-particle radioactive isotope, to the same SSTR2 targeting peptide which has been shown to bind to the cancerous cell, to treat and potentially kill the tumor.

In August 2022 Perspective received a “safe to proceed” decision on an Investigational New Drug (“IND”) application with the U.S. Food and Drug Administration (“FDA”) to evaluate [²¹²Pb]VMT-α-NET therapy under IND #160357. The indication of the opening study is treatment of advanced SSTR2-positive NETs patients who are progressing on, symptomatic on, or intolerant of approved non-radiological therapies. On September 29, 2022, Perspective received Fast Track Designation for this program based on preclinical data for the indication of SSTR2-positive NETs regardless of prior treatment response.

Additionally, Perspective believes there is an opportunity for Orphan Drug Designations for VMT-α-NET for NET subtype indications. There is also potential for a priority review voucher if Perspective pursues the rare pediatric disease of advanced neuroblastoma as Perspective’s best path for drug approval after review of Phase 1 trial data.

Clinical Studies of ²¹²Pb-VMT-α-NET

Perspective has a multi-center open-label study (clinicaltrials.gov identifier NCT05636618) of [²¹²Pb]VMT-α-NET, a targeted alpha-particle therapy, for patients with advanced SSTR2-positive neuroendocrine tumors. This study is intended to utilize a mTPI-2, or modified toxicity probability interval 2, dose-ranging design to evaluate approximately 10 - 32 adult subjects with unresectable or metastatic NETs of gastrointestinal, lung, adrenal or neural tissue origin. The primary endpoints of this study are safety and tolerability, determination of a recommended dose for subsequent study and determination of pharmacokinetic ("PK") properties. Secondary endpoints are overall response rate by RECIST v.1.1, progression-free survival by RECIST v.1.1 and overall survival. The first part of the study involves dose escalation, designed to determine the maximum tolerated dose ("MTD") or maximum feasible dose ("MFD") following a single administration of [²¹²Pb]VMT-α-NET. The first patient cohort received 111 MBq (3mCi) per dose. The second cohort, which is currently being recruited, will receive administered activities of 185 MBq (5mCi), with cohorts 3 and 4 receiving 370 MBq (10 mCi) and 555 MBq (15 mCi), respectively, if the MTD or MFD is not reached during escalation. According to the mTPI-2 study design, intermediate de-escalation doses are also possible to allow selection of the optimal activity dose to take forward into the dose expansion part of the study.

The second part of the study is a dose expansion phase based on the identified MTD/MFD. Patients with positive uptake on FDA-approved SSTR2 PET/CT will receive a fixed dose of [²¹²Pb]VMT-α-NET IV administered at the recommended Phase 2 dose and schedule determined in the Phase 1 dose escalation.

In March 2024, Perspective provided the following update on the ongoing clinical trial (all data is as of March 7, 2024):

Preclinical Studies of ²¹²Pb-VMT-α-NET

Perspective’s therapeutic [²¹²Pb]VMT-α-NET has demonstrated positive clinical activity in preclinical studies using a mouse model of NETs, whereby [²¹²Pb]VMT-α-NET significantly inhibited tumor growth and significantly improved survival compared to untreated mice controls.

Perspective’s diagnostic [²⁰³Pb]VMT-α-NET has produced strong SPECT/CT imaging and tumor contrast in multiple preclinical studies using mouse models of tumors expressing SSTR2, whereby [²⁰³Pb]VMT-α-NET has shown an 8-fold improved tumor uptake with decreased kidney retention as compared to ²⁰³Pb radiolabeled DOTATOC. DOTATOC is an established targeting compound for imaging SSTR2-expressing NETs when radiolabeled to positron emission tomography ("PET") isotopes.

The Company also presented mouse model data highlighting the efficacy of [^203/212Pb]VMT-α-NET in treating metastatic neuroblastoma tumors. The study showed successful tumor uptake via sequential SPECT imaging and demonstrated a maximum tolerated dose of [²¹²Pb]VMT-α-NET as 2.22 MBq without acute toxicity, with a 100% overall survival rate at 90 days observed in the group receiving three fractionated doses of 740 kBq of [²¹²Pb]VMT-α-NET.

At the World Molecular Imaging Congress, the Company presented data highlighting the effectiveness of [²¹²Pb]VMT-α-NET in treating neuroendocrine tumors in a tumor xenograft mouse model. The results highlighted the significant therapeutic efficacy of treatment with three fractionated doses of [²¹²Pb]VMT-α-NET, which resulted in a 70% complete response rate and 80% survival at 120 days.

Perspective’s first-in-human experience with [²⁰³Pb]VMT-α-NET imaging occurred as an investigator-initiated trial ("IIT") at the University of Ulm in Dresden, Germany in 2021 in a patient with metastatic and refractory gastrointestinal NET. Imaging from this study using [²⁰³Pb]VMT-α-NET revealed favorable properties, including rapid tumor accumulation, rapid renal clearance and excellent tumor retention as seen by SPECT/CT imaging at 22 hours with high tumor conspicuity. There were no adverse signs or symptoms attributed to the imaging tracer. The pharmacokinetic and biodistribution properties of the imaging agent, based on medical physics analysis, suggest the potential for the chemically identical therapeutic agent, [²¹²Pb]VMT-α-NET, to be administered without concurrent renal protective amino acid infusion in radiotherapy naïve patients. This would be a clinically relevant point of differentiation from the current practice using approved radiopharmaceutical products for NETs.

Investigator-Initiated Studies of ²¹²Pb/²⁰³Pb-VMT-α-NET

An investigator-initiated Phase 1 imaging trial of [²⁰³Pb]VMT-α-NET is expected to begin at the University of Iowa to investigate the feasibility of using the agent to enable personalized, image-guided therapy dose calculations for [²¹²Pb]VMT-α-NET therapy in patients with recurrent NETs after treatment with approved radiopharmaceutical therapy. An Imaging IND is open for this trial and IRB approval has been obtained. Perspective is uncertain when the provisional results will be available.

In December 2023, Perspective announced that the first patient was dosed at the University of Iowa in an investigator-initiated Phase 1 trial evaluating the safety of [²¹²Pb]VMT-α-NET, in patients with unresectable or metastatic SSTR2-expressing neuroendocrine tumors. The patients being enrolled in the study have either progressed or relapsed after previous therapies, including currently approved peptide receptor radionuclide therapies ("PRRT"). This is a single site safety study (clinicaltrials.gov identifier NCT06148636) of [²¹²Pb]VMT-α-NET targeted alpha-particle therapy for patients with refractory or relapsed SSTR2-positive neuroendocrine tumors. The first part of this Form 10-K (this “Report”). Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and any amendmentsPhase 1 trial is imaging with a surrogate tracer, [²⁰³Pb]VMT-α-NET, using SPECT/CT imaging. Each participant is assigned a radiation dose to those reports filed or furnished pursuant to Section 13(a) or 15(d)the kidneys that cannot be exceeded. The second part of the Securities Exchange Actstudy is a sequential 3 + 3 dose escalation phase of 1934 (Exchange Act)four cohorts based on the maximum allowed injected dose for an individual while keeping kidney exposure to less than a predetermined threshold. The study involves two treatments, about eight to ten weeks apart. The drug will be given by infusion once per treatment. Participants will also receive an infusion of amino acids to help protect the kidneys as well as medications to help protect against nausea. A participant who is administered [²¹²Pb]VMT-α-NET will be monitored for at least six months for safety assessments. Participants will also have imaging at six months post-treatment to measure how their tumors responded to therapy and will have lifelong follow-up for this study. The preliminary data readout is expected in the second half of 2024.

In November 2023, Perspective announced the publication of the first human SPECT images utilizing the alpha-emitting isotope of ²¹²Pb, which was labeled to the Company's proprietary theranostic VMT-α-NET program. The imaging was conducted as part of a series of four neuroendocrine tumor patients who were administered VMT-α-NET at a clinical study site in Germany. The patient received 90 MBq (2.4mCi) of [²¹²Pb]VMT-α-NET intravenously, and whole-body scintigraphy and SPECT/CT images were acquired 2 hours, 5 hours, and 19 hours after injection. Images were collected on a Symbia Intevo T6 (Siemens Healthineers) using a high-energy collimator. The SPECT/CT images showed high accumulation of [²¹²Pb]VMT-α-NET in liver metastases and were consistent with the previously acquired [⁶⁸Ga]DOTATATE PET/CT. High tumor retention was observed in the planar and SPECT/CT images over time. Due to the short half-life of ²¹²Pb (10.6 hours), the images acquired after 19 hours showed a high level of noise due to the low count statistics. The patient showed no early or acute side effects.

In September 2023, the Company announced the presentation of encouraging early clinical results from an open-label, single-arm, investigator-initiated study in India investigating the safety and efficacy of [²¹²Pb]VMT-α-NET in patients with NETs and medullary thyroid carcinomas. The early clinical findings were presented at the 36th Annual Congress of the European Association of Nuclear Medicine ("EANM") for the Phase 2a study of [²¹²Pb]VMT-α-NET in pre- and post-Lutathera GEP-NET patients, being conducted at Fortis Healthcare, India. Ten adult patients with histologically confirmed NETs and metastatic medullary thyroid carcinomas who failed at least one prior line of treatment were treated as part of an IIT. All patients were planned to receive [²¹²Pb]VMT-α-NET peptide at intervals of eight weeks up to four doses or until evidence of radiographic progression, unacceptable toxicity or the patient’s decision to discontinue. All patients were to be co-infused with an amino acid solution for renal protection. The primary objective of the study is to evaluate the safety of low doses of [²¹²Pb]VMT-α-NET in this patient population. Secondary assessments will include objective response rate measured by RECIST 1.1 or PERCIST criteria, and the number of patients with treatment-related adverse events as assessed by CTCAE v.4.0. Both will be measured at 24 months after the last administered dose of [²¹²Pb]VMT-α-NET. The isotope was supplied via the Company’s proprietary VMT-α-GEN isotope delivery system.

Highlights of the presented results at EANM included:

Three additional patients were enrolled in the second half of 2023 for a total of ten GEP-NET patients and two medullary thyroid cancer patients. All ongoing patients are available freeexpected to complete their fourth treatment cycle by end of chargeMarch 2024. The updated results from the investigator-initiated study are expected to be presented at the Society of Nuclear Medicine and Molecular Imaging, or SNMMI, meeting in Toronto at the end of the second quarter in 2024.

Three patients were screened in 2023 in the IIT in post-Lutathera GEP-NET, and all three patients were located at the University of Iowa. All three patients received treatment in December 2023 for the completion of the first cohort. If all patients complete four cycles, then the end of fourth cycle of treatment is expected in June 2024.

The IIT for patients with advanced NETs and lack of further treatment options is underway at the University Dresden in Germany. Four patients were treated with [²¹²Pb]VMT-α-NET and eight patients were imaged with [²⁰³Pb]VMT-α-NET during the second half of 2023, and investigators may plan additional treatments in 2024.

VMT01: A Targeted Alpha Therapy Targeting MC1R

Overview of VMT01and VMT02

Perspective is also leveraging its TAT platform with its second program candidate, VMT01, which is currently in Phase 1/2a clinical trials. Perspective designed VMT01 to target and deliver ²¹²Pb to tumor sites expressing MC1R, a protein that is overexpressed in melanoma cancers. Review of market research by Grandview Research, Inc., and ForeSight Niche Assessment indicates metastatic melanoma represents over an $8.0 billion market opportunity.

Using a specialized peptide, VMT01 is designed to target MC1R on our websitetumor cells. As a diagnostic, Perspective either links ²⁰³Pb or Gallium-68 to its MC1R-targeting peptide. MC1R is a G-protein coupled receptor that has been investigated as a target for metastatic melanoma drug delivery due to its overexpression on the surface of melanoma cells and relative absence in normal cells. MC1R-targeted radiolabeled peptides have been used as delivery vehicles for delivering radiometals to melanoma tumors in preclinical models for diagnostic imaging and therapy, as well as in clinical imaging studies that demonstrated the ability to identify MC1R-positive tumors by PET imaging. 

Perspective also designed two imaging surrogates, the chemically identical [²⁰³Pb]VMT01 for SPECT imaging and dosimetric calculations and [⁶⁸Ga]VMT02, a PET imaging tracer, for patient selection. [⁶⁸Ga]VMT02 utilizes the same targeting peptide as VMT01 but differs in having a chelator optimized for PET radiotracers (DOTA). Through the use of the imaging scans, Perspective is able to characterize whether the patient’s cancer expresses MC1R. This confirms the patient may be a candidate for treatment. As a therapeutic, Perspective links ²¹²Pb to the same MC1R targeting peptide which has been shown to bind to the cancerous cell, to treat and potentially kill the tumor. The melanoma program focuses primarily on development of the therapeutic compound. The rationale for the development of two imaging tracers is to provide flexibility in imaging a molecular target for which a validated and approved imaging tracer does not exist. Further commercialization of one or both of these imaging tracers will follow a separate regulatory path from the therapeutic compound and will proceed based on the potential for utility after a therapeutic efficacy signal is identified. 

VMT01 and VMT02 peptides bind with high affinity and specificity to melanoma tumors (where MC1R is present) and do not bind to healthy cells (where MC1R is absent). Thus, the radioactive nuclide carried by the peptide is delivered primarily to tumor cells, while nonspecific binding to healthy cells is minimal. Treatment is carried out in two stages. In the first stage (i.e., the diagnostic stage), [²⁰³Pb]VMT01 or [⁶⁸Ga]VMT02 is administered for SPECT or PET imaging, respectively. The decay of radionuclides ²⁰³Pb and ⁶⁸Ga result in gamma radiation that can be detected by the imaging device. This detection can be used to pinpoint the presence of cancerous tumors expressing MC1R and illuminate the pharmacokinetic properties and biodistribution of the radiopharmaceutical. This information can be used to guide the second stage (i.e., the therapeutic stage) with [²¹²Pb]VMT01, in which radionuclide ²¹²Pb replaces ²⁰³Pb and ⁶⁸Ga. [²¹²Pb]VMT01 is designed to deliver alpha (α) radiation efficiently to melanoma tumors that express the MC1R receptor. This two-stage process is commonly referred to as image-guided receptor-targeted alpha-particle radionuclide therapy for cancer and is also referred to as a “theranostic” approach.

Nonclinical pharmacology, pharmacokinetics and toxicology studies utilizing in vitro and in vivo assays, SPECT and PET imaging and histopathology were conducted by the sponsor to support the first-in-human Phase 1/2a clinical development of [²¹²Pb]VMT01 per recommendations in the United States Food and Drug Administration Guidance document titled “Oncology Therapeutic Radiopharmaceuticals: Nonclinical Studies and Labeling Recommendations Guidance for Industry.” Promising results have demonstrated an increase in progression-free survival, improvement in overall survival and, in some cases, complete remission in mice bearing murine and human melanoma tumors. Perspective has also observed significant synergy with checkpoint inhibitors in animal models that are resistant to immunotherapy alone and a subset of animals receiving the combination therapy demonstrate resistance to re-inoculation with naive melanoma cells.

Management believes that there are currently no FDA approved peptide-based receptor targeting approaches for the treatment of metastatic melanoma. The goal of the theranostic approach with [²⁰³Pb]VMT01 or [⁶⁸Ga]VMT02 (diagnosis) and [²¹²Pb]VMT01 (therapy) is to establish a new methodology to treat patients with MC1R-expressing tumors that has the potential to improve long-term outcomes.

Role of VMT01 in Advanced Melanoma Treatment

Melanoma is a cancer of the skin arising from uncontrollable growth of melanocytes, the melanin producing cells of the body. Melanoma generally originates on the epidermis (the outermost layer of skin). In rare instances, melanoma can originate in the eyes or mucosal membranes, as these are other locations where melanocytes are present. Metastatic melanoma is the result of melanoma that has progressed through the layers of skin, infiltrated the blood stream or lymphatic system and traveled to other areas of the body to metastasize. 

The worldwide melanoma incidence is estimated to reach 335,160 new cases in 2024 (source: GlobalData) and the risk of melanoma increases as people age, with the average age of diagnosis being early to mid 60s. Melanoma is a global disease affecting all populations around the world. The risk of developing melanoma increases significantly in areas of high ultraviolet exposure and for people with fair complexion. Particularly high incidences are observed in North America, Northern Europe and New Zealand. The highest occurs in Australia, where annual rates are more than twice that of North America. In the U.S., there will be an estimated 107,879 new diagnoses of melanoma by 2025 (representing one-third of all cases worldwide) and approximately 7,868 deaths annually from metastatic melanoma (source: GloboCan). In most cases, metastatic melanoma cannot be cured but treatment can support a longer life.

The National Cancer Institute’s Surveillance, Epidemiology, and End Results ("SEER") Program estimates 77% of all melanoma cases in the United States are local disease, receiving surgical treatment followed by watchful waiting. Melanoma that has regional spread (stage III) indicates spreading to nearby lymph nodes and accounts for 9% of cases, with a five-year survival ranging from 93% for stage IIIA to 32% for stage IIID reported in 2021 (source: Tonella L, Pala V, Ponti R, Rubatto M, Gallo G, Mastorino L, Avallone G, Merli M, Agostini A, Fava P, Bertero L, Senetta R, Osella-Abate S, Ribero S, Fierro MT, Quaglino P. Prognostic and Predictive Biomarkers in Stage III Melanoma: Current Insights and Clinical Implications. Int J Mol Sci. 2021 Apr 27;22(9):4561. doi: 10.3390/ijms22094561. PMID: 33925387; PMCID: PMC8123895). Metastatic melanoma is classified as stage IV, where melanoma metastasizes to distant organs, such as the brain, lungs or liver, and contains any T or N value in the TNM staging system. Metastatic melanoma accounts for 4% of cases and carries a poor prognosis with a five-year survival of 30% (source: SEER). The majority of metastatic melanoma patients will receive some form of immunotherapy; however, more than 50% ultimately progress. Patients with tumors positive for the BRAF mutation who progress on immunotherapy can receive targeted therapy; however, these patients ultimately acquire resistance. Thus, the majority of metastatic melanoma patients who eventually progress on immunotherapy (and targeted therapy if BRAF positive) are left with very limited options and represent the patient population with the greatest unmet need in melanoma (source: Global Data). This segment of the melanoma population is the intended entry market for VMT01. Worldwide sales for the systemic treatment of advanced melanoma are expected to reach $6.7 billion by 2025 with the U.S. accounting for over 60% of the market, or approximately $4.0 billion in sales (source: Global Data).

Leading treatments for metastatic melanoma are typically not curative. Treatments include immunotherapy to help the immune system recognize evading cancer cells, targeted therapy to interfere with known cancer processes, radiation therapy to kill cancer cells via high-energy X-ray or proton beams and chemotherapy to attack rapidly dividing cancer cells. Immunotherapies and targeted mitogen-activated protein kinase inhibitor ("MAPKi") cell therapies have improved outcomes, but low response rates, acquired drug resistance and adverse side effects have limited quality of life for metastatic melanoma patients. The most dramatic improvements in response (combination therapies; up to 61%) have often been reported to lead to grade 3/4 adverse events and therapy discontinuation. Recurrence is common, with complex mechanisms of resistance that include altered oncogenic pathways, tumor heterogeneity and enhanced DNA repair. Perspective’s TAT platform using [²¹²Pb]VMT01 has the potential to overcome many of these resistance pathways. Perspective’s intent is to test the safety and tolerability of [²¹²Pb]VMT01in previously treated patients who are experiencing progression or recurrence of disease as monotherapy and seek approval for testing in combination with first-line immunotherapies as soon as reasonably practicablea preliminary safety profile is established and regulatory approval is obtained.

Clinical Studies of ²¹²Pb–VMT01

In 2020, Perspective filed an IND application with the FDA to evaluate [²⁰³Pb]VMT01 and [⁶⁸Ga]VMT01 imaging in adults with advanced stage melanoma under IND #152145, which was given a "safe to proceed" designation on August 21, 2020. Perspective completed evaluating [²⁰³Pb]VMT01 and [⁶⁸Ga]VMT01 in a first-in-human Phase 1 imaging study conducted at the Mayo Clinic in Rochester, MN. This study utilized a cross-over design where six subjects with stage IV unresectable melanoma were imaged. The primary endpoints of this study are safety and biodistribution and secondary endpoints are molecular target validation and image quality. Perspective has finished enrolling subjects in the study and is nearing completion of analysis of the dosimetry portion of the trial. Perspective is working on the clinical study report and anticipates it will be released in the first half of 2024. Positive imaging of MC1R was seen in a subset of patients using both agents, and no treatment-related adverse events have been observed to date.

On January 21, 2022, Perspective received an IND "safe to proceed" letter from the FDA to evaluate [²¹²Pb]VMT01 in patients with advanced and progressive melanoma. Perspective’s ongoing trial of [²¹²Pb]VMT01 (clinicaltrials.gov identifier NCT05655312) is a multi-center, open-label dose escalation, dose expansion study in subjects with histologically confirmed melanoma and MC1R-positive imaging scans. The first part of the study is a dose escalation phase to determine the MTD or MFD following a single administration of [²¹²Pb]VMT01. In October 2023, Perspective announced that recruitment for the first patient cohort was complete, and those patients received 111 MBq (3mCi) per dose. The second cohort, which is currently being recruited, will receive administered activities of 185 MBq (5mCi), with cohorts 3 and 4 receiving 370 MBq (10 mCi) and 555 MBq (15 mCi), respectively, if the MTD or MFD is not reached during escalation. According to the mTPI-2 study design, intermediate de-escalation doses are also possible to allow selection of the optimal activity dose to take forward into the dose expansion part of the study.

The second part of the study is a dose expansion phase based on the identified MTD/MFD. Patients may be eligible to receive up to three administrations of [²¹²Pb]VMT01 approximately eight weeks apart. A dosimetry sub-study is included to assess biodistribution, tumor uptake and correlation of uptake with observed toxicities and efficacy.

In March 2024, Perspective provided the following update on the ongoing clinical trial (all data is as of March 7, 2024):

In March 2024, Perspective announced a clinical trial collaboration agreement with Bristol Myers Squibb to evaluate the safety and tolerability of [²¹²Pb]VMT01 in combination with Bristol Myers Squibb’s nivolumab in patients with histologically confirmed melanoma and positive MC1R imaging scans. This combination study is an amendment to the Company’s ongoing Phase1/2a study of [²¹²Pb]VMT01 in patients with metastatic melanoma.

PSV40X: A Differentiated PSMA-Targeted Alpha Therapy

On December 31, 2023, Perspective entered into an exclusive patent license agreement with the Mayo Clinic for the rights to the PSMA Alpha-PET DoubLET platform technology for the treatment of PSMA-expressing cancers, with an initial focus on prostate. The PSMA Alpha-PET DoubLET platform technology represents a potential leap forward in the field of prostate cancer diagnostics and treatment. This leading radiopharmaceutical platform provides detailed PET imaging-based diagnosis and dosimetry using long-lived copper-64 (⁶⁴Cu) for imaging and alpha-particle-targeted radiopharmaceutical therapy ("RPT") using ²¹²Pb. It can also be used for beta-particle-targeted RPT using copper isotopes. Prostate cancer is the second-most prevalent form of cancer affecting men worldwide, emphasizing the critical need for advanced technologies to improve early detection and treatment outcomes. For 2023, the Cancer Institute estimated 88,300 new cases of prostate cancer in the U.S. and around 34,700 deaths from the disease.

Preclinical studies demonstrated a high degree of radiation delivered to tumors while minimizing exposure to critical organs and tissues, particularly a reduction in salivary gland uptake and kidney retention (Johnson et al., RPT Interest Group June 7 2023 https://rrp.cancer.gov/working_groups/AlphaPET-RPT_Int_group_lecture.pdf) as noted in the graphic below.

¹ indicates p < 0.05 [⁶⁴Cu]PSV401 vs [⁶⁸Ga]PSMA-11 (all data sets as indicated) 

² Johnson et al., RPT Interest Group June 7 2023 https://rrp.cancer.gov/working_groups/AlphaPET-RPT_Int_group_lecture.pdf;

³ SUV = Standardized Uptake Variable 

Pre-Targeting Theranostic Targeting Platform - The Next Generation of TAT

In February 2024, Perspective announced that it has executed an exclusive, worldwide license agreement with Stony Brook University for the global intellectual property rights to its Cuburbit[7]uril-admantane ("CB7-Adma") pre-targeting platform and has applied for the Phase 1 tranche of a 2.5-year Fastrack Small Business Innovation Research grant (Phase 1 $400 thousand; total $2.4 million) from the National Institutes of Health's ("NIH") National Cancer Institute ("NCI") in support of Perspective's CB7-Adma host-guest pre-targeting program for the diagnosis and treatment of cancer.

Pre-targeting using the CB7-Adma platform involves two steps. First, an antibody that binds with high specificity to a cancer-specific protein is administered via intravenous injection. This antibody is chemically modified to include the CB7 chemical entity and accumulates over time at the tumor site. Then, a radionuclide held tightly by Perspective's proprietary chelator attached to an Adma group is administered. The Adma group binds to the CB7 group that was previously attached to the cancerous cells with remarkable specificity, delivering radiation dose selectively to the tumor sites. 

Central to this innovation is CB7-Adma (host-guest) complex formation, driving the interaction between the antibody and radioligand. The chosen host-guest pair, CB7-Adma, demonstrates promising in vivo stability, modularity and low immunogenicity. The platform's potential was validated through in vivo profiling of ligands, employing a CB7-modified carcinoembryonic antigen ("CEA") targeting antibody.

PSV359 – A Targeted Alpha Therapy Targeting Fiber Activation Protein

Tumor stroma cells do not typically express cancer-specific markers like SSTR2 or MC1R. Fiber Activation Protein ("FAP") is primarily expressed on tumor stroma cells, but also on some cancer cells. FAP-α is a pan-cancer target that is highly expressed in many cancers. Perspective’s in-house discovery team has developed an optimized peptide with potential best-in-class characteristics that has been demonstrated in preclinical models. In March 2024, Perspective released the first in human clinical SPECT/CT imaging which suggests the tumor targeting and retention of the PSV359 compound is excellent, while clearing from normal organs rapidly and completely. The FAP-α PSV359 program is a significant addition to Perspective’s clinical pipeline of targeted alpha therapeutic assets and Perspective is working to file an IND application in late 2024 for this new program.

Manufacturing and Supply

Perspective has developed a proprietary isotope delivery system, colloquially called a “generator,” VMT-α-GEN, to allow for delivery of its preferred therapeutic isotope ²¹²Pb for supply to patients. Perspective has a license to possess radioactive materials and distribute our radiopharmaceuticals from the Iowa Department of Health and Human Services, Radioactive Materials Program at our Coralville, IA site. In January 2021, we entered into a 10-year feedstock contract with the National Isotope Development Center ("NIDC") of the Department of Energy's ("DoE") Isotope Program. Perspective receives feedstock shipments of Thorium-228 from the NIDC. Perspective also has contracts with various manufacturers to produce certain components of its VMT-α-GEN system. This has allowed Perspective to scale manufacturing of VMT-α-GEN for research purposes that Perspective believes will facilitate its alpha therapy clinical trials. Perspective believes that by controlling its own therapeutic isotope supply, it can solve the many supply chain risks that have slowed alpha-particle therapy clinical adoption to date.

Perspective assembles and manufactures its finished radiopharmaceutical candidates by chelating or trapping an atom of ²¹²Pb within a specialized chemical “cage” and connecting the ²¹²Pb within its cage to the targeting peptide with its proprietary linker technology. For clinical supply, Perspective intends to use a combination of third-party contract manufacturing organizations, or CMOs, and its own manufacturing sites, which comply with the FDA’s current good manufacturing practices, or cGMP, for the manufacture and distribution of its drug substance.

For the drug precursors and isotopes that comprise Perspective’s TAT platform, a variety of cGMP manufacturers have been engaged and qualified. Perspective procures chelator-modified peptide precursors from peptide manufacturers who are capable of producing cGMP precursor material. The imaging isotope ²⁰³Pb is procured from manufacturers with appropriate radiation handling licensing and shipped to its production site in Coralville, IA, or to CMOs, while ⁶⁸Ga, is produced on site at PET radiopharmacies that have access to this isotope and are capable of producing finished product. Therapeutic isotope ²¹²Pb is supplied via Perspective’s proprietary ²²⁴Ra/²¹²Pb isotope delivery systems (“generators”), which are manufactured by a CMO. These isotope delivery systems can be shipped globally to enable final finished radiopharmaceutical production. Perspective has received "safe to proceed" designations for two therapeutic IND applications in which its isotope delivery system was presented to the FDA for use in clinical trial manufacturing. Quality and stability testing for all of Perspective’s precursors is an ongoing process, and there have been no quality or stability issues in its supply chain to date.

For discovery activities and early phase clinical testing, Perspective has established a clinical drug manufacturing facility at its laboratories in Coralville, IA, to assemble the precursors into ready-to-use drug products. These facilities comprise approximately 2,000 square feet of wet laboratory facilities and a small finished product facility equipped with appropriate air and temperature handling and monitoring to comply with applicable clinical drug regulatory requirements. Perspective has staff experienced in finished radiopharmaceutical manufacturing and shipping who will not only supply drug product for its near-term activities but will also perform technology transfer to any CMOs where the finished production radiopharmaceuticals will be accomplished. Perspective has obtained all appropriate radiation handling licensing to provide clinical doses for its Phase 1/2 clinical trials. In addition, Perspective is capable of synthesizing peptides, chelators and linkers in its facilities in Coralville, and this capability enables it to perform research independently for pipeline development.

Short-list CMOs have locations that are strategically placed locally to major metropolitan areas that are within reach for delivery of Perspective’s radiopharmaceuticals for trials and ultimately for commercialization. Perspective is currently establishing a network of CMOs across the United States and is transferring know-how and technology to these CMOs to allow broader potential geographic coverage of radioactive products across its potential clinical trial sites. As noted in the graphic below showing a heat map of population in the United States, Perspective will be able to service a majority of cancer centers by strategically locating facilities throughout the United States.

In March 2024, Perspective acquired the assets and associated lease of Lantheus’ radiopharmaceutical manufacturing facility in Somerset, New Jersey. Perspective believes it will be able to convert the facility, which has three production suites, to manufacture finished radiopharmaceutical product using previously validated precursors. As a cGMP compliant facility, Perspective intends to utilize the facility to manufacture clinical supply of high quality ²⁰³Pb-labeled tumor-specific peptides to visualize and diagnose tumors, and ²¹²Pb-labeled radiopharmaceuticals to treat target tumors with TAT. Moreover, with its three cGMP suites at the facility, Perspective expects to have the capacity to meet future clinical trial and commercial demands at major cancer treatment centers throughout the Northeastern U.S.

Perspective intends to continue to expand its manufacturing and supply network during 2024 as it anticipates increasing its clinical trial activities.

Commercialization

None of Perspective’s current program candidates have received the regulatory approvals required to begin commercialization.

Competition

The life sciences and pharmaceutical industries are known to have rapid advancement of novel technologies, intense competition and a strong emphasis on intellectual property. While Perspective believes that its technology and intellectual property provide us with competitive advantages, we face potential competition from multiple sources, including large pharmaceutical companies, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and public and private research organizations.

Commercial and academic clinical trials are being pursued by a number of parties in the field of radiopharmaceuticals. Early results from these trials have fueled continued interest in radiopharmaceuticals, which is being pursued by several biotechnology companies, as well as by large pharmaceutical companies, including both commercial and academic clinical trials. Results from these trials, combined with recent product approvals, have garnered continued interest in the space by both large pharmaceutical companies and specialized biotechnology companies, which are developing both early-stage and later-stage candidates.

There are also several companies developing alpha-based radiopharmaceuticals for the treatment of cancer, including Bayer, Novartis, Bristol-Myers Squibb (with their recent acquisition of RayzeBio), Eli Lilly (with their recent acquisition of POINT Biopharma), Telix Pharmaceuticals Limited, Actinium Pharmaceuticals, Inc., RadioMedix, Inc., Orano Med, Aktis Oncology, Fusion Pharmaceuticals, Inc. (which announced on March 19, 2024 that they are being acquired by AstraZeneca), Aktis Oncology, Inc., Convergent Therapeutics, Janssen, ARTBIO and Curie Therapeutics, Inc. These companies use various alpha-emitting isotopes such as ²²³Ra, ²²⁵Ac, ²¹²Pb and ²²⁷Th. Most alpha-based radiopharmaceuticals are in clinical development, with Bayer’s Xofigo® being the only approved alpha particle-based therapy. Xofigo® was approved in 2013 for the treatment of symptomatic bone metastases in people with castration-resistant prostate cancer.

There are also companies with beta-based radiopharmaceuticals, both in development and already approved. There are multiple companies, including Lantheus, Novartis and Q BioMed Inc., with approved beta-based radiopharmaceutical products using isotopes such as ¹³¹I, ¹⁷⁷Lu, ⁸⁹Sr and ⁹⁰Y. Novartis’ Lutathera® and Pluvicto® are prominent beta-based radioligands, and other beta-based radiopharmaceuticals are in various stages of clinical development by companies including Novartis, Curium SAS, Nordic Nanovector, Cellectar Biosciences, ITM Isotope Technologies Munich SE, Clovis Oncology and Y-mAbs Therapeutics, Inc., Actinium Pharmaceuticals, Inc., Lantheus, Blue Earth Therapeutics and Clarity Pharmaceuticals.

For Perspective's program candidate [²¹²Pb]VMT-α-NET, the company is aware of several competing therapies targeting neuroendocrine tumors. Novartis’ Lutathera®, which was approved in 2018, uses ¹⁷⁷Lu for the treatment of individuals with somatostatin receptor-positive gastroenteropancreatic neuroendocrine cancers. The Company is aware of the following companies with neuroendocrine tumor, radioligand preclinical and clinical development programs: ITM, Bristol-Myers Squibb (through their recent acquisition of RayzeBio), Eli Lilly (through their recent acquisition of POINT Biopharma) and Radiomedix. Perspective also faces potential competition from other treatments targeting neuroendocrine tumors such as Sandostatin® and Afinitor® (Novartis), Somatuline® (Ipsen) and Sutent® (Pfizer). While Perspective believes [²¹²Pb]VMT-α-NET has significant advantages compared to conventional approaches to neuroendocrine tumors, the Company may still face competition from these more established treatments.

Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient enrollment in clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

We could see a reduction or elimination in our commercial opportunity if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient to administer, are less expensive or with a more favorable label than our drug candidates. Our competitors also may obtain FDA or other regulatory approval for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. The key competitive factors affecting the success of all of our drug candidates, if approved, are likely to be efficacy, safety, convenience, price, availability of the relevant isotope, the effectiveness of imaging diagnostics, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Grants and Awards

Perspective’s next-generation radiopharmaceutical technology has been recognized by many prestigious organizations and has received numerous awards and grants in support of the development of its technology and programs.

Perspective has benefited from Small Business Innovation Research ("SBIR") awards of approximately $17 million through September 2022 from the National Institutes of Health and National Cancer Institute to Michael K. Schultz, PhD, Perspective’s co-founder and the Company’s Chief Science Officer, Frances L. Johnson, M.D., Perspective’s co-founder and the Company’s Chief Innovation Officer and to Perspective’s principal collaborators at the University of Iowa. The table below summarizes key grant awards that have been peer-reviewed by expert panels at the National Cancer Institute.

Intellectual Property

Perspective’s success depends, in part, on its ability to obtain and maintain intellectual property protection for its platform technology, program candidates and know-how, to defend and enforce its intellectual property rights, in particular, its patent rights, to preserve the confidentiality of its know-how and trade secrets and to operate without infringing the proprietary rights of others. Perspective seeks to protect its program candidates and technologies by, among other methods, filing U.S. and foreign patent applications related to its proprietary technology, inventions and improvements that are important to the development of its business. Perspective also relies on trade secrets, know-how, continuing technological innovation and in-licensing of third-party intellectual property to develop and maintain its proprietary position. Perspective, or its collaborators and licensors, file patent applications directed to its key program candidates in an effort to establish intellectual property positions to protect its program candidates as well as uses of its program candidates for the prevention and/or treatment of diseases.

As of December 31, 2023, Perspective exclusively licenses five issued U.S. patents, 20 pending foreign patent applications and one pending international Patent Cooperation Treaty, or PCT, applications from the University of Iowa and currently has filed two pending provisional U.S. patent applications relating to its continuous new program development.

Perspective in-licensed a patent family with composition of matter and method claims directed to radiopharmaceutical cancer-targeted compositions comprising chelating moieties, linkers and targeting moieties. Patent applications are pending in the United States and various foreign jurisdictions and regions including China, Canada, South Korea, India, Europe and Australia.

From the University of Iowa, Perspective in-licenses patent applications with composition of matter and methods of use claims covering VMT-α-NET and its therapeutic and diagnostic use, along with structural claims for Perspective’s PSC with patent applications in the United States and various other foreign jurisdictions and regions including Europe, Australia, Canada, India and China. Patent applications in this family, if issued, are expected to expire in approximately 10 to 17 years, without taking potential patent term extensions into account.

Additionally, from the University of Iowa, Perspective in-licenses one issued U.S. patent (US 11,179,484 B2) and one provisional pending U.S. patent application with composition of matter and methods of use claims covering VMT01 and its therapeutic and diagnostic use for treating melanoma, which are expected to expire in approximately 13 years, without taking potential patent term extensions into account.

The issuance of the VMT01 patent coincided with the completion of a clinical imaging trial which allowed Perspective to evaluate VMT01 against the value of a portfolio of patents in-licensed from the University of New Mexico ("UNM"). Positive results of its clinical trial in comparison to previously published clinical data on the use of the UNM-patented compound allowed Perspective to issue a Notice of Termination for the portfolio in 2022, which represented a significant cost to the company, and the IND for the use of VMT01 for clinical therapy of melanoma patients has received a "safe to proceed" designation (i.e., approval to conduct the trial) from the FDA. The issued U.S. patent with composition-of-matter and methods-of use-claims covering VMT01 and its therapeutic and diagnostic use for melanoma or other MCR1-expressing tumors are expected to expire in approximately 13 years, without taking potential patent term extensions into account.

In December 2023, Perspective entered into a patent license agreement with Mayo Clinic for the rights to the PSMA Alpha-PET DoubLET platform technology for the treatment of PSMA-expressing cancers, with an initial focus on prostate. The PSMA Alpha-PET DoubLET platform technology represents a potential leap forward in the field of prostate cancer diagnostics and treatment. This leading radiopharmaceutical platform provides detailed PET imaging-based diagnosis and dosimetry using long-lived copper-64 (⁶⁴Cu) for imaging and alpha-particle-targeted radiopharmaceutical therapy ("RPT") using ²¹²Pb. It can also be used for beta-particle-targeted RPT using copper isotopes. Preclinical studies demonstrated a high degree of radiation delivered to tumors while minimizing exposure to critical organs and tissues. The agreement with Mayo Clinic will expire upon the later of the expiration date of the last-to-expire patent rights or the date of discontinuation of sales of the licensed product.

In January 2024, Perspective entered into an exclusive in-licensing of Stony Brook University’s Cuburbit[7]uril-admantane ("CB7-Adma") pre-targeting platform which covers the global intellectual property rights. Pre-targeting using the CB7-Adma platform involves two steps. First, an antibody that binds with high specificity to a cancer-specific protein is administered via intravenous injection. This antibody is chemically modified to include the CB7 chemical entity and accumulates over time at the tumor site. Then, a radionuclide held tightly by Perspective's proprietary chelator attached to an Adma group is administered. The Adma group binds to the CB7 group that was previously attached to the cancerous cells with remarkable specificity, delivering radiation dose selectively to the tumor sites. Central to this innovation is CB7-Adma (host-guest) complex formation, driving the interaction between the antibody and radioligand. The chosen host-guest pair, CB7-Adma, demonstrates promising in vivo stability, modularity and low immunogenicity. The platform's potential was validated through in vivo profiling of ligands, employing a CB7-modified CEA targeting antibody. The agreement with Stony Brook University will expire on the later of the expiration date of the last to expire licensed patents or 20 years from the date of the first sale of a product utilizing the intellectual property.

Perspective has an active pipeline development program, resulting in additional intellectual property developments within the company. Perspective submitted two provisional applications in 2022 to support its programs and submitted applications for the next peptide-based radiopharmaceutical (compositions and methods patent applications) in 2023. Perspective anticipates new peptide-based radiopharmaceuticals provisional applications from its discovery laboratory on a rolling basis of approximately 18- to 24-month schedules, depending on the complexity of the target and molecular construct. Perspective intends to supplement this effort with in-licensing supported by an active collaborative grant program with academic centers around the globe. Perspective has added a collaboration with Seoul National University and Technical University Munich to expand the reach of the discovery program. All collaborations include appropriate confidentiality arrangements and material transfer agreements and documentation to protect Perspective’s intellectual property assets as well as establish a relationship to enable it to license intellectual property it identifies as valuable to it. These activities leverage a strong collaborative network established by Perspective to drive innovation and generate new intellectual property.

Agreements and Collaborations

Lantheus Agreements

Investment Agreement 

On January 8, 2024, Perspective entered into an investment agreement (the “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 Perspective agreed to sell and issue to Lantheus in a private placement transaction (the “Lantheus Private Placement”) certain shares (the “Lantheus Shares”) of Perspective’s Common Stock. The closing of the purchase and sale of the Lantheus Shares to Lantheus by Perspective (the “Lantheus Closing”) were subject to Perspective 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. The Lantheus Shares were sold at a price of $0.37 per share, for gross proceeds to Perspective of approximately $20.8 million. Pursuant to the Lantheus Investment Agreement, Perspective agreed to cooperate in good faith to negotiate and enter into a registration rights agreement with Lantheus, obligating Perspective to file a registration statement on Form S-3 with the U.S. Securities and Exchange Commission to register for resale the Lantheus Shares issued at the Lantheus Closing. The Lantheus Investment Agreement also contains agreements of Perspective and Lantheus whereby Lantheus is provided certain board observer and information rights of Perspective, as well as standstill provisions prohibiting Lantheus from taking certain actions for a specified period of time, subject to certain exceptions.

The Lantheus Investment Agreement also provides Lantheus with certain pro rata participation rights to maintain its ownership position in Perspective in the event that Perspective makes any public or non-public offering of any equity or voting interests in Perspective or any securities that are convertible or exchangeable into (or exercisable for) equity or voting interests in Perspective, subject to certain exceptions.

Pursuant to the Lantheus Investment Agreement, Perspective is required to notify Lantheus within 10 business days of the end of a fiscal quarter in which Perspective issued shares of Common Stock pursuant to that certain At Market Issuance Sales Agreement among Perspective, Oppenheimer & Co. Inc., B. Riley Securities, Inc., and JonesTrading Institutional Services LLC dated November 17, 2023 (the “ATM Agreement”), of (i) the number of shares of Common Stock issued during such fiscal quarter pursuant to the ATM Agreement and (ii) the average price per share received by Perspective before commissions (the “ATM Average Price”). Upon receipt of such notice, Lantheus may elect, at its option, to purchase all or a portion of its Pro Rata Portion (as defined in the Lantheus Investment Agreement) of such shares at an aggregate price equal to the number of shares purchased multiplied by the ATM Average Price for such quarter (the “ATM Participation Right”). Pursuant to the Lantheus Investment Agreement, Lantheus may not exercise the ATM Participation Right more than two times per calendar year.

Asset Purchase Agreement 

On January 8, 2024, Perspective entered into an Asset Purchase Agreement (the “Progenics APA”) with Progenics Pharmaceuticals, Inc., a Delaware corporation (“Progenics”) and affiliate of Lantheus, pursuant to which Perspective will acquire certain assets and the associated lease of Progenics’ radiopharmaceutical manufacturing facility in Somerset, New Jersey for a purchase price of $8.0 million in cash. The closing of the transactions pursuant to the Progenics APA was subject to customary closing conditions, including regulatory approval. The transactions contemplated by the Progenics' APA closed on March 1, 2024.

Option Agreement 

On January 8, 2024, Perspective entered into that certain Option Agreement (the “Option Agreement”) and together with the Lantheus Investment Agreement and the Progenics APA, the “Agreements”) with Lantheus whereby Lantheus was granted an exclusive option to negotiate an exclusive, worldwide, royalty- and milestone-bearing right and license to [²¹²Pb]VMT-α-NET, the Company’s clinical-stage alpha therapy developed for the treatment of neuroendocrine tumors and a right to co-fund the Investigational New Drug ("IND") application, enabling studies for early-stage therapeutic candidates targeting prostate-specific membrane antigen and gastrin-releasing peptide receptor and, prior to IND filing, a right to negotiate for an exclusive license to such candidates. In consideration of the rights granted by the Company to Lantheus pursuant to the Option Agreement, Lantheus will pay to Perspective a one-time payment of $28.0 million, subject to certain withholding provisions related to the closing contemplated by the Progenics APA.

Under the terms of the Option Agreement, Lantheus also has a right of first offer and last look protections for any third-party merger and acquisition transactions involving the Company for a 12-month period beginning on January 8, 2024.

The Agreements contain customary representations, warranties and covenants that were made solely for the benefit of the parties to the Agreements. Such representations, warranties and covenants (i) are intended as a way of allocating risk between the parties to the Agreements and not as statements of fact and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, Perspective. Accordingly, the Agreements are being disclosed only to provide investors with information regarding the terms of the transaction and not to provide investors with any other factual information regarding Perspective. Moreover, information concerning the subject matter of the representations and warranties may change after we electronically filethe date of the Agreements, which subsequent information may or may not be fully reflected in public disclosures.

Equity Financings

March 2024 Private Placement with Institutional Investors

On March 4, 2024, Perspective entered into an investment agreement (the "March 2024 Investment Agreement”) with certain accredited institutional investors (“Institutional Investors”) pursuant to which Perspective agreed to issue and sell, in a private placement (the “March 2024 Private Placement”), 92,009,981 shares (“March 2024 Shares”) of Perspective’s common stock, par value $0.001 per share (the “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 "March 2024 Closing").

The gross proceeds to the Company from the March 2024 Private Placement were approximately $87.4 million, before deducting fees payable to the Placement Agents (as defined below) and other estimated transaction expenses. Perspective intends 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.

The March 2024 Investment Agreement contains customary representations, warranties and agreements by the Company and the Institutional Investors, indemnification obligations of the Company and the Institutional Investors, other obligations of the parties and termination provisions.

The March 2024 Private Placement was conducted pursuant to a Placement Agency Agreement, dated March 4, 2024 (the “Placement Agency Agreement”), by and between Perspective and Oppenheimer & Co. Inc., as representative of the placement agents named therein (the “Placement Agents”). Per the Placement Agency Agreement, Perspective agreed to: (i) pay the Placement Agents a cash fee equal to 5.85% of the gross proceeds received by the Company from the sale of the Shares; and (ii) reimburse the Placement Agents for certain fees and expenses. The Placement Agency Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature.

In connection with the Private Placement, Perspective also entered into a registration rights agreement, dated March 6, 2024 (the “Registration Rights Agreement”), with the Institutional Investors obligating the Company to register the resale of the March 2024 Shares within a specified period of time after the March 2024 Closing.

January 2024 Public Offering

On January 17, 2024, Perspective entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co. Inc., as representative of the underwriters named therein (the “Underwriters”), in connection with its previously announced underwritten public offering (the “Public Offering”) of 132,075,218 shares (the “Public Shares”) of Perspective's Common Stock and, in lieu of Public Shares to certain investors, pre-funded warrants (the “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 material with,Pre-funded Warrant. Under the terms of the Underwriting Agreement, Perspective 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 Perspective from the Public Offering were approximately $69.0 million, before underwriting discounts and commissions and estimated expenses of the Public Offering.

Perspective intends 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 furnish itbusinesses and investments.

The Public Offering was made pursuant to Perspective’s shelf registration statement on Form S-3 (File No. 333-275638), declared effective by the Securities and Exchange Commission (SEC)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 (the “Warrant Shares”) 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 Perspective’s 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 Perspective.

The Underwriting Agreement contains customary representations, warranties and agreements by Perspective, customary conditions to closing, indemnification obligations of Perspective and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties.

Brachytherapy Divestiture

On December 7, 2023, Isoray entered into an Asset Purchase Agreement (the “GT Medical APA”) by and among Isoray, Perspective, and GT Medical Technologies, Inc., a Delaware corporation (“GT Medical”). You canPerspective entered into the GT Medical APA as sole stockholder of Isoray and as Seller Parent as that term is defined in the GT Medical APA.

Subject to the satisfaction or waiver of the conditions set forth in the GT Medical APA, Isoray will sell to GT Medical, and GT Medical will purchase from Isoray, all of Isoray’s right, title and interest in and to substantially all of the assets of Isoray related to Isoray’s commercial Cesium-131 business (the “Business”) including equipment, certain contracts, inventory and intellectual property (the “GT Medical Asset Purchase”). Subject to limited exceptions set forth in the GT Medical APA, GT Medical is not assuming the liabilities of Isoray.

Pursuant to the terms of, and subject to the conditions specified in, the GT Medical APA, upon consummation of the GT Medical Asset Purchase (the “GT Medical Closing”), (i) GT Medical will issue to Isoray shares of GT Medical’s common stock, par value $0.0001 per share, representing 0.5% of GT Medical’s issued and outstanding capital stock on a fully diluted basis as of the GT Medical Closing (the “GT Medical Stock Consideration”) and (ii) Isoray will have the right to receive, and GT Medical will be obligated to pay, certain cash royalty payments during each of the first four years beginning upon the date of the GT Medical Closing (each such year, a “Measurement Period”), as summarized below:

The GT Medical Stock Consideration has no registration rights and transfers of the GT Medical Stock Consideration are subject to a right of first refusal on behalf of the other stockholders of GT Medical and GT Medical as further described in the GT Medical Asset Purchase Agreement.

The consummation of the GT Medical APA is subject to the parties mutually obtaining the necessary operating permits and licenses to operate the Business after the GT Medical Closing, at least one Key Employee, as defined in the GT Medical APA, entering into an employment offer letter and not expressing prior to the GT Medical Closing any intention to rescind or repudiate such offer letter or terminate employment with GT Medical or its affiliates following the GT Medical Closing and certain other customary closing conditions to the GT Medical Closing.

Isoray also readhas agreed that, for the period commencing on the date of the GT Medical Closing and copycontinuing until the third anniversary thereof, neither it nor any materials we fileof its affiliates will, directly or indirectly, operate, perform or have any ownership interest in any business that designs, develops, manufactures, markets, sells, installs or distributes products that are competitive with the activities of the Cesium-131 business, which is defined as the manufacturing, refinement, commercialization, use, marketing, sale and distribution of Cesium-131 and brachytherapy seeds containing Cesium-131.

The GT Medical APA also includes customary termination provisions, including that, in general, either party may terminate the GT Medical APA if the transaction has not been consummated by March 31, 2024, or if any governmental authority issues any order that restrains, enjoins or otherwise prohibits or prevents the transaction. Likewise, either party may terminate the GT Medical APA if the other party has breached any representation, warranty, covenant, obligation or agreement which would reasonably be expected to cause any of the conditions to closing to not be satisfied prior to the GT Medical Closing, subject, in some cases, to the opportunity of the breaching party to cure such breach.

The respective Board of Directors of Isoray, Perspective and GT Medical have approved the GT Medical APA and the transactions contemplated therein.

The GT Medical Closing is anticipated to be completed in the first half of 2024 and the assets and operations of the Business are presented as a discontinued operation in accordance with Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements – Discontinued Operations, and prior year amounts have been reclassified in accordance with this accounting pronouncement. As a result of the transaction, the Company has effectively exited the brachytherapy segment and will now focus exclusively on its radiopharmaceutical development segment.

Viewpoint Merger

On February 3, 2023, Perspective completed the merger of Isoray Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Perspective, with Viewpoint Molecular Targeting, Inc. (“Viewpoint”) (such transaction being the “Merger”). Pursuant to the Merger, the Company issued 136,545,075 shares of common stock, representing approximately 49% of its fully diluted outstanding capital stock. Viewpoint is an alpha-particle radiopharmaceutical company in the alpha-emitter market developing oncology therapeutics and complementary imaging agents.

Upon the closing of the Merger, Perspective Therapeutics increased the size of its Board of Directors from four members to five members. Alan Hoffmann and Dr. Philip Vitale resigned from the board and Michael McCormick resigned as Chairman of the Board but remained a director of the Company. Lori Woods was appointed as Chairperson of the Board and Johan (Thijs) Spoor, Robert Froman Williamson, III and Dr. Frank Morich were appointed as directors of the Company. In addition, Ms. Woods resigned as Chief Executive Officer of the Company and Mr. Spoor was appointed as Chief Executive Officer of the Company. On May 9, 2023, Michael McCormick resigned from the board and on June 1, 2023, Heidi Henson was appointed to the board.

For a more detailed summary of the Merger, see our Forms 8-K filed with the Securities and Exchange Commission (“SEC”) on September 28, 2022, and on February 6, 2023, and our Form 8-K/A filed with the SEC on April 21, 2023.

Collaborations

License Agreement with the University of Iowa

On June 5, 2018, Perspective entered into a license agreement, as amended on August 1, 2018, November 1, 2019, January 30, 2020, and June 12, 2020, with the University of Iowa Research Foundation ("UIRF"), for certain patent rights relating to: (i) the composition and use of peptide radiopharmaceutical drugs for the treatment of cancer alone or in combination with approved therapies (collectively, the “Patent Rights”). Perspective holds a worldwide exclusive license, with the right to sublicense, import, make, have made, use, provide, offer to sell and sell all products derived from technology covered by the Patent Rights (the “Licensed Products and/or Process(es)”).

The UIRF License is a royalty-bearing license obligating Perspective to pay a percentage of proceeds received from sales of Licensed Products and/or Licensed Process(es) at a rate that Perspective believes is within market parameters for a newly organized preclinical development stage company. Perspective has also agreed to share a percentage of its proceeds that it derives from other agreements, like sublicense agreements, relating to Licensed Products and/or Licensed Process(es) that Perspective may enter into in amounts that it also believes are within market parameters for a newly organized preclinical development stage company. In addition to its obligation to pay royalties, Perspective has also agreed to pay UIRF a success fee on the execution of a liquidity event (or an initial public offering of its equity) in lieu of milestone payments. Perspective paid the success fee to UIRF in 2023 following the completion of the merger between Perspective and Viewpoint. Perspective is also obligated to pay for past and ongoing intellectual property expenses.

The UIRF License commenced on June 5, 2018 and expires on the date of the last-to-expire Patent Rights, unless terminated earlier under the provisions thereof. Perspective has the right to terminate the UIRF License at any time upon 90 days’ written notice to UIRF and the payment of a $10,000 termination fee. Each party has the right to terminate the UIRF License if the other party is in default or breach of any condition of the UIRF License with a right to cure any such breach within 90 days from receipt of notice of such default or breach. Either party can also terminate the UIRF License if the other party voluntarily files for bankruptcy or other similar insolvency proceedings, makes a general assignment for the benefit of creditors, or is the subject of an involuntary bankruptcy petition. If Perspective fails to pay any sum that is due and payable to UIRF within 90 days after receiving written notice of its default from UIRF, then UIRF has the option of terminating the UIRF License. UIRF may also terminate the UIRF License in the event Perspective, or any sublicensee, brings any action against UIRF, unless such suit is for an uncured material breach or imminent threatened breach of the UIRF License Agreement.

Perspective was required to procure liability insurance, naming UIRF as an additional insured, before it initiated any human testing or clinical trials and to maintain such insurance at least 15 years beyond the term of the UIRF License.

The UIRF License also obligates Perspective to meet certain performance and financial milestones.

If Perspective fails to meet these milestones, UIRF will have the right to terminate the UIRF License upon notice as provided in the UIRF License.

License Agreement with Mayo Clinic

In December 2023, Perspective entered into a patent license agreement with Mayo Clinic for the rights to the PSMA Alpha-PET DoubLET platform technology for the treatment of PSMA-expressing cancers, with an initial focus on prostate. The PSMA Alpha-PET DoubLET platform technology represents a potential leap forward in the field of prostate cancer diagnostics and treatment. This leading radiopharmaceutical platform provides detailed PET imaging-based diagnosis and dosimetry using long-lived copper-64 (⁶⁴Cu) for imaging and alpha-particle-targeted radiopharmaceutical therapy ("RPT") using ²¹²Pb. It can also be used for beta-particle-targeted RPT using copper isotopes. Preclinical studies demonstrated a high degree of radiation delivered to tumors while minimizing exposure to critical organs and tissues. The agreement with Mayo Clinic will expire upon the later of the expiration date of the last-to-expire patent rights or the date of discontinuation of sales of the licensed product.

License Agreement with Stony Brook University

In January 2024, Perspective entered into an exclusive in-licensing of Stony Brook University’s Cuburbit[7]uril-admantane ("CB7-Adma") pre-targeting platform which covers the global intellectual property rights. Pre-targeting using the CB7-Adma platform involves two steps. First, an antibody that binds with high specificity to a cancer-specific protein is administered via intravenous injection. This antibody is chemically modified to include the CB7 chemical entity and accumulates over time at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information abouttumor site. Then, a radionuclide held tightly by Perspective's proprietary chelator attached to an Adma group is administered. The Adma group binds to the operationCB7 group that was previously attached to the cancerous cells with remarkable specificity, delivering radiation dose selectively to the tumor sites. Central to this innovation is CB7-Adma (host-guest) complex formation, driving the interaction between the antibody and radioligand. The chosen host-guest pair, CB7-Adma, demonstrates promising in vivo stability, modularity and low immunogenicity. The platform's potential was validated through in vivo profiling of ligands, employing a CB7-modified CEA targeting antibody. The agreement with Stony Brook University will expire on the later of the Public Reference Room by callingexpiration date of the SEClast to expire licensed patents or 20 years from the date of the first sale of a product utilizing the intellectual property.

Facilities

Perspective’s corporate headquarters are located at 1-800-SEC-0330.2401 Elliott Avenue, Suite 320, Seattle, WA 98121. In addition, the SECCompany leases laboratory and office space at 2500 Crosspark Road, Coralville, IA 52241 ("BioVentures Center") in the University of Iowa Research Park. In December 2022, Perspective completed the purchase of a 20,000 square-foot building located at 4125 Westcor Court, Coralville, IA, that has office and laboratory space which is currently used only for office space and will be built out to accommodate laboratory and manufacturing facilities.

Perspective’s facilities include a radiopharmaceutical manufacturing laboratory (750 square feet) for finished product, clinical use radiopharmaceutical production. The wet labs have appropriate bench, hood and radiochemistry equipment and a separate cell-culture room for all discovery lab pipeline development. The facilities at the BioVentures Center include wifi, internet connections and shared data archive space on the University system as well as data integrity storage and backup provided by the University of Iowa Research Park. In addition, the lease at the BioVentures Center grants 24/7 access for Perspective employees to the University of Iowa core laboratories including the vivarium, small animal imaging facilities, pathology, microscopy, mass spectrometry, nuclear magnetic resonance and other molecular characterization facilities. Perspective also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.separate secure network data storage.

Information regarding our corporate governance, includingIn March 2024, Perspective acquired the charterslease of our audit committee, our nominationsLantheus' radiopharmaceutical manufacturing facility located at 110 Clyde Road, Somerset, NJ and corporate governance committeePerspective has subsequently agreed to acquire Lantheus’ office lease in at 270 Davidson Avenue, Suite 320, Somerset, NJ. The Davidson Avenue office lease was acquired in February 2024, and our compensation committee, and our CodesPerspective closed on the Clyde Road facility in March 2024.

In December 2023, Perspective announced the divestiture of the foregoing information without charge upon requestbrachytherapy division which includes the leased production facility located at Applied Process Engineering Laboratory in Richland, WA. Subject to Mark Austin, Vice Presidentsatisfaction of Finance and Corporate Controller, 350 Hills Street, Suite 106, Richland, WA, 99354.customary closing conditions the facility lease is expected to transfer to GT Medical in the first half of 2024.

Perspective believes that its current facilities and CMO relationships are adequate to meet its existing needs.

Business OperationsOther Agreements

For information related to in-licensing and patent licensing agreements, see the section entitled "Intellectual Property."

Overview of the Discontinued Operations

In 2003, Isoray, our wholly owned subsidiary, obtained clearance from the Food and Drug Administration (FDA)("FDA") for the use of Cesium-131 (Cesium-131) radioisotope in the treatment of all malignant tumors. The FDAFDA's clearance granted in August 2009 permits loading Cesium-131 seeds into bio-absorbable braided sutures or “braided strands”strands,” giving the Company the ability to treat brain, lung, head and neck, colorectal and chest wall cancers. As of the date of this Report, such applications include prostate cancer, brain cancer, colorectal cancer, gynecological cancer, lung cancer, ocular melanoma and pancreatic cancer. The brachytherapy seed form (a sealed source) of Cesium-131 may be used in surface, interstitial and intra-cavity applications for tumors with known radio-sensitivity. Management believes the combination of a short half-life and relatively high-energy of Cesium-131 will allow it to become a leader in the brachytherapy market, and Cesium-131 represents the first major advancement in brachytherapy technology in approximately 30 years with attributes that could make it the long-term “seed of choice” for internal radiation therapy procedures.

The Company’sIsoray’s core product is its Cesium-131 sealed source brachytherapy “seed.” These seeds can be inserted individually or in combination into various locations in the body until the physician is satisfied with the radiation dose delivered. The Company also sells seeds in strands to keep them from individually movingdelivered and to allow the physician to put multiple seeds in a row as desired. In addition, “pre-loaded” needles may have Cesium-131 brachytherapy seeds inserted in them, or a strand with seeds in the strand, inserted into the needle. Seeds can be sold with our Blu Build™ loading device that allows clinicians to efficiently configure strands in the operating room. Seeds can also be loaded into suture material, which can be sewn by Isoray into a piece of bio-absorbable mesh which can be sewn or stapled into tissue by the physician for use in lung, pelvic floor and other cancer locations. Under a manufacturing agreement with GT Medical Technologies, Inc. (“GT Med Tech”), Isoray inserts Cesium-131 seeds into a collagen matrix which GT Med Tech’s customers place in the brain.

Brachytherapy seeds are small devices that deliver a therapeutic dose of radiation used in an interstitial radiation procedure. The procedure has become one of the primary treatments for prostate cancer. The brachytherapy procedure places radioactive seeds as close as possible to (in or near) the cancerous tumor (the word “brachytherapy” is derived from Greek and means close therapy). A primary advantage of seed brachytherapy is the ability of the seeds to deliver therapeutic radiation thereby killing the cancerous tumor cells while minimizing exposure (damage) to adjacent healthy tissue. This procedure allows doctors to administer a high dose of radiation directly to the tumor. A seed contains a radioisotope sealed within a titanium capsule. The number of seeds used varies based on the size of the cancerous area being treated, the isotope used and the activity level specified by the physician. When brachytherapy is combined with another treatment method (dual-therapy), fewer seeds are used in the procedure. The isotope decays over time (half-life) and eventually the seeds become inert (typically over 6 half-lives). The seeds may be used as a primary treatment (monotherapy) or as an adjunct therapy with other treatment modalities, or as treatment for residual disease after excision of primary tumors. The number of seeds for treatment sites vary widely (as few as 8 seeds to more than 100 seeds) depending on the type of cancer, the tumor location, the prescribed activity level and any additional type of therapy being utilized. 

In the cases of brain and lung tumors (and other solid tumors), a surgeon will remove the tumor if it is medically prudent and this offers the patient some benefit in terms of controlling the growth of the cancer or its symptoms. In many cases, radiation therapy is added following the surgery; this is known as “adjuvant” radiation therapy. The Company believes that its form of adjuvant radiation therapy deployable in such cases offers advantages over external beam methods. However, external beam holds the vast majority of the market for adjuvant radiation therapy.

Prostate Cancer

Isoray began the production and sale of Cesium-131 brachytherapy seeds in October 2004 for the treatment of prostate cancer after receiving clearance of its premarket notification (510(k)) by the Food and Drug Administration. Prostate cancer treatment represents about 75% of the business of Isoray today.

When brachytherapy is the only treatment (monotherapy) used in the prostate, approximately 70 to 120 seeds are permanently implanted in the prostate during an outpatient procedure. Typically, physicians use loose seeds in needles or in a cartridge or seeds loaded into strands which can also be loaded into needles for the treatment of prostate cancer. Seeds may be combined with another treatment method (dual therapy) when treating prostate cancer.

In late 2019, the first peer-reviewed report with long-term follow-up clinical outcomes for patients treated with Cesium-131 brachytherapy for prostate cancer patients was published in the journal “Brachytherapy”. Moran, B. J., et al., Long-term biochemical outcomes using Cesium-131 in prostate brachytherapy.Brachytherapy 18(6):800-805 (2019). In this observational study of 571 prostate cancer patients, long-term outcomes based on serum PSA were determined by the authors to be “…excellent and on par with…” other implantable brachytherapy seeds that had previously been the subject of long-term study.

Several months later, in the same journal, a second report was published that provided detailed, long-term PSA follow-up data for a group of Cesium-131 treated prostate cancer patients (Benoit, et al., Cesium-131 prostate brachytherapy: a single institutional long-term experience. Brachytherapy19(3):298-304 (2020)). The authors, from the University of Pittsburgh School of Medicine, reported results from 669 men and likewise concluded “excellent long-term biochemical control” following treatment with Cesium-131 prostate brachytherapy.

From the same patient group as above, the University of Pittsburgh School of Medicine reported in 2020 an evaluation of the intermediate-risk group prostate cancer patients (Rodriguez-Lopez, J. L., et al, Report of a Large Cohort of Intermediate-Risk Prostate Cancer Patients Treated with Cs-131 Brachytherapy.International Journal of Radiation Oncology*Biology*Physics108(3): e926 (2020)).  The authors reported excellent outcomes for the favorable intermediate-risk subgroup treated with Cesium-131 prostate brachytherapy alone and excellent outcomes for the unfavorable intermediate-risk subgroup with combined external beam radiation and Cesium-131 prostate brachytherapy.

In addition to the long-term cancer control data mentioned above, a report from 2017 describes favorable long-term quality of life outcomes following Cesium-131 brachytherapy in the treatment of prostate cancer (S.M. Glaser, et al., Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium-131,International Journal of Radiation Oncology*Biology*Physics98(5):1053-1058 (2017)). 

The Company continues to identify and support work that seeks to employ and study Cesium-131 brachytherapy seeds in combination with external beam radiation therapy (“EBRT”). Compelling evidence is emerging supporting the use of such combination brachytherapy and EBRT in intermediate and high-risk prostate cancer cases. (Sylvester J, Braccioforte M.H., Moran B.J., Intensity modulated radiation therapy (IMRT) followed by cesium-131 brachytherapy for intermediate and high risk localized prostate cancer. Brachytherapy18(3):S72 (2019)).

For low-risk prostate cancer, studies are ongoing to evaluate the use of Cesium-131 in “focal,” or sub-total brachytherapy of the prostate. It is hypothesized that low-risk patients using focal brachytherapy may achieve rates of prostate cancer control comparable to that of full gland treatment while significantly reducing side effects. An early results study of a series of men treated with Cesium-131 focal therapy was presented at the 2021 Annual Meeting of the American Brachytherapy Society, Moran, B. J., et al., PO40: A Pilot Study of Cs-131 Focal Brachytherapy in a Prospectively-Followed Group of Low Risk Localized Prostate Cancer Patients Staged by Stereotactic Transperineal Prostate Biopsy.Brachytherapy.20(3): S74-S75 (2021). The author concludes the average serum PSAs in these men declined in the short term.

Early results from another series of men treated with Cesium-131 focal therapy was presented at the 2018 Annual Meeting of the American Brachytherapy Society, Kalash, R., et al., Focal brachytherapy using Cesium-131 in low-risk prostate cancer. Brachytherapy17 (Suppl):S89 (2018). The authors conclude that, while too early to estimate disease specific outcomes, serum PSAs in these men had declined in the short term and there was no residual effect on urinary, bowel or erectile symptoms.  The Company will continue to monitor these series studying Cesium-131 based focal therapy of low risk prostate cancer.

Gynecologic Cancer

Individual seeds can also be placed via needle into the female reproductive tract for the treatment of various gynecologic cancers. This effort has been led by Dr. Jonathan Feddock, formerly of the University of Kentucky, and currently of Baptist Health Lexington. In June 2016, Dr. Feddock conducted two presentations on gynecological cancer patients who underwent treatment with permanent implantation of Cesium-131 brachytherapy seeds. In the first presentation, it was noted that 21 out of 26 recurrent cancer patients remained visually free of cancer at a median of 14 months after implantation which equates to 80.7% local control (J. Feddock, et al., Permanent interstitial re-irradiation with cesium-131: a highly successful second chance for cure in recurrent pelvic malignancies,Brachytherapy15 (S1)S78-9 (2016)). In the second presentation, a series of 22 women with pelvic cancer underwent Cesium-131 brachytherapy seed implantation with other forms of radiation therapy treating patients who were recently diagnosed and had not yet undergone any treatment. All these cancers were successfully controlled at a median follow-up of 16 months. Side effects using the Cesium-131 brachytherapy seeds were minor and all treatments were performed as outpatient procedures. (J. Feddock, et al., Outpatient interstitial implants integrating cesium-131 permanent interstitial brachytherapy into definitive treatment for gynecologic malignancies,Brachytherapy15 (S1):S93-4 (2016)). Dr. Feddock supplemented his prior publication with a presentation at the American Brachytherapy Society 2018 meeting describing a combination technique of Cesium-131 plus external beam radiation therapy for patients with advanced vaginal melanoma. The group concluded that this small series of five patients demonstrated the treatment to be “effective initial treatment” with a “favorable toxicity profile” (J. Feddock, et al. Permanent interstitial brachytherapy (PIB) using cesium-131 in vaginal melanoma – a new wide-local radiation technique.Int J Radiat Oncol Biol Phys102(3S); E281 (2016)).

Brain Cancer

Stranded Cesium-131 Sources

Starting in 2012, multiple institutions began utilizing Cesium-131 brachytherapy seeds loaded in braided strands for treatment of a variety of brain cancers. The application of Cesium-131 brachytherapy seeds loaded in braided strands to date has been primarily in salvage cases as a re-treatment for metastatic brain cancers where aggressive tumors had reoccurred following standard of care treatment.

From 2014 to present there have been numerous published abstracts and society presentations which have been presented and support the effectiveness of treating recurrent metastatic brain cancers with Cesium-131. Dr. Gabriella Wernicke and co-investigators at Weill Cornell Medical College at the NY Presbyterian Hospital have published multiple papers on the efficacy, favorable side-effect profile and cost-effectiveness of Cesium-131 brachytherapy seeds in the treatment of metastatic brain cancer. (A. G. Wernicke, et al., Clinical Outcomes of Large Brain Metastases Treated With Neurosurgical Resection and Intraoperative Cesium-131 Brachytherapy: Results of a Prospective Trial,Int J Radiat Oncol Biol Phys.98 (5):1059-1068 (2017); A. Pham, et al., Neurocognitive function and quality of life in patients with newly diagnosed brain metastasis after treatment with intra-operative Cesium-131 brachytherapy: a prospective trial, J Neurooncol127(1):63-71 (2016); A.G. Wernicke, et al., Surgical technique and clinically relevant resection cavity dynamics following implantation of cesium-131 brachytherapy in patients with brain metastases,Operative Neurosurgery12(1):49-60 (2016); A.G. Wernicke, et al., Cesium-131 brachytherapy for recurrent brain metastases: durable salvage treatment for previously irradiated metastatic disease,Journal of Neurosurgery 10.3171/2016.3.JNS152836 (Published online June 3, 2016); A.G. Wernicke, et al., The cost-effectiveness of surgical resection and cesium-131 intraoperative brachytherapy versus surgical resection and stereotactic radiosurgery in the treatment of metastatic brain tumors,J Neurooncol127(1):145-53 (2016)).

In May 2021, a group of physicians from Weill Cornell Medical College published a retrospective study comparing outcomes between patients with surgically removed brain metastases treated with Cesium-131 brachytherapy or by stereotactic radiosurgery (SRS) as adjuvant radiation therapy (i.e. following surgical removal) (Julie, DA, et al., A matched-pair analysis of clinical outcomes after intracavitary cesium-131 brachytherapy versus stereotactic radiosurgery for resected brain metastases.Journal of Neurosurgery134(5): 1447-1454. (2021)). While retrospective in nature, the authors of the study found a lower rate of local recurrence in the Cesium-131 treatment group (10% versus 28.3%).  Toxicity from the Cesium-131 implant was not significantly different from SRS treatment. Such findings continue to support the notion that Cesium-131 brachytherapy can benefit the management of surgically addressable brain metastases.

GammaTile™ Treatment for Brain Cancer

During fiscal 2013, the Company began providing technical assistance and supported selling Cesium-131 brachytherapy seeds for embedding in collagen tiles developed by physicians at Barrow Neurological Institute (Barrow) to treat malignant meningioma, primary brain cancers and metastases of cancers to the brain. These physicians from Barrow formed a company, GammaTile LLC, now GT Medical Technologies, Inc. (“GT Med Tech”), and further refined this technology which integrates Cesium-131 brachytherapy seeds and has resulted in the issuance of multiple patents to GT Med Tech for the treatment of brain cancers.

In December 2018 a paper was published in the Journal of Neurosurgery describing outcomes of patients who had experienced multiple reoccurrences of a tumor type known as meningioma following previous surgeries in conjunction with external beam radiation. Following treatment with Cesium-131, 90% of the treated tumors had no evidence of regrowth at the operative site (local control). The incidence of radiation necrosis, a common side effect to the brain from Cesium-131 brachytherapy seeds occurred in only 2 of the 20 treatments. (D. Brachman, et al. Resection and permanent intracranial brachytherapy using modular, biocompatible cesium-131 implants: result in 20 recurrent, previously irradiated meningiomas.Journal of Neurosurgery131(6), 1819-1828 (December 2018)).

This same group of physicians has presented clinical studies of GammaTile™ in the treatment of other brain cancers. 

In June 2019, Dr. David Brachman presented to the American Brachytherapy Society in Miami a series of patients experiencing the recurrence of a variety of brain cancers including meningiomas, high grade gliomas, and brain metastases.  (Brachman D., Youssef E., Dardis C., et al. Surgically Targeted Radiation Therapy: Safety Profile of Collagen Tile Brachytherapy in 79 Recurrent, Previously Irradiated Intracranial Neoplasms on a Prospective Clinical Trial. Brachytherapy18(S3):S35 (2019)). Dr. Brachman, who was awarded the Judith Stittman Best Abstract Award for this work, described GammaTile™ therapy utilizing Cesium-131 as having an excellent safety profile that “could help expand treatment options for this difficult cohort of patients”.  This work is important because recurrence of these hard-to-treat brain cancers leaves patients with very limited options due to their prior radiation treatments.

Clinical studies continue to demonstrate the safety and effectiveness of GammaTile™ in concert with surgery for the treatment of brain metastases (Nakaji, P., et al., Resection and Surgically Targeted Radiation Therapy for the Treatment of Larger Recurrent or Newly Diagnosed Brain Metastasis: Results From a Prospective Trial.Cureus12(11): e11570 (2020)). 

The feasibility of this same approach using GammaTile™ has also been demonstrated for recurrent primary brain cancers (Patel, K., et al., Cs-131 Intracavitary Brachytherapy as an Adjunct to Maximal Safe Resection for Locally Recurrent High-Grade Glioma. International Journal of Radiation Oncology*Biology*Physics 108(3): e670-e671 (2020)).

The Company collaborated with GT Med Tech to file an application with the U.S. FDA to clear GammaTile™ for clinical use and the FDA provided clearance on July 6, 2018. In January 2020 GammaTile™ Therapy launched full market release.  Prior to fiscal 2021, total revenues from sales to GT Med Tech have been less than ten percent (10%) of sales. GT Med Tech has indicated it intends to increase sales and marketing efforts during the Company’s fiscal year 2022, but there is no assurance that this will occur.

Head and Neck Cancer

Cesium-131 brachytherapy is also used in the treatment of recurrent head and neck cancers.  First reported by Bhupesh Parashar MD from Weill Cornell Medical College (A. Pham, et al.  Cesium-131 brachytherapy in high risk and recurrent head and neck cancers: first report of long-term outcomes.  J Contemp Brachytherapy7(6):445-52 (2015), the appeal of Cesium-131 brachytherapy in the treatment of these cancers lies in the motivation by the practitioner to avoid delivering dose to critical structures in the head and neck, including the arteries and the spinal cord.  Since these patients have already been subjected to external beam radiation therapy and may not tolerate another course, brachytherapy with Cesium-131 offers a significant re-treatment option.

In fiscal 2019 a group from Thomas Jefferson University published their initial results from a series of 15 patients with recurrent head and neck cancers treated with surgery and Cesium-131 brachytherapy (V. Bar-Ad, et al.  Single institution implementation of permanent (131)Cs interstitial brachytherapy for previously irradiated patients with resectable recurrent head and neck carcinoma.J Contemp Brachytherapy11(3):227-34 (2019)).  The authors of this paper concluded that Cesium-131 brachytherapy is a feasible treatment option for these patients.

In June 2020 the Company announced that an agreement had been completed with a group of physicians based at the University of Cincinnati. The agreement related to support for a Phase I/IIa clinical study of recurrent or metastatic head and neck cancers treated by a combination of surgical resection, Cesium-131 brachytherapy, and blockade of the programmed cell death protein 1 (PD-1) checkpoint using pembrolizumab therapy (Keytruda® from Merck & Co., Inc.). A pilot study, conducted in 2020, established the feasibility and safety of Cesium-131 brachytherapy in these patients (without Keytruda®) with no unexpected severe toxicities (Kharouta, M., et al., Permanent Interstitial Cesium-131 Brachytherapy in Treating High-Risk Recurrent Head and Neck Cancer: A Prospective Pilot Study.Front Oncol 11: 639480 (2021)).

Management believes that as immunotherapies (e.g. immune checkpoint inhibition) become more prevalent in the treatment of human cancers, the optimal combination with more conventional cancericidal therapies will be a key area of research interest. The Company has a collaboration agreement with MIM Software to deliver a treatment solution to more accurately target the placement of Cesium-131 for recurrent head and neck cancers.

Approval of Billing Codes for the Intraoperative Use of Cesium-131

In May 2020, the Centers for Medicare and Medicaid Services (CMS) approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting. The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131. DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.

The 64 ICD-10-PCS codes are important for the growing surgical applications of Cesium-131 in treating a significant range of hard to treat cancers includingprostate, brain, lung, head and neck, abdominal, breast, gynecological, pelvic, and colorectal cancers. The new codes took effect on October 1, 2020 and management believes they will provide greater impetus for usage as now CMS will be able to track the additional cost of the Cesium-131 seed itself and reimburse the hospital through the DRG payment system for this additional costs when an in-patient brachytherapy procedure is performed.

Industry Information

Prostate Cancer Treatment

According to the American Cancer Society, one in seven men will be diagnosed with prostate cancer during his lifetime. It is the most common form of cancer in men, and the second leading cause of cancer deaths in men following lung cancer. The American Cancer Society estimates there will be about 248,530 new cases of prostate cancer diagnosed and an estimated 34,130 deaths associated with the disease in the United States in 2021.

Prostate cancer treatment remains a key focus of the Company. Most doctors use the American Joint Committee on Cancer (AJCC) TNM system to stage prostate cancer. This system is based on three key pieces of information:

These factors are combined to determine an overall stage, using Roman numerals I through IV (1-4). The lower the number, the less the cancer has spread. A higher number, such as stage IV, means a more advanced cancer.

Once diagnosed, prostate cancer can generally be divided into either localized or advanced disease. Further, within the localized category the disease can be further categorized to one of the three “risk groups”: low, intermediate and high risk. As the risk increases so does the probability of advanced cancer at diagnosis and the probability of failing treatment with cancer progression or recurrence.

Low Dose Rate Permanent Brachytherapy (LDR). Isoray’s Cesium-131 brachytherapy seeds are an option in the treatment of prostate cancers of all risk levels of localized disease.In this approach, seeds of radioactive material are placed inside thin needles, which are inserted through the skin in the area between the scrotum and anus and into the prostate. The seeds are left in place as the needles are removed and give off low doses of radiation for weeks or months. Radiation from the seeds travels a very short distance, so the seeds can give off a large amount of radiation in a very small area. This limits the amount of damage to nearby healthy tissues.

Isoray’s Cesium-131 brachytherapy seeds are an option in the treatment of prostate cancers of all risk levels of localized disease. The diagnosis of prostate cancer – and especially low risk prostate cancer – has been potentially reduced with the introduction of guidelines dissuading the use of serum PSA screening at the general practitioner level as a means to detect prostate cancer early in men with no symptoms of prostate cancer. Effective July 2012, the U.S. Preventative Services Task Force (USPSTF) recommended against the use of the PSA test as a screening tool. As a result of the recommendation, prostate cancer diagnosis dropped by 12.2% the month after the recommendation and has continued to drop. (D.A. Barocas, et al., Effect of the USPSTF Grade D Recommendation against Screening for Prostate Cancer on Incident Prostate Cancer Diagnoses in the United States,J Urol194(6) The Journal of Urology (2015)).

In 2018, the USPSTF finalized its recommendation from advising against screening to the position that the decision for men between 55 and 69 to undergo PSA-based screening should be made by a man in consultation with his doctor. This change may contribute to an increased incidence of prostate screening (and therefore more prostate cancer cases) as opposed to an unscreened population – although this conclusion will await future trending information. To the knowledge of management, this is the latest information available.

Furthermore, the deferral of potentially cancer-eradicating (definitive) prostate cancer treatments such as surgery and radiation therapy has become more popular as some men with prostate cancer have decided to “watch” the cancer using a variety of diagnostic tools – a trend known as “active surveillance.”

As such, the industry has experienced an overall decrease in the number of low risk cases of prostate cancer diagnosed due to reduced PSA screening, as well as a larger number of men who are deferring treatment altogether at a higher rate than seen historically. Intense competition in the space due to numerous established treatment options along with added entrants such as robotic surgery and proton therapy has further eroded the overall brachytherapy market share. The industry continues to focus on the significant data that supports the use of brachytherapy in treating prostate cancer. Management believes the current review of cost effective treatment comparisons with other treatment options, the aging population worldwide and the efficacy of treatment has recently contributed to the revitalization of brachytherapy treatment for prostate cancer.

Minimally invasive brachytherapy such as that provided by the Company’s Cesium-131 brachytherapy seeds provides significant advantages over competing treatments including lower cost, equal or better survival data, fewer side effects, faster recovery time and the convenience of a single outpatient implant procedure that generally lasts less than one hour (Grimm, et al., Comparative analysis of prostate-specific antigen free survival outcomes for patients with low, intermediate and high risk prostate cancer treatment by radical therapy. Results from the Prostate Cancer Results Study Group,British Journal of Urology International, Vol. 109 (Suppl 1), (2012); Merrick, et al., Effect of prostate size and isotope selection on dosimetric quality following permanent seed implantation, Techniques in Urology Vol. 7 (2001); Potters, et al., 12-Year Outcomes Following Permanent Prostate Brachytherapy in Patients with Clinically Localized Prostate Cancer, Journal of Urology (May 2005); Sharkey, et al., Brachytherapy versus radical prostatectomy in patients with clinically localized prostate cancer, Current Urology Reports, (2002)).

In addition to permanent, LDR brachytherapy, such as Cesium-131, localized prostate cancer can be treated with prostatectomy surgery (RP for radical prostatectomy), external beam radiation therapy (EBRT), three-dimensional conformal radiation therapy (3D-CRT), intensity modulated radiation therapy (IMRT), dual or combination therapy, high dose rate brachytherapy (HDR), cryosurgery, hormone therapy, proton therapy and active surveillance (watchful waiting). The success of any treatment is measured by the feasibility of the procedure for the patient, morbidities associated with the treatment, overall survival, and cost. When the cancerous tissue is not completely eliminated, the cancer typically returns to the primary site, often with metastases to other areas of the body.

Prostatectomy Surgery Options. Laparoscopic and robotic prostatectomy surgeries are currently primarily used to remove all or portions of the prostate gland and seminal vesicles and tissue around it in order to minimize the damage that leads to impotence and incontinence, but these techniques require a high degree of surgical skill. To the knowledge of management, this is a common treatment choice.

External Radiation Therapy. Primary External Beam Radiation Therapy (EBRT), Three-dimensional Conformal Radiation Therapy (3D-CRT), Stereotactic Radiotherapy (SBRT), Intensity Modulated Radiation Therapy (IMRT) and Proton Therapy all involve directing a beam of radiation from outside the body at the prostate gland to destroy cancerous tissue. Treatments are received on an outpatient basis with the patient usually receiving five treatments per week over a period of several weeks (up to nine). While the treatments each last only a few minutes, getting the patient and equipment in place for each treatment takes longer. To the knowledge of management, this is the predominant treatment modality when using radiation therapy.

Proton beam radiation therapy. Proton beam therapy focuses beams of protons instead of x-rays on the cancer. Unlike x-rays, which release energy both before and after they hit their target, protons cause little damage to tissues they pass through and release their energy only after traveling a certain distance. This means that proton beam radiation can, in theory, deliver more radiation to the prostate while doing less damage to nearby normal tissues. Proton beam radiation can be aimed with techniques similar to 3D-CRT and IMRT.

Although in theory proton beam therapy might be more effective than using x-rays, so far studies have not shown if this is true. The machines needed to make protons are very expensive, and they are not available in many centers in the United States. Management believes proton beam radiation is not covered by all insurance companies.

Dual or Combination Therapy. Dual therapy is the combination of IMRT or 3-dimensional conformal external beam radiation and seed brachytherapy to treat extra-prostatic disease or high-risk prostate cancers. Combination therapy treats high risk patients with a course of IMRT or EBRT over a period of several weeks. When this initial treatment is completed, the patient must then wait for several more weeks to months to have the prostate seed implant. The process could also involve the seed implant being performed first, followed by the course of external radiation. As of the filing of this Form 10-K, management estimates that at least 25% of all U.S. prostate implants are now dual therapy cases. 

High Dose Rate Temporary Brachytherapy (HDR). HDR temporary brachytherapy involves placing soft nylon tubes (catheters) into the prostate gland and then giving a series of radiation treatments through these catheters. The catheters are then removed and no radioactive material is left in the prostate gland. A radioactive source typically containing Iridium-192 is placed into the catheters. This procedure is typically repeated multiple times over a period of several days while the patient is hospitalized.

Watchful Waiting and Active Surveillance. Because prostate cancer often grows very slowly, some men (especially those who are older or who have other major health problems) may never need treatment for their cancer. Instead, their doctor may suggest watchful waiting or active surveillance, terms physicians may use differently or interchangeably.

So far, no large randomized studies have compared active surveillance to treatments such as surgery or radiation therapy.

Additional Treatments. Additional, but less frequently used, treatments include cryotherapy, hormone therapy, and chemotherapy.

Clinical Series for Prostate Low Dose Rate Brachytherapy

Studies have demonstrated durably high rates of control following brachytherapy for localized prostate cancer out to 15 years post-treatment (J. Sylvester, et al., 15-year biochemical relapse free survival in clinical stage T1-T3 prostate cancer following combined external beam radiotherapy and brachytherapy; Seattle experienceInternational Journal of Radiation Oncology Biology Physics, Vol. 67, Issue 1, 57-64 (2007)). The cumulative effect of these studies has been the conclusion by leaders in the field that brachytherapy offers a disease control rate as high as surgery, though with a lesser side-effect profile than surgery (J.P. Ciezki, Prostate brachytherapy for localized prostate cancer, Current Treatment Options in Oncology Volume 6, 389-393 (2005)).

Long-term survival data for brachytherapy with I-125 and Pd-103 supports the efficacy of brachytherapy in the treatment of clinically localized cancer of the prostate gland. Clinical data indicate that brachytherapy offers success rates for early-stage prostate cancer treatment that are equal to or better than those of RP or EBRT. While historically clinical studies of brachytherapy have focused primarily on results from brachytherapy with I-125 and Pd-103, management believes that these data are also relevant for brachytherapy with Cesium-131. In fact, it appears that Cesium-131 offers comparable and potentially improved clinical symptom outcomes over I-125 and Pd-103, perhaps due to its shorter half-life. (A.B. Shah, et al., A comparison of AUA symptom scores following permanent low dose rate prostate brachytherapy with iodine-125 and cesium-131, Brachytherapy12 (Suppl. 1) S64 (2013)). In addition, a report from 2017 describes favorable long-term quality of life outcomes following Cesium-131 brachytherapy in the treatment of prostate cancer (S.M. Glaser, et al., Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium-131,Int J Radiat Oncol Biol Phys.98(5):1053-1058 (2017)).

In May 2017 a collaborative group of Canadian researchers published the results of a study that randomized intermediate- to high-risk localized prostate cancer to an external beam dose escalation and a permanent implant brachytherapy dose escalation (W. J. Morris, et al.Androgen Suppression Combined with Elective Nodal and Dose Escalated Radiation Therapy (the ASCENDE-RT Trial): An Analysis of Survival Endpoints for a Randomized Trial Comparing a Low-Dose-Rate Brachytherapy Boost to a Dose-Escalated External Beam Boost for High- and Intermediate-risk Prostate Cancer, International Journal of Radiation Oncology, Biology, Physics Volume 98, 275-285, 2017). These patients all underwent standard external beam radiation therapy and hormonal therapy. This study, known as the “ASCENDE-RT” study, demonstrated a significant therapeutic advantage to the patients who underwent permanent implant brachytherapy boost, reporting a 20% advantage (83% versus 63%) in biochemical relapse-free survival at nine years following treatment.

This study is the first in many years to successfully randomize a group of newly diagnosed, localized prostate cancer patients and demonstrate a statistically significant advantage to one treatment over another – in this case iodine-125 brachytherapy boost over external beam radiation therapy boost. The impact on the number of patients considered for “combination therapy” (external beam and brachytherapy) could be substantial, especially once men are informed of these study results.

Sexual impotence and urinary incontinence are two major concerns men face when choosing among various forms of treatment for prostate cancer. Studies have shown that brachytherapy with iodine and palladium resulted in lower rates of impotence and incontinence than surgery (C. Buron, et al., Brachytherapy versus prostatectomy in localized prostate cancer: results of a French multicenter prospective medico-economic study, International Journal of Radiation Oncology, Biology, Physics Volume 67, 812-822 (2007)). Combined with the high disease control rates described in many studies, these findings have driven the adoption of brachytherapy as a front-line therapy for localized prostate cancer.

Comparing Cesium-131 to I-125 and Pd-103 Clinical Results

Management believes that the Cesium-131 brachytherapy seed has specific clinical advantages for treating cancer over I-125 and Pd-103, the other isotopes currently used in brachytherapy seeds. The table below highlights the key differences of the three isotopes. 

In early 2021, the long-term follow-up data from a prospective randomized trial of Cesium-131 and Iodine-125 was published (Moran, B. J., et al., Long-term outcomes of a prospective randomized trial of (131)Cs/(125)I permanent prostate brachytherapy.Brachytherapy 20(1): 38-43 (2021)).  This long-term data with a nine-year median follow-up concluded that “short- and long- term urinary, sexual, and bowel quality of life, as well as long-term biochemical control were comparable” between the two isotopes. The data supports Cesium-131 as an effective long-term solution for these patients and supports Cesium-131 as a viable choice for prostate cancer patients.

Improved side-effect profile.

In addition to the cancer-related outcomes described for prostate brachytherapy, a significant portion of patients who undergo I-125 or Pd-103 brachytherapy experience acute urinary irritative symptoms following treatment – more so than with surgery or external beam radiation therapy (S.J. Frank, et al., An assessment of quality of life following radical prostatectomy, high dose external beam radiation therapy, and brachytherapy Iodine implantation as monotherapies for localized prostate cancer,Journal of Urology Volume 177, 2151-2156 (2007)). These irritative symptoms can range from an increased frequency of urination to significant pain upon urination. Because the portion of the urethra that runs through the prostate takes high doses from the implant, these side effects are fairly common following prostate brachytherapy.

Studies show that Cesium-131, with the shortest available half-life of the commonly used implantable isotopes, results in a quicker resolution of these irritative symptoms based on the shorter time interval over which normal tissue receives radiation from the implanted sources than for longer lived isotopes such as I-125. (A. Shah, et al., A comparison of AUA symptom scores following permanent low-dose-rate prostate brachytherapy with Iodine-125 and Cesium-131, Brachytherapy12(SI) S64 (2013)). These results are seemingly confirmed with long-term quality of life data as described by a study from UPMC, where it was suggested that patients treated with Cesium-131 prostate brachytherapy were able to recover and maintain their baseline quality of life in the long term. Glaser, S. M., et al. Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium-131.Int J Radiat Oncol Biol Phys98(5): 1053-1058 (2017).

The advantage of the Company’s Cesium-131 brachytherapy seed is the resolution of urinary side effects as pictured in the graphic below has been observed in a second study, presented at the 2013 Annual Meeting of the American Brachytherapy Society (A.B. Shah, et al). The following graph is a comparison of elevated side effect (AUA) symptom scores following permanent low dose rate prostate brachytherapy with Iodine-125 and Cesium-131. (Brachytherapy12(Suppl. 1) S64 (2013)):

As seen in the plot of these AUA scores, the duration of an elevated side effect score profile resolved to pre-treatment levels more quickly with the Cesium-131 group than with the Iodine-125 group. All patients were treated at the same institution by the same physicians, and the difference in the time to resolution was considered significant.

Further evidence of the favorable side effect profile of Cesium-131 was published by a group of physicians from the University of Pittsburgh Medical Center (UPMC) in August 2017 (Glaser Long-Term Quality of Life in Prostate Cancer Patients Treated With Cesium-131.International Journal of Radiation Oncology*Biology*Physics 2017 Aug 1;98(5):1053-1058. doi: 10.1016/j.ijrobp.2017.03.046. Epub 2017 Mar 31. PMID: 28721888). This report concluded that only minimal long-term changes were noted to the urinary and bowel quality of life measures, and that men treated with Cesium-131 for their prostate cancers are able to return to baseline measure of quality of life after treatment.

Brain Cancer Treatment Options

An estimated 24,530 new cases of malignant primary tumors of the brain or spinal cord are expected to be diagnosed in 2021. About 18,600 people are expected to die from brain and spinal cord tumors in 2021 (American Cancer Society, 2021). In addition to primary tumors, metastasis of brain tumors from other body sites are estimated at over 65,000 new cases per year.

On July 6, 2018, the Company and GT Med Tech received FDA 510(k) regulatory clearance for the brachytherapy technology, known as GammaTile™ Therapy that incorporates proprietary Cesium-131 seeds within customizable collagen-based carriers for the treatment of recurrent brain tumors. On January 27, 2020, GT Med Tech announced that it had received clearance from the FDA for an expanded indication that will allow patients of newly diagnosed malignant brain tumors to be treated by GammaTile™ Therapy.

Isoray Medical and GT Medical Technology executed a collaborative development agreement and an exclusive ten-year supply agreement for GammaTile™ Therapy in fiscal year 2018. In fiscal year 2019, the Company and GT Med Tech amended and restated the manufacturing and supply agreement which now expires in April 2029. The amended agreement requires GT Med Tech to provide a twelve-month rolling forecast on a monthly basis.  The first calendar month of each rolling forecast becomes a binding purchase order and the remaining eleven months are a non-binding forecast.  The amended agreement also adjusted some pricing due to updated procedures, allows GT Med Tech to move the loading of the GammaTile™ to another non-Company facility provided GT Med Tech continues to purchase Cesium-131 seeds exclusively from the Company, and also governs how GammaTile™ process improvement projects will be scoped and billed. GammaTile™ leverages Cesium-131’s unique ability to deliver a highly targeted dose of intense radiation treatment while limiting radiation exposure to surrounding tissue.

CMS established an ICD-10-PCS code for GammaTile™, 00H004Z (insertion of radioactive element, Cesium-131 implant into brain, open approach).  CMS also mapped GammaTile™’s ICD-10-PCS code to DRG 023.  DRG 023 is the highest paying DRG for craniotomy procedures.  ICD-10-PCS is a code set designed for use in the hospital in-patient setting in the United States.  ICD-10-PCS codes can be used to identify and track differences in resource consumption, quality, and patient outcomes for different inpatient hospital procedures.  ICD-10-PCS codes are distinguishable from the MS-DRG (Medicare Severity-Diagnosis Related Group) codes that are commonly used to assign payment levels to inpatient hospital admissions for use by Medicare and other health care insurers. Along with Medicare, commercial carriers and many Medicaid programs use the ICD-10-PCS and DRG code sets, including DRG 23.

GT Med Tech has reimbursement for GammaTile™ under ICD-10PCS-00H004Z and MS-DRG 023 which reimburses hospitals in the inpatient setting and will continue to roll out its sales and marketing strategy for release of GammaTile™. In January 2020, GammaTile™ Therapy launched a full market release.  Prior to fiscal 2021, total revenues from sales to GT Med Tech have been less than ten percent (10%) of revenues. GT Med Tech has indicated it intends to increase sales and marketing efforts during the Company’s fiscal year 2022, but there is no assurance that this will occur.

In addition to GammaTile™ Therapy, the Company’s customers can also use braided strands containing Cesium-131 brachytherapy seeds for the treatment of brain cancer. Cesium-131 brachytherapy seeds deliver 90% of their dose in 33 days and are therefore well-suited to use with bioabsorbable mesh, single seed applications, implantable strands, and by implantable device.

Gynecological Cancer Treatment Options (Cervical, Vaginal and Vulvar Cancer)

An estimated 28,780 new cases of cervical (14,480), vaginal (8,180) and vulvar (6,120) cancers are expected to be diagnosed in the United States in 2021. A combined estimate of 7,370 deaths are expected to occur from cervical, vaginal and vulvar cancers in the United States in 2021 (American Cancer Society, 2021). In addition to brachytherapy to treat gynecological cancers such as cervical, vaginal and vulvar cancers, other treatment options include surgery, laser surgery, radiation therapy, chemotherapy, and topical treatments.

During 2016, two abstracts (J. Feddock, et al., Permanent interstitial re-irradiation with cesium-131: a highly successful second chance for cure in recurrent pelvic malignancies,Brachytherapy15(S1):S78-9 (2016); J. Feddock, et al., Outpatient interstitial implants - integrating cesium-131 permanent interstitial brachytherapy into definitive treatment for gynecologic malignancies, Brachytherapy15(S1):S93-4 (2016)) and presentations were presented at the World Brachytherapy Conference in San Francisco on the treatment of Re-Irradiation with Cesium-131 in recurrent pelvic malignances in women who have recurrent cancers. Physicians at the University of Kentucky, College of Medicine reported local control in 80.7% after Cesium-131 implantation for the recurrent patients and reported successful control of 22 women with pelvic cancer that had not had previous treatment. Based upon the positive results seen in the Cesium-131 treatment of recurrent gynecological cancers, physicians at the University of Kentucky are currently moving Cesium-131 treatment into the primary treatment of these cancers.

In April 2017, the group of physicians from the University of Kentucky published a paper in the journal Brachytherapy that described the early experience with a template-based approach using Cesium-131 in the treatment of gynecologic cancers. Although reporting on only five patients, the University of Kentucky physicians demonstrated the feasibility and safety of replacing a high dose-rate isotope (Iridium-192) with Cesium-131. This report builds on the earlier published and presented work that strongly suggests a role for Cesium-131 in the treatment of gynecologic cancers.

Head and Neck Cancer Treatment Options

An estimated 54,010 new cases of head and neck cancer are expected to be diagnosed in the United States in 2021 (American Cancer Society, 2021).

Surgery is the most common option to treat head and neck cancers. Chemotherapy is often used in conjunction with surgery or radiation therapy depending on the type and stage of the cancer. External beam radiation therapy and brachytherapy have been used together or in combination with surgery or chemotherapy. Immunotherapy is a newer treatment option for advanced or recurrent cancer (American Cancer Society, 2021).

Cesium-131 brachytherapy seeds allow oncologists to add targeted radiation treatment to head and neck cancers after surgical resection. This targeted radiation treatment is especially needed in patients whose neck cancer has recurred following previous radiation therapy. Often these patients cannot tolerate further external beam radiation therapy for fear of over radiating critical head and neck structures.

Management believes Cesium-131 brachytherapy seeds continue to represent an improved approach to brachytherapy treatment of specific head and neck cancers.

Lung Cancer Treatment Options

An estimated 235,760 new cases of lung cancer are expected in 2021, accounting for 12% of all cancer diagnoses in the United States. Approximately 22% of all cancer deaths are from lung cancer and it accounts for the most cancer related deaths in both men and women in the United States. An estimated 131,880 deaths will result from lung cancer in 2021 (American Cancer Society, 2021).

Lung cancer has historically been treated utilizing surgery, radiation therapy, chemotherapy, immunotherapy and targeted therapy including LDR brachytherapy. More than one kind of treatment may be used in combination with others, depending on the stage of the patient’s cancer and other factors. (American Cancer Society, 2021).

The Company believes that Cesium-131, with its shorter half-life (faster rate of decay) and relatively high energy, is better suited for treating lung cancer in Stages I and II than I-125. The bioabsorbable mesh used in this procedure to apply the Cesium-131 brachytherapy seeds generally dissolves after about 45 days. Cesium-131 delivers 90% of its dose in 33 days and is therefore well-suited to use with bioabsorbable mesh. A report was published in May of 2015 describing outcomes from a series of 52 patients treated with a limited surgical resection and Cesium-131 brachytherapy. (B. Parashar, et al., Analysis of stereotactic radiation vs. wedge resection vs. wedge resection plus Cesium-131 brachytherapy in early stage lung cancer,Brachytherapy14 (5):648-54 (2015)).

Our Strategy

The key elements of Isoray’s strategy for fiscal year 2022 includes:

Continue to Invest in Sales and Marketing Development Activities. Prostate cancer treatment represents the original and core business for the Company’s Cesium-131 product. With long-term follow-up data relating to biochemical (PSA) control of prostate cancer now presented to the prostate cancer field, Isoray plans to aggressively increase the number of centers using Cesium-131 through its direct sales force and through its international distributors. Because intermediate- to long-term follow-up data is required to convince clinicians and patients to consider any particular therapy for localized prostate cancer, the availability of long-term data with Cesium-131 in the treatment of prostate cancer represents a significant milestone. Isoray hopes to capture more of the incremental market growth if and when seed implant brachytherapy recovers market share from other treatments, take market share from existing competitors, and expand the use of Cesium-131 as a dual therapy option where it has experienced success. In 2021, the Company hired a new Vice President of Sales and Marketing who brings twenty-five years industry experience to lead the initiatives in growing the core prostate business, as well as identifying new sites of care from the traditional HOPD setting, which will result in expanded patient access to care and treatment efficiencies. The marketing team works in conjunction with the local sales team members to deliver value to customers through several channels. The Company continues to invest in digitally integrated, data-focused, and virtual learning platforms that align our products and services with our clinicians' needs. The Company believes that this approach will result in increased awareness to customers and patients, and to faster adoption of Cesium-131 by clinical teams.

Isoray recently added the Proximie virtual communication platform to our digital resources to enhance our physician training efforts. This technology is specifically designed to assist clinicians by sharing all aspects of a medical procedure in real time as well as having the ability to review sessions that have been archived in a library. We are working to achieve greater engagement with US leading teaching and research institutions in these efforts. The Company believes this will help us get back to our pre-pandemic training levels. In addition, the Company is partnering with the American Brachytherapy Society (ABS) to support ABS’ training initiative 300 in 10 which is designed to train 300 teams in brachytherapy in 10 years.

BluBuild™ Loader. The Company believes that customers perform prostate brachytherapy procedures via one of several general procedure techniques, including (but not limited to): pre-plan techniques, intra-operative techniques, and real-time techniques. Further, the Company believes that customers are comfortable with their techniques, and want products to facilitate their preferred methods. Competitors to the Company provide a set of standard products (including loose seeds, seeds loaded in cartridges, and seeds pre-loaded in needles) to meet the customer needs. Further, Theragenics and Becton-Dickenson (BD), formerly Bard Brachytherapy, have products that support intra-operative and real-time techniques that allow for stranding or linking seeds together in custom configurations in the operating room. These products allow physicians to gain the benefits of stranded or linked seeds while still allowing for customization to the patient's anatomy, as determined at the time of the procedure. The Company believes that approximately 25% of procedures are performed with some level of customization in the operating room.

It is this segment of the market – customers looking to customize their procedures to the patient's anatomy at the time of the procedure – that the Company expects to address with its Blu Build™ loading device. The Blu Build™ loading device efficiently configures strands in the operating room, allowing the clinician to make determinations about the product configurations with the most recent picture of the patient’s anatomy. The Company believes that this technique may provide advantages in some brachytherapy products and will provide a better solution for this market segment. 

During fiscal year 2019, the Company released the Blu Build™ loader in a limited market release. Based on feedback from the limited market release, the Company adjusted certain intricacies of the design. This is the first internally developed proprietary delivery device in the Company's history. The Company continues to refine the design of the Blu Build™ loader, however, the COVID-19 pandemic impacted the sourcing of parts and the ability to fully market the Blu Build™ loader to new accounts. This led to a slower than expected release of Blu Build™ during fiscal 2020 and 2021. 

Management believes we have enough inventory to support our current customers and new customers in the pipeline and we have resolved our sourcing of parts. Management believes that the Blu Build™ loader will be able to gain greater market acceptance in fiscal 2022, but there is no assurance that this will occur.

Commercialization of GammaTile™ Therapy for the treatment of primary and recurrent brain metastases. The utilization of the GammaTile™ system over the past five years has developed a product with consistent and repeatable results as evidenced by the June 2016 presentation at the Society of Neurologic Oncologists. Management intends to continue to support and facilitate the commercialization of the GammaTile™ Therapy by GT Medical Technologies product.

In January 2018 the Company entered into a Manufacturing and Supply Agreement with GT Med Tech and in April 2019 the Company entered into an Amended and Restated Manufacturing and Supply Agreement with GT Med Tech (collectively the Manufacturing and Supply Agreement). Pursuant to the Manufacturing and Supply Agreement, the Company has agreed to exclusively supply Cesium-131 seeds to be incorporated into the GammaTile™ Therapy and manufacture the GammaTile™ Therapy product for end users designated by GT Med Tech.

In January 2019, GT Med Tech, which is the sole commercial agent of GammaTile™ Therapy, began a limited market release and in January 2020 began a full market release. The Company continued to provide assistance to GT Med Tech for various process improvement projects on a time and materials basis on a limited basis during fiscal year 2021. To date revenues realized from the process improvement projects have been nominal.

GammaTile™ Therapy was assigned a specific ICD-10 PCS code by the CMS for reimbursement purposes in the hospital setting. 

Increase utilization of Cesium-131 in treatment of other solid tumor applications such as brain, gynecological and other cancers. The Company has clearance from the FDA for its premarket notification (510(k)) for Cesium-131 brachytherapy seeds that are preloaded into bioabsorbable braided sutures and bioabsorbable braided sutures attached to bioabsorbable mesh. This FDA clearance allows commercial distribution for treatment of brain, gynecological, head and neck and lung tumors as well as tumors in other organs. The Company continues to sell Cesium-131 products to physicians treating brain, gynecological, head and neck and lung cancer while continuing to support the compilation of treatment outcomes for publication. Isoray will continue to explore licenses or joint ventures with other companies to develop the appropriate technologies and therapeutic delivery systems for treatment ofcertain other solid tumors.

Early clinical data support management’s initiatives into brain cancers, gynecological, head and neck, and early stage non-small cell lung cancers. Local control – defined as success in preventing the re-growth of cancer in the immediate vicinity of the treatment area – has been excellent to date.

Obtaining More Favorable Reimbursement Codes. In May 2020, CMS approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting. The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131. DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.

The 64 ICD-10-PCS codes are important for the growing surgical applications of Cesium-131 in treating a significant range of hard to treat cancers including brain, lung, head and neck, abdominal, breast, gynecological, pelvic, and colorectal cancers. The new codes took effect on October 1, 2020.

Support Clinical Research and sustained product development. The publication and presentation of speculative and real-world data contribute to the acceptability of Cesium-131 in the oncologic marketplace. Discussion in the medical-scientific community of established and novel Cesium-131 applications is considered a prerequisite to expansion into untapped markets. The Company structures and supports clinical studies on the therapeutic benefits of Cesium-131 for the treatment of solid tumors and other patient benefits. We are and will continue to support clinical studies with several leading radiation oncologists to clinically document patient outcomes, provide support for our product claims, and compare the performance of our seeds to competing seeds. Isoray plans to sustain long-term growth by implementing research and development programs with leading medical institutions in the U.S. and other countries to identify and develop other applications for Isoray’s core radioisotope technology. The Company has deployed a secure, regulatory environment compliant, online information system capable of large usable databases to participating investigators.

During fiscal year 2020, a presentation was accepted at the annual meeting of the American Society for Radiation Oncology (ASTRO) that reported multi-center outcomes following Cesium-131 treatment of recurrent head & neck cancers following surgery. However, the annual meeting of the American Brachytherapy Society (ABS), where Cesium-131 studies are often reported, was canceled for the Spring of 2020 due to the COVID-19 pandemic. The Company will continue to seek to increase the number of reports made to society meetings and the peer reviewed literature in order to seek to enhance the standing of its products in the scientific community.

The Company also continues to consult with noted contributors from the medical physics community and expects that articles for professional journals regarding the benefits of and clinical trials involving Cesium-131 will continue to be submitted.

In addition, the Company continues to support the clinical findings of the various protocols and publications through presentations by respected thought leaders. The Company will continually review and update all marketing materials as more clinical information is gathered from the protocols and studies. Apart from clinical studies and papers sponsored by the Company, several physicians across the country have independently published papers and studies on the benefits of Cesium-131.

Targeted Expansion into International Markets. The Company believes that in addition to a significant domestic market for its products, there exists a potential international demand for Cesium-131. The current global market for permanent prostate brachytherapy is larger than the domestic market. Further, many of the surgical applications the Company is exploring domestically may also have significant international opportunities. Due to the pandemic most of these geographical regions have limited access, capacity or capability to introduce new products at this time.  The Company will continue to monitor world-wide progress to open access to care for patients who would benefit from our products.

Historically, the Company has placed limited resources towards realizing these international opportunities instead keeping the focus of expanding our domestic market share. The Company has provided Cesium-131 product, when requested, to certain markets with potential distributors, however, this distribution has been limited. Instead of relying solely on perceived demand by a potential distributor which believes in the viability of the Company’s product in a given country, the Company will continue to consider international markets and only enter those markets based on a potential market meeting some or all of the following criteria:

On July 14, 2017, the Company entered into an agreement with a distributor in Russia that provides for the ability to sell the entire product line in the Russian Federation. The agreement had a one-year initial term with two additional one-year terms which automatically renew unless either party invoke their right to terminate earlier under the provisions of the agreement. Although sales have been minimal under this agreement, the two parties elected to have the agreement automatically renew through July 2020. On September 22, 2020, the Company entered into an agreement with the same distributor. The agreement has a one-year initial term with two additional one-year terms which automatically renew unless either party invoke their right to terminate earlier under the provisions of the agreement. The agreement has continued to automatically renew, but there have been no sales in the past two fiscal years.

In fiscal year 2020, the Company entered into a three-year agreement with a distributor in India that provides for the ability to sell Cesium-131 brachytherapy seeds in different configurations within India. Due to the ongoing COVID-19 global pandemic, there have been no sales to date under this agreement.

In fiscal 2019, due to significant expense involved in renewal, the Company declined to renew the CE Mark on its Cesium-131 seed for distributing in European markets.  This will limit European market opportunities to sell / distribute the seed.  The Company will periodically re-evaluate the opportunity associated with having the CE Mark, and, if appropriate, reapply for the mark.

COVID-19 / National Pandemic Impact and Response. Isoray continues to execute on the core strategic elements discussed above.  Still, there have been aspects of the COVID-19 pandemic that continue to impact our commercial efforts.  Initially, customers and potential customers limited vendor access to their facilities.  This required the sales team to use other techniques to connect with our customers, including video conference and ongoing email and telephonic conversations.   Further, the onset of the pandemic impacted patient treatment schedules and physician wellness and screening visits.  This has resulted in inconsistent patient demand for treatment and referral patterns through the early months of the pandemic that reappeared with the escalation of the COVID-19 Delta variant. As healthcare organizations continue to limit elective procedures based on COVID-19 hospitalization rates, we are supporting some customers shifting site of care from the traditional hospital outpatient (HOPD) to the ambulatory surgery center (ASC). We cannot anticipate when patient treatment volume and referrals will return to pre-pandemic conditions.  The pandemic has given us the opportunity to look at more efficiencies in our sales process, including customer communication techniques and strategies.  It has also allowed the full incorporation and increased utilization of our customer relationship management (CRM) tools, which should create a stronger basis for on-going and future customer communications, as well as implementing a virtual learning platform for educating our treating physician customers.

The new Delta variant and other variants of COVID-19 could create disruptions to our business and particularly to our access to customers and potential customers. The impact of the Delta variant and other variants cannot be predicted at this time, and could depend on numerous factors, including vaccination rates in the general public, how effective the COVID-19 vaccines and boosters are against the Delta variant and other variants, the response of governmental bodies and regulators, and the severity and duration of the outbreak among others. 

Cesium-131 Manufacturing Process and Suppliers

Product Overview

Isoray markets the CS-1 Cesium-131 brachytherapy seed for the treatment of prostate cancer, brain cancer, lung cancer, head and neck cancers, gynecological cancer, pelvic/abdominal cancer, and colorectal cancer. The Company intends to market Cesium-131 for the treatment of other malignant diseases as opportunities are identified in the future through the use of existing proven technologies that have received FDA-clearance. The strategy of utilizing existing FDA-cleared technologies reduces the time and cost required to develop new applications of Cesium-131 and deliver them to market.

Cesium-131 is a radioactive isotope that can be produced by the neutron bombardment of Barium-130 (Ba-130). To produce the Cesium-131 brachytherapy seed, a proprietary chemical separation is performed that results in 99.9% pure Cesium-131 isotope. Purified Cesium-131 is adsorbed onto a ceramic core containing a gold X-ray marker. This internal core assembly is subsequently inserted into a titanium capsule that is then welded shut and becomes a sealed radioactive source and a biocompatible medical device.

Product Offerings

In addition to providing loose seeds to customers, most brachytherapy manufacturers offer their seed product to the end user packaged in various configurations provided in a sterile or non-sterile package depending on the customer’s preference. These include:

In fiscal year 2021, the Company delivered approximately 44% of its Cesium-131 seeds to customers configured in Mick^® cartridges, approximately 31% of its Cesium-131 seeds configured in stranded and pre-loaded in a needle form, 16% of its Cesium-131 seeds configured in a braided strand form, 2% of its Cesium-131 seeds sold in a loose configuration and the remaining 7% configured in either a pre-loaded in a needle, Blu Build™, or stranded form.

Maintain ISO Compliance

In August 2008, the Company obtained its initial ISO 13485:2003 certification and has subsequently been ISO certified under various compliance standards since then.

In April 2018, the British Standards Institute (BSI) certified the Company’s successful transition to ISO 13485:2016. This transition moved Isoray’s quality system into the current state of the art Quality Management System per the ISO standard. The Company is subject to a recertification audit by BSI every three years, two annual maintenance audits and one additional unannounced audit during each three-year period for a total of four audits during each three-year period. The Company had its first annual surveillance audit in March 2019. The Company successfully passed the audit with only one minor nonconformance found by BSI, which was subsequently resolved. The Company was recommended for continued certification.

In January 2020, BSI conducted a microbiology assessment of the operations at our manufacturing facility in Richland, Washington to ISO 13485:2016 medical device standards. There were zero non-conformances found by BSI. The Company was recommended for continuing certifications. In February-March 2020 BSI conducted a re-certification audit of the Company to ISO 13486:2016 general requirements. The Company successfully passed the audit with three minor non-conformances. The minor non-conformances were subsequently resolved.  The Company was recommended for continued certifications.

In January 2021, BSI conducted a remote surveillance assessment audit of our quality management system.  The Company successfully passed the audit with three minor non-conformances.  The minor non-conformances were subsequently resolved.  The Company was recommended for continued certifications.  The company is scheduled for a microbiology assessment in February of 2022, and a surveillance audit in March-April 2022.

Isotope Suppliers

The Company has identified key reactor facilities in Russia, the U.S., Canada, Poland, Belgium, and South Africa, but is currently solely relying on and has a contract with one Russian supplier with access to two reactors. On July 30, 2019, Medical entered into a new supply agreement with JSC Isotope, its historical Russian supplier. With this agreement, Medical agreed to purchase Cesium-131 from JSC Isotope within the quality standards and within the time periods specified, through December 31, 2020.  On August 26, 2020, the Company entered into a new supply contract (the “New Agreement”) with JSC Isotope. Pursuant to the New Agreement, Medical will purchase Cesium-131 from JSC Isotope, at the quality standards, volume, and pricing indicated in the New Agreement, from August 26, 2020 through December 31, 2021. On February 10, 2021, an addendum was signed updating delivery locations. On March 18, 2021, the Company entered into a new supply contract with JSC Isotope pursuant to which the Company will purchase Cesium-131 for a term from March 18, 2021 through March 31, 2023.

From November 2017 to July 2018, the Company received supply under the JSC Agreement from the Research Institute of Atomic Reactors (RIAR) during the outage of INM. On August 25, 2017, the Company executed a consignment inventory agreement with MedikorPharma-Ural LLC (“Medikor”) to process the Company’s enriched Barium at a specific nuclear reactor in Russia beginning in November 2017. The term of the consignment agreement is 10 years.

In order to maximize the efficiency of Cesium-131 production from the specific reactor using the “enriched” Barium, (the RIAR reactor) (when supply comes from this reactor), the Company has consigned its supply of “enriched” Barium to the RIAR facility. “Enriched” in this context refers to a Barium Carbonate supply that contains a greater proportion of the non-radioactive isotope Barium-130 than is found in nature. This higher proportion of Barium-130 leads to a greatly increased yield of Cesium-131 when it is placed in a high flux neutron environment as is available at RIAR and a small number of other reactors worldwide.

INM returned from its planned outage in August 2018. INM was again the 100% supplier of Russian-sourced Cesium-131 beginning in August 2019 when RIAR began a planned outage that lasted until the summer of 2020. Since the planned outage of RIAR ended, we are now able to obtain sufficient supplies of Cesium-131 from INM. However, as the INM facility is reducing capacity and ultimately shutting down later in 2021, the Company intends to use the RIAR facility again.  On September 9, 2021, the Company entered into a Consignment Agreement with MedikorPharma-Ural LLC, a company incorporated in accordance with the laws of Russia.  Pursuant to the Consignment Agreement, the Company will purchase 6,000 mg of enriched barium carbonate for $720,000, which is needed for the manufacture of Cesium-131, and consign this inventory to Medikor. It is expected that beginning in October 2021, Medikor will use the barium carbonate consigned by the Company and contract with a third-party manufacturer to produce Cesium-131. Pursuant to the Consignment Agreement, Medikor will pay the Company varying US dollar amounts per curie of Cesium-131 the Company purchases.  It is further expected that a separate third-party contractor will receive the Cesium-131 produced by the third-party manufacturer and will sell the Cesium-131 exclusively to the Company.  The Company anticipates obtaining enough Cesium-131 under this arrangement to obtain over 5,000 curies of Cesium-131 through the end of the term, December 31, 2030, but there is no assurance as to whether the Consignment Agreement will be terminated before this full amount is obtained and other supply sources are used, nor is there assurance that the agreements with the third-parties will be executed.

The Company has not received any isotope from a domestic supplier since January 2019 and has no plans to use domestic suppliers unless supply of Cesium-131 is not available from Russia.

Management believes that failure to obtain deliveries of Cesium-131 from its Russian supplier, JSC Isotope (which provides supply from both the INM and RIAR reactors), would have a material adverse effect on seed production.

Quality Controls

Since July 2008, Isoray has met Quality Systems Inspection Techniques (QSIT) with no report of deviations from Good Manufacturing Practices or list of observations (FDA Form 483) issued. In August 2017, the FDA conducted an announced QSIT inspection of the Richland facility and again, did not find any nonconformance to U.S. medical device regulations and did not issue a Form 483.

In October 2015, Isoray underwent an unannounced inspection by British Standards Institution (BSI), Isoray’s representative to the European Union and designator of Isoray’s CE Marks with no nonconformities found. BSI also conducted a microbiologic audit and a surveillance audit in November 2015 and March 2016 respectively. In March 2017, BSI conducted its full system inspection and recertification and found no nonconformities to ISO 13485:2003 medical device standards. In April 2018, BSI certified the Company’s successful transition to ISO 13485:2016. This transition moved Isoray’s quality system into the current state of the art Quality Management System per the ISO standard. The Company had its first annual surveillance audit in March 2019. The Company successfully passed the audit with only one minor nonconformance found by BSI, which was subsequently resolved. The Company was recommended for continued certification.

In January 2021, BSI conducted a remote surveillance assessment audit of our quality management system.  The Company successfully passed the audit with three minor non-conformances.  The minor non-conformances were subsequently resolved.  The Company was recommended for continued certifications.  The Company is scheduled for a microbiology assessment in February of 2022, and a surveillance audit in March-April 2022.

The Federal Aviation Administration (FAA) also conducted an unannounced audit in May 2016. Because Isoray ships hazardous materials on flights in the U.S., Isoray is subject to regulation by the FAA. No findings were made in this audit.

Regulatory Developments

In July of 2017, the Company received a five-year renewal from the Washington State Department of Health (WA DOH) in response to its application to renew the Company’s Radioactive Materials License. The WA DOH acts as an agent of the U.S. Nuclear Regulatory Commission and grants the Company its ability to receive, inventory and ship radioactive material.

During fiscal year 2019, the Company elected to not renew its CE Mark due to no sales activity in the European Union, limited interest in Cesium-131 due to the pricing and reimbursement environment and changing European Union registration requirements that would have required significant investment into additional clinical trials. Therefore, as the Company looks at international opportunities to sell Cesium-131 seeds it will focus on those markets outside of the European Union.

During fiscal year 2021, the Company received FDA 510(k) clearance for use of C4 Imaging's Sirius® positive-signal MRI (Magnetic Resonance Imaging) markers with the Company's Cesium-131 brachytherapy seeds. Sirius® is implanted during the treatment of prostate cancer with the Cesium-131 seeds and is used to facilitate seed localization within the prostate utilizing a single post-implant MRI procedure. We are beginning a limited market release on this technology in our first quarter of fiscal year 2022 and expect it to be available for full market release later in fiscal year 2022 but there is no assurance this timing will occur.

Order Processing

The Company applies a just-in-time production process that is responsive to customer input and orders to ensure that individual customers receive a higher level of customer service than received from our competitors who have the luxury of longer lead times due to longer half-life products. Time from order confirmation to completion of product manufacture can be as soon as two working days, including processing and purification of Cesium-131, attachment of isotope to a core, loading and welding of the core into a titanium casing, testing, quality assurance, assembling seeds into delivery devices (i.e. needles, sutures, strands, cartridges, etc.), sterilization and shipping.

It is up to each physician to determine the dosage necessary for implants and acceptable dosages vary among physicians. Many physicians order more seeds than necessary to assure themselves that they have a sufficient quantity. Upon receipt of an order, the Company either delivers the seeds from its facility directly to the physician in either loose, preloaded, or Blu Build™ form and for a couple of customers we send the order to an independent preloading service that delivers the seeds just prior to implant. If the implant is postponed or rescheduled, the short half-life of the seeds makes them unsuitable for use and therefore they must be re-ordered.

Due to the lead time for obtaining and processing the Cesium-131 isotope and its short half-life, the Company relies on sales forecasts and historical knowledge to estimate the proper inventory levels of isotope needed to fulfill all customer orders. Consequently, some portion of the isotope is lost through decay and is not used in an end product. Management continues to reduce the variances between ordered isotope and isotope deliveries and is continually improving its ordering process efficiencies.

Manufacturing Facility

The Company maintains a production facility located at Applied Process Engineering Laboratory (APEL) in Richland, Washington. The APEL facility became operational in September 2007. The production facility has over 15,000 square feet and includes space for isotope separation, seed production, order dispensing, a clean room for assembly of our product offerings, and a dedicated shipping area. In 2015, the Company entered into a modification to the production facility lease that modified the requirement to return the facility to ground at the time of exit at Company discretion, exercised an extension in 2017 to increase the lease term to April 30, 2021, and reduced the required notice to terminate the lease early from twelve months to six months. In July 2019, the Company entered into another modification of the production facility lease that extends the term to April 20, 2026, and maintained the then current rental rate through April 2020, and provides for an eighteen-month termination notice with an early termination penalty of up to $40,000 which decreases in the future beginning May 1, 2022.

These lease modifications provide the flexibility required for the Company to plan, design and construct its own production facility, which is expected to reduce operational cash flow requirements and provide for long-term security of production capabilities for the Company. The Company has completed the design process for a new facility and has permit ready plans to build when the Company needs to move into a new facility. The new production facility is currently on hold as the Company has sufficient production capacity to meet future demands and while the Company focuses its resources on revenue growth. It is anticipated that the Company will continue work on the new production facility process in the next four to five years. Management believes that construction of a new facility will take 18 to 24 months to complete from the time that ground is broken.

Sales and Marketing

Marketing Strategy

The Company continues to implement and execute on the established sales and marketing strategy. This strategy involves a direct focus on the prostate cancer market and existing and new Cesium-131 customers, expanding treatment sites of care from traditional hospital outpatient departments to ambulatory surgery centers and to freestanding clinics, with a secondary focus on developing opportunities in emerging applications, including brain tumors, gynecological cancers and head and neck tumors. In fiscal 2022 the Company will undergo a website redesign as well as new collateral and educational materials. Due to our inability to host in-person training programs as a result of the COVID-19 pandemic, we plan to utilize the Proximie virtual communication platform. Proximie’s innovative technology is specifically designed to assist clinicians by sharing, in real time or streamed, all aspects of a medical procedure in tremendous detail. This platform allows the leading brachytherapists we currently work with to share all aspects of a procedure with other clinicians regardless of their physical location. We plan to install this learning platform in two leading centers. This education effort will allow for interactive training of new domestic sites, as well as training our international partners.

To support the new marketing strategy, the Company has continued to engage with its medical advisory boards to provide professional input and insight regarding the Company’s current products and research and developments efforts. The Company held its first advisory meeting for prostate cancer in September 2016. The Company held its most recent meeting in May 2020 and is planning on continuing this strategy. The Company is looking to continue to build additional advisory boards as the other applications grow in viability. The additional boards will vary by cancer type/site and the supporting specialties that treat that cancer. They will include, but not be limited to, radiation oncologists, surgeons, urologists, and physicists. These additional boards will be a mix of customers and non-customers, which the Company believes will provide increased insight regarding the perception of its products and opportunities to meet the needs of the market.

The market for treatments of localized prostate cancer is very competitive and largely hinges upon two factors: the demonstration of long-term follow-up data that has been presented to the prostate cancer treatment profession and the economic and strategic dynamics of the different therapeutic options. Cesium-131 was introduced to the prostate cancer marketplace more than a decade after Iodine-125 and Palladium-103, and the resulting lag time for mature clinical data to be developed has proven an obstacle to widespread market acceptance. The time to publish these results is lengthy and includes time to enroll patients in protocols which may take multiple years depending on the size of the enrollment population, time to aggregate the results at five years from the final patient treatment, time to analyze the data and author the article followed by the time for peer review, and finally publication in a medical journal. The total time for this process may approach a decade from start to publication and these long-term results were just beginning to be published at the end of fiscal year 2019. In 2019, the first long term data for Cesium-131 prostate brachytherapy have now been released from The Chicago Prostate Cancer Center. A second long term study from University of Pittsburgh Medical Center, was published in 2020. These publications continue to support adoption of Cesium-131 as they place the isotope on a more level data field with the other isotopes.

The prostate brachytherapy market has been pressured by the economic differences and strategic dynamics of competing treatment options such as robotic surgical devices and external beam radiation facilities. These factors have combined to result in the current multi-year contraction of the prostate brachytherapy market. The declining market has impacted the competitive landscape, reducing the number of competitors and their respective investments in sales, marketing and product development efforts. Based upon Company market review and research, there appears to be an opportunity for Isoray to expand its current market opportunity with continued investment in sales and marketing efforts. The Company believes its hires of both sales and marketing veterans with regional sales support will continue to support its growth of market share in the prostate cancer treatment business. The Company also believes that an increased share of the prostate brachytherapy market share will assist in facilitating Cesium-131 brachytherapy cancer treatment growth in other body sites.

The professional and patient market segments each play a role in the ultimate choice of cancer treatment and the specific isotope chosen for seed brachytherapy treatment. The Company has developed a customized brand message for each audience. The Company’s website delivers personalized messaging that positions Cesium-131 as a treatment option for cancers throughout the body. Isoray continues to develop and/or refresh print, visual and digital media (including physician brochures discussing the clinical advantages of Cesium-131, clinical information materials, and digital content for the website and social media awareness efforts). In addition, the Company attends national professional meetings, including:

Since April 2020, as a result of the national COVID-19 pandemic, many of the meetings continue to be cancelled, or transitioned to virtual formats.  The Company assesses each of these changing meeting formats individually and is working with the hosts and professional societies to maximize opportunities to raise awareness about Cesium-131 products and interact with our customers and potential customers.  As these meetings and conferences continue to evolve, we will also adapt to find the most efficient methods to support our market position. The Company will continue to invest resources in these conferences as they occur as management believes this is an effective way to educate others concerning Cesium-131.

In today’s U.S. health care market, patients are more informed and involved in the management of their health than in the past. Many physicians relate incidents of their patients coming for consultations armed with articles researched on the Internet and other sources describing new treatments and medications. In many cases, these patients are demanding a certain therapy or drugs and the physicians are complying when medically appropriate.

Because of this consumer-driven market factor, we also promote our products directly to the public. We target the prostate cancer patient, his spouse, family, care givers and loved ones. We emphasize to these segments the specific advantages of the Cesium-131 brachytherapy seed through our website, patient advocacy efforts, informational patient materials and patient testimonials, other awareness efforts through social media channels, and advertisements in specific markets supporting brachytherapy. Over the past year, the Company has continued to increase its efforts to raise awareness about Cesium-131 and Isoray Medical. In 2020, an integrated patient community website, called Together (located at www.isoray.com/together/), was launched to help inform and educate potential patients and their families about brachytherapy. None of our websites should be considered a part of this Report. This effort continues to build on our strength as a digital innovator in patient outreach and personalized messaging. Management believes this increased awareness should ultimately translate to more patients finding a physician with Cesium-131 experience.

The Company’s marketing plan with regard to non-prostate segments includes identifying and exhibiting at scientific meetings attended by specialty physicians who perform procedures related to Company’s product offerings, direct sales contact with such physicians (for example thoracic surgeons and neuro-surgeons), the development and dissemination of training videos and other media that outline the Company’s products, and the implementation of local training events to provide product and procedure information to potential customers. 

Further, the Company is partnering with key clinicians within each application to support early experiences and identify additional facilities that may be interested in the applications. The Company continues to work with its existing radiation oncology physician customers and to educate them as to additional or new Company products and expand utility of Cesium-131 within the facility and across different disease sites. To facilitate this expanded position, the Company’s sales managers call on in person or virtually, as applicable, existing radiation oncology physicians and other key decision makers within an organization to discuss the available clinical results and experiences in coordination with key Company scientific personnel to educate the customer representatives about different Cesium-131 applications and comparisons to competing treatments.

Sales and Distribution

In the prostate cancer market, our sales team targets radiation oncologists, and medical physicists as well as urologists and facility administrators as key clinical decision-makers in the type of radiation therapy offered to prostate cancer patients. As the urologist plays a key role in influencing the ultimate treatment for each prostate cancer patient, our sales team is expanding efforts to raise interest in brachytherapy within the urology community, both in direct effort and through the urology referrals at existing facilities.  We will continue to work with our existing clinicians to raise awareness in their referral community about the benefits of Cesium-131 brachytherapy.

With respect to non-prostate applications, the Company targets neurosurgeons, thoracic surgeons, gynecologic oncologists, and other surgeons in addition to radiation oncologists. After these clinicians identify the value of the Company’s Cesium-131 products, the Company then also needs support for the procedure from the medical physicists on staff and facility administrators. The sales cycle for non-prostate applications has proved to be a longer process than for prostate applications and often takes nine months or longer before the Company is licensed in a new hospital and can make its first sale.

Isoray has a direct sales organization consisting of territory sales managers, a Director of Sales, and a Vice President of Sales and Marketing responsible for the development of the team and the execution of the sales plan. The Company’s territory sales managers are responsible for all sales activities in their respective territories and solicit potential specialist physicians in all areas of the body. This approach allows our territory sales managers to call on a single location for all applications of our products, resulting in a more efficient sales approach.

The sales organization is fully committed to and is in the process of executing the commercial plan for the development of new sales materials, training materials, and website assistance. Further, the marketing team supports the development of the Company brand. Finally, the sales organization continues to work with the Research and Development team to help in the development of new products and advancements to support customer brachytherapy needs.

The Company expects to continue to explore the opportunity to extend its customer base outside the U.S. market through use of established distributors in target markets of other countries. As of September 2021, the Company had independent distributors in Russia, India, and Peru to focus on prostate and centers in the targeted markets. Although it has international distribution agreements in place, due to the COVID-19 global pandemic, the Company continues to experience difficulties in generating sales of Cesium-131 products through its international distributors. With the launch of the virtual learning platform, we look forward to re-engaging with our international distributors.

Reimbursement

Reimbursement by third party payers is the primary means of payment for all Isoray products. CMS is the primary payer, providing coverage for approximately 65% of all prostate brachytherapy cases and most non-prostate procedures. Well established brachytherapy coverage and payment policies are currently in place by CMS and other non-governmental payers for out-patient procedures. For surgical procedures provided in an in-patient setting, payment is provided as part of a DRG code, which includes the surgical elements of the procedure.

In the hospital outpatient prospective payment system (HOPPS) out-patient setting, brachytherapy sources are legislated to be paid individually. Under this umbrella, in 2003, CMS established a unique HCPCS code for Cesium-131 brachytherapy seeds that permitted providers to report the use of Cesium-131 directly to payers. In July 2007, CMS established two separate Cesium-131 codes for providers to report loose seeds and stranded seeds due to the cost differential of these two products. Reimbursement for prostate brachytherapy services and sources is well established in the U.S. and most providers (hospitals and physicians) are not faced with reimbursement challenges when providing this treatment option to patients. 

As noted above, there are currently two different methodologies for CMS payment. The first, the out-patient setting, includes prostate brachytherapy, and a limited range of other procedures, including some gynecological implants, and as such, is covered by the CMS Outpatient Prospective Payment System, which since 2010 has provided a fixed reimbursement per seed for stranded and loose seeds. Cesium, iodine, and palladium each have their own reimbursement values for stranded and loose seeds. If reported correctly when seeds are submitted for payment to CMS, providers are reimbursed at a flat rate that is determined by median costs of the seeds.  CMS calculates future payments based on prior hospital billing data. This has generally resulted in a historical trend of declining year over year reimbursement with few exceptions. Private insurance companies have historically followed the CMS reimbursement policies. The Company expects that CMS will continue its annual review of payments provided as reimbursement for our various products.

The other payment method is for in-patient procedures, where the patient remains in the hospital for more than 24 hours. Lung, brain and head and neck implant procedures utilizing brachytherapy sources require the patient to be admitted to the hospital. In-patient procedures are covered by CMS which remits a set amount depending on the type of surgery being performed and the complexity of the surgery. Under this Diagnostic Related Group (DRG) system, the hospital pays for all the items involved in the care of the patient excluding physician fees. The brachytherapy seeds in these in-patient cases are not paid for separately by CMS, but rather included as part of the DRG payments from CMS.

Historically, because the Company’s seeds may not be separately reimbursed by CMS for in-patient procedures, there can be difficulty in convincing hospitals to use the Company’s products. In September 2019, the Company submitted for additional ICD-10-PCS code for other surgical procedures and in May 2020, CMS approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting. The codes allow hospitals to bill Medicare and other health insurers for specific surgical procedures that would benefit from the addition of Cesium-131. DRG, or diagnostic related groups, are designed for Medicare and other health insurers to set payment levels for hospital in-patient services.  The 64 ICD-10-PCS codes are important for the growing surgical applications of Cesium-131 in treating a significant range of hard to treat cancers including brain, lung, head and neck, abdominal, breast, gynecological, pelvic, and colorectal cancers. The new codes took effect on October 1, 2020. The codes will map to DRG payments for the associated procedures.

The Company plans on considering additional applications for ICD-10-PCS codes for in-patient brachytherapy treatments in the future. Receipt of additional ICD-10-PCS codes in the future for brachytherapy applications will assist in the sales to hospitals and institutions that currently are not reimbursed for brachytherapy radiation for in-patient care. Management believes the lack of incremental reimbursement by CMS and private insurers for brachytherapy placed at the time of surgery rather than delivered at a point in time following surgery may be impeding the faster and broader adoption of in-patient brachytherapy.

In July 2019, CMS proposed a significant change to the way Medicare currently pays for radiation services in an out-patient setting. The Radiation Oncology Alternative Payment Model (RO APM) proposed a single, bundled payment for a 90-day episode of radiation therapy including LDR brachytherapy, IMRT, SBRT, proton therapy, and HDR brachytherapy. The RO APM proposal applied the same payment levels to services provided in physician offices, free-standing centers, and hospital outpatients. In addition, certain surgical codes were proposed to be included in the bundled payment such as those for gynecological treatments. This CMS proposal for a revised payment included brachytherapy sources. All comments regarding the RO APM were due to CMS by mid-September 2019 and the Company submitted its comments prior to the deadline.

The final rule was published on September 18, 2020 with an initial effective date of January 1, 2021; however, CMS subsequently delayed the effective date to July 1, 2021. The Consolidated Appropriations Act, 2021 enacted December 27, 2020 included a provision that delayed the effective date to January 1, 2022. As published, the rule is effective for randomly selected Core-Based Statistical Areas (CBSAs) and the participating zip codes are included in the final rule. The selected zip codes include approximately thirty percent of all eligible Medicare fee-for-service (FFS) radiotherapy episodes nationally.

In July 2021, CMS proposed changes to the RO APM which includes removing brachytherapy from the list of included modalities under the RO Model so that brachytherapy would still be paid under the current fee-for-service (FFS) model. In the proposed rule, CMS explains the exclusion of brachytherapy from the RO APM is to ensure that providers would not be incentivized to forego brachytherapy in situations where a combination of brachytherapy and EBRT is clinically indicated. Additionally, the proposed rule includes a five year performance period for select zip codes of January 1, 2022 through December 31, 2026. Management is currently evaluating the impact the proposed rule may have on our business, financial condition, or results of operations.

Financial Information About Segments

The Company has previously presented its 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 Perspective’s financial statements, Perspective has now determined that it operates in only one segment, as it only reports profit and loss information on an aggregate basis to its chief operating decision maker.

Financial Information About Geographic Areas

All of the Company’s long-lived assets are located in the United States. Revenue by geographic region is based on the shipping addresses of the Company's customers. The following summarizes revenue by geographic region:

Other Information

Customers

The following are the Company’s top customers, facilities or physician practices that utilize multiple surgical facilities shown as a percentage of total sales for the twelve months ended June 30, 2021:

The loss of either the single largest physician practice or a combination of the other significant facilities and customers could have a material adverse effect on the Company’s revenues, which would continue until the Company located new customers to replace them. There can be no assurance this would occur in a timely manner or at all.

One other unrelated customer accounted for approximately 5.9% of total sales, so our top three customers accounted for approximately 42.5% of total sales.

Proprietary Rights

The Company relies on a combination of patent, copyright and trademark laws, trade secrets, software security measures, license agreements and nondisclosure agreements to protect its proprietary rights. Some of the Company’s proprietary information may not be patentable.

Our management believes that certain aspects of the Isoray seed design and construction techniques are patentable innovations. These innovations resulted in a patent granted by the USPTO under Patent Number 7,410,458, in August 2008, with a currently expected expiration date in 2025. Certain methodologies regarding isotope production, separation, and seed manufacture are retained as trade secrets and are embodied in Isoray’s procedures and documentation. Four patents have been granted by the USPTO relating to methods of deriving Cesium-131 developed by Isoray employees: Patent Number 7,479,261, with a currently expected expiration date in 2027; Patent Number 7,531,150, with a currently expected expiration date in 2027; Patent Number 7,316,644, currently expected to expire in 2025; and Patent Number 7,510,691, currently expected to expire in 2027. One patent has been granted by the USPTO relating to a device for loading brachytherapy seeds: Patent Number 10,328,278, currently expected to expire in 2038. The Company has two patents that were issued on April 23, 2014 and are in force in Canada (Canada 2576907 and 2571349), both of which expire in 2025. The Company has three patents granted in the Russian Federation which expire at various times in 2024 and 2025. The Company has a single patent granted in each of the EU, Hong Kong, Netherlands and India which expire various times in 2024 and 2025. The Company has a patent application pending in the US and a single patent application filed for the Patent Cooperation Treaty. The Company is continuing its efforts to develop and patent additional methods of deriving Cesium-131 and other isotopes.

Research and Development

During the two-year period ended June 30, 2021, Isoray and its subsidiaries incurred approximately $2.6 million in costs related to research and development activities. The Company expects to continue ongoing research and development activities for the foreseeable future. Chief among R&D expenditures in fiscal year 2021 were the support of clinical research studies that are accumulating data on prostate, brain and head and neck cancers, consulting, and new product development (Blu Build™ loader and others).

Government Regulation

The Company’s present and future intended activities in the development, manufacture and sale of cancer therapy productsprograms are subject to extensive laws, regulations, regulatory approvals and guidelines. WithinIn the United States, the Company’s therapeutic radiological devicesCompany must comply with laws, such as the U.S. Federal Food, Drug and Cosmetic Act which is enforced("FFDCA"), regulations, guidance documents and standards promulgated by the U.S. Food and Drug Administration (FDA). The Company is also required to adhere to applicable FDA, Quality System Regulations, also known aswhich govern, among other things, the Good Manufacturing Practices, which include extensivetesting, development, manufacturing, quality control, safety, purity, potency, efficacy, approval, labeling, packaging, storage, record keeping, distribution, marketing, sales, import, export, post-approval monitoring and periodic inspections of manufacturing facilities. The Company’s predecessor obtained FDA 510(k) clearance in March 2003 to market its Cesium-131 seed for the treatment of localized solid tumorsreporting, advertising and other malignant disease and Isoray obtained FDA 510(k) clearancepromotional practices involving pharmaceutical programs. We cannot market a program candidate in November 2006 to market preloaded brachytherapy seeds and in August 2009 for preloading flexible braided strands and bioabsorbable mesh. In July 2018 the Company obtained 510(k) clearance for the GammaTile™ Therapy which it subsequently transferred to GT Med Tech per the Collaborative Development Agreement executed in March 2017.

In the United States until the pharmaceutical program has received FDA regulates,approval or licensure.

The FFDCA provides several distinct pathways for the approval of new drugs. A new drug application (“NDA”) under Section 505(b)(1) of the FFDCA is a comprehensive application to support approval of a product candidate that includes, among other things, newdata and information to demonstrate that the proposed drug is safe and effective for its proposed uses, that production methods are adequate to ensure the identity, strength, quality and purity of the drug, and that proposed labeling is appropriate and contains all necessary information. A 505(b)(1) NDA generally contains results of the full set of pre-clinical studies and clinical trials conducted by or on behalf of the applicant to characterize and evaluate the product clearancescandidate. Alternatively, Section 505(b)(2) of the FFDCA permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and approvalsfor which the applicant has not obtained a right of reference. The applicant may rely to establishsome extent upon the FDA’s findings of safety and efficacyeffectiveness for an approved product that acts as the reference drug and submit its own product-specific data, which may include data from pre-clinical studies or clinical trials conducted by or on behalf of these products. We are also subjectthe applicant, to other federal and state laws and regulations, includingaddress differences between the Occupational Safety and Health Actproduct candidate and the Environmental Protection Act.reference drug. Drug manufacturers may also submit an abbreviated new drug application ("ANDA") under section 505(j) of the FFDCA to market a generic version of an approved branded drug product if the manufacturer shows the generic version is “therapeutically equivalent” or expected to have the same clinical effect and safety profile as the branded drug product when administered to patients under the conditions specified in the labeling.

The Federal Food, Drug,process of obtaining regulatory approvals and Cosmetic Actthe subsequent compliance with appropriate federal, state, local and other federalforeign statutes and regulations governrequire the expenditure of substantial time and financial resources. In addition, the laws, rules and regulations that apply to our business are subject to change and it is difficult to foresee whether, how or influencewhen such changes may affect our business.

Development and Approval

Drug development process. The process to develop and obtain approval for pharmaceutical products for commercialization in the research, testing, manufacture, safety, labeling, storage, record keeping, approval, distribution, use, reporting, advertisingUnited States and promotion of such products. Noncompliance with applicablemany other countries is lengthy, complex and expensive, and the outcome is far from certain. Although foreign requirements can result in civil penalties, recall, injunction or seizure of products, refusal of the government to approve or clear product approval applications, disqualification from sponsoring orfor conducting clinical investigations, preventing ustrials and obtaining approval may differ in certain respects from entering into government supply contracts, withdrawal of previously approved applications,those in the United States, there are many similarities, and criminal prosecution.they often are equally rigorous, and the outcome cannot be predicted with confidence. 

InThe process required before a pharmaceutical product may be marketed in the United States medical devices are classified into three different categories overgenerally include the following:

Prior to initiating human testing of any pharmaceutical product, the product undergoes preclinical testing. Nonclinical tests include laboratory evaluations of product chemistry, pharmacology, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. Adherence to federal regulations, such as GLPs and the Animal Welfare Act enforced by the Department of Agriculture, is required during the conduct of these tests.

The sponsor of a clinical study is required to submit the results of nonclinical tests, along with manufacturing details, analytical data, any available clinical data or literature, and a proposed clinical protocol, to the FDA applies increasing levelsas part of regulation: Class I, Class II, and Class III. Most Class I devicesan IND application before clinical testing may begin. Some nonclinical testing typically continues even after IND submission. An IND provides an exemption from the FFDCA, allowing the shipment of an unapproved product for investigational use in clinical trials, subject to FDA authorization. The IND becomes effective 30 days after FDA receipt, unless concerns are exempt from premarket notification 510(k); most Class II devices require premarket notification 510(k); and most Class III devices require premarket approval. Our Cesium-131 seed is a Class II device and received 510(k) clearance in March 2003.

Approval of new Class III medical devices is a lengthy procedure and can take a number of years and require the expenditure of significant resources. There is a shorter FDA review and clearance process for Class II medical devices, the premarket notification or 510(k) process, whereby a company can market certain Class II medical devices that can be shown to be substantially equivalent to other legally marketed devices. Since brachytherapy seeds have been classifiedraised by the FDA as a Class II device, we have been ableabout the proposed clinical trial, including whether subjects will be exposed to achieve market clearance for our Cesium-131 seed usingunreasonable risks, within that period, in which case outstanding issues must be resolved before the 510(k) process.clinical trial can proceed.

As a registered medical device manufacturerClinical trials may involve the administration of the program candidate to healthy volunteers or subjects under the supervision of qualified investigators, generally physicians not employed by or under the study sponsor’s control. Clinical trials involving some products for certain diseases may begin with testing in patients with the FDA, wedisease. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to inspectionbe used to ensure compliance with FDA’s current Good Manufacturing Practices, or cGMP. These regulations requiremonitor subject safety, including stopping rules that weassure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any of our contract manufacturers design, manufacture and service products, and maintain documents in a prescribed manner with respect to manufacturing, testing, distribution, storage, design control, and service activities. Modifications or enhancements that could significantly affect the safety or effectiveness of a device or that constitute a major changeamendments to the intended use of the device require a new 510(k) premarket notification for any significant product modification.

The Medical Device Reporting regulation requires that we provide informationprotocol must be submitted to the FDA on deaths or serious injuries alleged toas part of the IND. Clinical trials must be associatedconducted and monitored in accordance with the useFDA’s regulations comprising the GCP requirements, including the requirement that all research subjects or his or her legal representative provide informed consent. Further, each clinical trial must be reviewed and approved by an independent IRB at, or servicing, each institution at which the clinical trial will be conducted. IRBs are charged with protecting the welfare and rights of our devices,study participants and consider such items as wellwhether the risks to individuals participating in clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as product malfunctionsa data safety monitoring board or committee.

A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. Foreign study conducted under an IND must meet the same requirements that are likelyapply to cause or contributestudies being conducted in the United States. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to death or serious injurythe FDA in support of an application if the malfunction wereclinical trial is conducted in compliance with GCP, including review and approval by an independent ethics committee and compliance with informed consent principles, and FDA is able to recur. Labeling and promotional activities are regulated byvalidate the FDA and, in some circumstances, bydata from the Federal Trade Commission.study through an onsite inspection if deemed necessary.

As a medical device manufacturer, weClinical trials are also subject to laws and regulations administered by governmental entities at the federal, state and local levels. For example, our facility is licensedtypically conducted in sequential phases, although they may overlap or be combined. The four phases are as a medical device manufacturing facility in the State of Washington and is subject to periodic state regulatory inspections. Our customers are also subject to a wide variety of laws and regulations that could affect the nature and scope of their relationships with us.follows:

In support of the Company’s global strategy to expand marketing to Russia and other strategic countries, the Company determined in FY 2018 it needed to migrate to the ISO 13485:2016 standard. In April 2018, BSI certified the Company’s successful transition to ISO 13485:2016. This transition moved Isoray’s quality system into the current state of the art Quality Management System per the ISO Medical Device Quality Management System standard. It was imperative that the Company complied with ISO 13485:2016 by the end of February 2019 in order to maintain its CE Marks. However, during fiscal year 2019, the Company elected to not renew its CE Mark due to no sales activity in the European Union, limited interest in Cesium-131 due to the pricing and reimbursement environment, and changing European Union registration requirements that would have required significant investment into additional clinical trials.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing and other sources that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.

Clinical trials may not be completed successfully within a specified period of time, if at all. The decision to terminate development of an investigational product may be made by a health authority (such as the FDA), an IRB/ethics committee, or by a company for various reasons. At any time before or during clinical trials, the FDA may order the temporary or permanent discontinuation of a clinical trial, which is referred to as a clinical hold, or impose other sanctions, if the agency believes the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the investigational product has been associated with unexpected serious harm to patients.

There are requirements for the registration of ongoing clinical trials of program candidates on public registries and the disclosure of certain clinical trial results and other trial information after completion within timeframes to the NIH for public dissemination on its clinicaltrials.gov website. In addition, sponsors or distributors of investigational products for the diagnosis, monitoring or treatment of one or more serious diseases or conditions must have a publicly available policy on evaluating and responding to requests for expanded access requests.

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational product candidate information is submitted to the FDA in the form of a marketing application to request market approval for the product in specified indications.

Marketing Application. After completing the clinical studies, a sponsor seeking approval to market a product candidate in the United States submits to the FDA a new drug application ("NDA"). The NDA is a comprehensive application intended to demonstrate the product candidate’s safety and effectiveness and includes, among other things, pre-clinical and clinical data, information about the product candidate’s composition, the sponsor’s plans for manufacturing and packaging and proposed labeling. When an application is submitted, the FDA makes an initial determination as to whether the application is sufficiently complete to be accepted for review. If the application is not, the FDA may refuse to accept the application for filing and request additional information. A refusal to file, which requires resubmission of the application with the requested additional information, delays review of the application.

The FDA reviews the application to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP. Before approving an application, the FDA often will inspect the facilities at which the product is manufactured for cGMP compliance and may inspect one or more clinical sites to assure compliance with GCP. FDA Advisory Committee meetings are often held for New Chemical Entities, novel indications, or for applications that otherwise present scientific, technical or policy questions on which the agency believes it would benefit from the perspectives of outside experts. An advisory committee meeting includes a panel of independent experts, including clinicians and other scientific experts, who review, evaluate and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

After review of an NDA, the FDA may grant marketing approval, request additional information, or issue a complete response letter (“CRL”) communicating the reasons for the agency’s decision not to approve the application. The CRL may request additional information, including additional preclinical or clinical data, for the FDA to reconsider the application. An application may be resubmitted with the deficiencies addressed, but resubmission does not guarantee approval. Data from clinical trials are not always conclusive, and the FDA’s interpretation of data may differ from the sponsor’s. Obtaining approval can take years, requires substantial resources and depends on a number of factors, including the severity of the targeted disease or condition, the availability of alternative treatments, and the risks and benefits demonstrated in clinical trials. Additionally, as a condition of approval, the FDA may impose restrictions that could affect the commercial prospects of a product and increase costs, such as a REMS, and/or post-approval commitments to conduct additional clinical trials or non-clinical studies or to conduct surveillance programs to monitor the product’s effects. Under the Pediatric Research Equity Act (“PREA”), certain applications for approval must also include an assessment, generally based on clinical study data, of the safety and effectiveness of the subject product in relevant pediatric populations, unless a waiver or deferral is granted.

Expedited Programs. The FDA maintains certain expedited programs to facilitate the development and review processes for certain qualifying pharmaceutical program candidates, including Fast Track designation, breakthrough therapy designation, priority review and accelerated approval. A pharmaceutical product candidate may be granted Fast Track designation if it is intended for the treatment of a serious or life-threatening condition and demonstrates the potential to address unmet medical needs for such condition. With Fast Track designation, the sponsor may be eligible for more frequent opportunities to obtain the FDA’s feedback, and the FDA may initiate review of sections of an application before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the remaining information. Even if a product receives Fast Track designation, the designation can be rescinded and provides no assurance that a product will be reviewed or approved more expeditiously than would otherwise have been the case, or that the product will be approved at all.

The FDA may designate a product candidate as a breakthrough therapy if it finds that the product candidate is intended, alone or in combination with one or more other program candidates or approved products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For program candidates with Breakthrough Therapy Designation, more frequent interaction and communication between the FDA and the sponsor can help to identify the most efficient path for clinical development. Program candidates designated as breakthrough therapies by the FDA may also be eligible for priority review. Even if a product receives Breakthrough Therapy Designation, the designation can be rescinded if the FDA determines the program no longer meets the qualifying criteria for breakthrough therapy and provides no assurance that a product will be reviewed or approved more expeditiously than would otherwise have been the case, or that the product will be approved at all.

Accelerated approval under FDA regulations allows a product designed to treat a serious or life-threatening disease or condition that provides a meaningful therapeutic advantage over available therapies to be approved on the basis of either an intermediate clinical endpoint or a surrogate endpoint that is reasonably likely to predict clinical benefit. As a condition of accelerated approval, the FDA will require that a sponsor of a drug product subject to accelerated approval perform an adequate and well-controlled post-marketing clinical trial to confirm clinical benefit. If a sponsor fails to conduct any required post-approval trial with due diligence, the FDA may withdraw the drug from the market. In addition, the FDA currently requires as a condition for accelerated approval that promotional materials be submitted in advance of initial dissemination, which could adversely impact the timing of the commercial launch of the product.

The FDA may also grant priority review designation to a product candidate, which sets the target date for FDA action on the application at six months from FDA filing, or eight months from the sponsor’s submission. Priority review may be granted where a product is intended to treat a serious or life-threatening disease or condition and, if approved, has the potential to provide a safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in safety or efficacy compared to available therapy. If criteria are not met for priority review, the standard FDA review period is 10 months from FDA filing or 12 months from sponsor submission. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval. Priority review may be available also for sponsors with a priority review voucher (“PRV”). FDA awards PRVs to drug sponsors that develop drugs for tropical diseases or rare pediatric diseases or to use as medical countermeasures. The PRV is transferable and may be sold to another drug sponsor.

Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug product intended to treat a “rare disease or condition,” which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States, but for which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for this type of disease or condition will be recovered from sales of the product. If orphan product designation is sought, it must be requested before submitting an NDA for the drug product for the proposed rare disease or condition. If the FDA grants orphan drug designation, the common name of the therapeutic agent and its designated orphan use are disclosed publicly by the FDA. Orphan product designation does not, by itself, convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which the FDA has interpreted to preclude approving for seven years any other sponsor’s application to market the same drug for the same use for which the drug has been granted orphan drug designation, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

As in the United States, designation as an orphan drug for the treatment of a specific indication in the European Union, must be made before the application for marketing authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits, including up to 10 years of market exclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan designated product.

Exclusivity and Patent Restoration. In the United States and elsewhere, certain regulatory exclusivities and patent rights can provide an approved drug product with protection from certain competitors’ products for a period of time and within a certain scope. In the United States, those protections include regulatory exclusivity under the Hatch-Waxman Act, which provides periods of exclusivity for a branded drug product that would serve as a reference listed drug for a generic drug applicant filing and an ANDA under section 505(j) of the FFDCA or as a listed drug for an applicant filing an NDA under section 505(b)(2) of the FFDCA. If such a product is a “new chemical entity” (“NCE”) generally meaning that the active moiety has never before been approved in any drug, there is a period of five years from the product’s approval during which the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety. (An application that contains a challenge to a patent associated with the reference product may be submitted at four years after reference product approval.) Certain changes to an approved drug, such as the approval of a new indication, may qualify for a three-year period of exclusivity during which the FDA cannot approve an ANDA or 505(b)(2) NDA for a similar drug that includes the change.

In addition, the Hatch-Waxman Act also provides for the restoration of a portion of the patent term lost during product development and FDA review of a marketing application if approval of the application is the first permitted commercial marketing of a drug containing the active ingredient. The patent term restoration period is generally one-half the time between the effective date of the IND or the date of patent grant (whichever is later) and the date of submission of the application, plus the time between the date of submission of the application and the date of FDA approval of the product. The maximum period of restoration is five years, and the patent cannot be extended to more than 14 years from the date of FDA approval of the product. Only one patent claiming each approved product is eligible for restoration and the patent holder must apply for restoration within 60 days of approval. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for patent term restoration.

Post-Approval Regulation

Quality Assurance and Current Good Manufacturing Practice Requirements. The FDA enforces regulations to ensure that the methods used in, and the facilities and controls used for, the manufacture, processing, packaging and holding of pharmaceutical products conform to cGMP. The cGMP regulations that the FDA enforces are comprehensive and cover all aspects of manufacturing operations, from receipt of raw materials to finished product distribution, and are designed to ensure that the finished products meet all the required identity, strength, quality and purity characteristics. Compliance with cGMP includes adhering to requirements relating to organization and training of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, quality control and quality assurance, packaging and labeling controls, holding and distribution, laboratory controls, and records and reports. Additionally, manufacturers of positron emission tomography ("PET") products are subject to a different set of cGMP requirements than other drug products. Third-party manufacturers of products are required also to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Failure of the Company’s third-party suppliers, to comply with applicable cGMP requirements or the conditions of the product’s approval may lead the FDA to take enforcement actions, such as issuing a warning letter, or to seek sanctions, including fines, civil penalties, injunctions, suspension of manufacturing operations, imposition of operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution. Other regulatory authorities have their own cGMP rules. Ensuring compliance requires a continuous commitment of time, money and effort in all operational areas.

Sales and Marketing. Once a marketing application is approved, the Company’s advertising, promotion and marketing of the product will be subject to close regulation, including promotion to healthcare practitioners, direct-to-consumer advertising, communications regarding unapproved uses (or “off-label uses”), industry-sponsored scientific and educational activities and promotional activities involving the internet. In addition to FDA restrictions on marketing of pharmaceutical products, state and federal fraud and abuse laws have been applied to restrict certain marketing practices in the pharmaceutical industry. Failure to comply with applicable requirements in this area may subject a company to adverse publicity, investigations and enforcement action by the FDA, the Department of Justice, the Office of the Inspector General of the Department of Health and Human Services, and/or state authorities. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval or license revocation, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on the Company’s ability to develop, promote, or distribute pharmaceutical products.

New Legislation. New legislation is passed periodically in Congress, or at the state level, that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. Further, FDA revises its regulations and guidance in light of new legislation in ways that may affect our business or products. It is impossible to predict whether other changes to legislation, regulation, or guidance will be enacted, or what the impact of such changes, if any, may be.

Other Requirements. Companies that manufacture or distribute drug products pursuant to approved NDAs must meet numerous other regulatory requirements, including adverse event reporting, submission of periodic reports, and record-keeping obligations.

Other requirements for radioactive substances. In the United States, as a manufacturer of medical devices and devicespharmaceuticals utilizing radioactive byproduct material, we are subject to extensive regulation by not only federal governmental authorities, such as the FDA and FAA,the Federal Aviation Administration ("FAA"), but also by state and local governmental authorities such as the Washington State Department of Health, to ensure such devices are safe and effective. In Washington State, the Department of Health, by agreement with the federalThe Nuclear Regulatory Commission (NRC),("NRC") regulates the possession, use and disposal of radioactive byproduct material as well as the manufacture of radioactive sealed sources to ensure compliance with state and federal laws and regulations. Our Cesium-131 brachytherapy seeds constitute both medical devices and radioactive sealed sources andtargeted alpha therapies are subject to these regulations.

Moreover, our use, management and disposal of certain radioactive hazardous substances and wastes are subject to regulation by several federal and state agencies depending on the nature of the substance or waste material. We believe that we are in compliance with all federal and state regulationslaws for this purpose.

In the European Union (“EU”), laws and regulations at EU level and in the EU Member States govern or influence the research, testing, manufacture, safety, labeling, storage, record keeping, approval, distribution, use, reporting, advertising and promotion of radiopharmaceutical products. Furthermore, in the EU, a legal framework is in place to ensure the safety of patients and medical staff working with radiopharmaceutical products. This framework consists of several directives, such as Directive 2013/59/Euratom on basic safety standards, which provides requirements related to radiation protection in medicine, particularly regarding the recording of radiation doses, the role of medical physicist and risk assessments, and Directive 2011/70/Euratom on the responsible and safe management of spent fuel and radioactive waste.

Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.

Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any program candidates for which we may obtain regulatory approval. The Company believesregulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more program candidates even if our program candidates obtain marketing approval.

Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available in a timely manner from third-party payors, including government healthcare programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. Third-party payors may limit coverage to specific products on an approved list, or formulary, which may not include all of the FDA-approved products for a particular indication. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. 

A primary trend in the United States healthcare industry and elsewhere is cost containment. Government healthcare programs and other third-party payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available promptly or at all for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases. Limited coverage may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

Obtaining coverage and adequate reimbursement is a time-consuming and costly process. There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Limited coverage may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Third-party payors also may seek additional clinical evidence, including expensive pharmacoeconomic studies, beyond the data required to obtain marketing approval, demonstrating clinical benefits and value in specific patient populations, before covering our products for those patients. If reimbursement is available only for limited indications, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Pharmaceutical Pricing

If we successfully commercialize any of our drugs, we may participate in the Medicaid Drug Rebate Program. Participation is required for federal funds to be available for covered outpatient drugs under Medicaid and Medicare Part B. Under the Medicaid Drug Rebate Program, we would be required to pay a mandatory rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid. Those rebates are based on pricing data reported by the manufacturer on a monthly and quarterly basis to the Centers for Medicare & Medicaid Services (“CMS"), the agency that administers the Medicare and Medicaid programs. Rebates owed by manufacturers under the Medicaid Drug Rebate program are no longer subject to a cap, which could adversely affect our future rebate liability.

Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include community health centers and other entities that receive certain federal grants, as well as certain hospitals that serve a disproportionate share of low-income patients.

Manufacturers are obligated to pay refunds to Medicare for single source drugs reimbursed under Medicare Part B and packaged in single-dose containers or single-use packages, for units of discarded drugs reimbursed by Medicare Part B in excess of 10 percent of total allowed charges under Medicare Part B for that drug. Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount.

Further, the Inflation Reduction Act of 2022 (“IRA”) establishes a Medicare Part B inflation rebate scheme under which, generally speaking, manufacturers will owe rebates if the price of a Part B drug increases faster than the pace of inflation. The IRA also created a drug price negotiation program that will determine the prices for Medicare units of certain high Medicare spend drugs and biologics without generic or biosimilar competition. Manufacturers may be subject to civil monetary penalties for certain violations of the negotiation and inflation rebate provisions and an excise tax during any noncompliance period under the negotiation program.

Additionally, individual states have passed legislation and implemented regulations designed to control pharmaceutical pricing, including sometimes establishing Prescription Drug Affordability Boards (or similar entities) to review high-cost drugs and, in some cases, set upper payment limits and implementing marketing cost disclosure and transparency measures.

Medicare is a federal program that is administered by the federal government that covers individuals age 65 and over or that are disabled as well as those with certain health conditions. Medicare Part B generally covers drugs that must be administered by physicians or other healthcare practitioners, among others. Medicare Part B generally pays for such drugs under a payment methodology based on the average sales price of the drugs. Manufacturers are required to report average sales price information to CMS on a quarterly basis. The manufacturer-submitted information may be used by CMS to calculate Medicare payment rates. Manufacturers are obligated to pay refunds to Medicare for single source drugs reimbursed under Medicare Part B and packaged in single-dose containers or single-use packages, for units of discarded drugs reimbursed by Medicare Part B in excess of 10 percent of total allowed charges under Medicare Part B for that drug. Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount. Further, the Inflation Reduction Act of 2022 ("IRA") establishes a Medicare Part B inflation rebate scheme, under which, generally speaking, manufacturers will owe rebates if the average sales price of a Part B drug increases faster than the pace of inflation. Failure to timely pay a Part B inflation rebate is subject to a civil monetary penalty.

Medicare Part D generally provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that are not administered by a physician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government and, subject to detailed program rules and government oversight, each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time to time. The prescription drug plans negotiate pricing with manufacturers and pharmacies and may condition formulary placement on the availability of manufacturer discounts. In addition, under the coverage gap discount program, manufacturers are required to provide a 70% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries are in the coverage gap phase of the Part D benefit design. Civil monetary penalties could be due if a manufacturer were to fail to offer discounts under the coverage gap discount program. The IRA sunsets the coverage gap discount program starting in 2025 and replaces it with a new manufacturer discount program. Failure to pay a discount under this new program will be subject to a civil monetary penalty. In addition, the IRA established a Medicare Part D inflation rebate scheme, under which, generally speaking, manufacturers will owe additional rebates if the average manufacturer price of a Part D drug increases faster than the pace of inflation. Failure to timely pay a Part D inflation rebate is subject to a civil monetary penalty.

The IRA also creates a drug price negotiation program under which the prices for Medicare units of certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price starting in 2026. Failure to comply with variousrequirements under the drug price negotiation program is subject to an excise tax and/or a civil monetary penalty. This or any other legislative change could impact the market conditions for our program candidates.

In addition, in order to be eligible to have its products paid for with federal state,funds under the Medicaid and local environmentalMedicare Part B programs and purchased by the Department of Veterans Affairs (the "VA"), Department of Defense ("DoD"), Public Health Service, and Coast Guard (the "Big Four" agencies) and certain federal grantees, a manufacturer also must participate in the VA Federal Supply Schedule ("FSS") pricing program, established by Section 603 of the Veterans Health Care Act of 1992 (the "VHCA"). Under this program, the manufacturer is obligated to make its covered drugs (innovator multiple source drugs, single source drugs, and biologics) available for procurement on an FSS contract and charge a price to the Big Four agencies that is no higher than the Federal Ceiling Price ("FCP"), which is a price calculated pursuant to a statutory formula. The FCP is derived from a calculated price point called the “non-federal average manufacturer price” ("Non-FAMP"), which we will be required to calculate and report to the VA on a quarterly and annual basis. Moreover, pursuant to Defense Health Agency ("DHA") regulations, manufacturers must provide rebates on utilization of their innovator and single source products that are dispensed to TRICARE beneficiaries by TRICARE network retail pharmacies. The formula for determining the rebate is established in the regulations and is based on the difference between the annual non-federal average manufacturer price and the Federal Ceiling Price, each required to be calculated by us under the VHCA. These programs obligate the manufacturer to pay rebates and offer its drugs at certain prices to certain federal purchasers.

A manufacturer that fails to comply with the requirements of the Tricare Retail Pharmacy Rebate Program may have its products excluded from Tricare retail pharmacies and/or the Tricare pharmacy benefits program; may be subject to interest, penalties and administrative fees; and, depending on the actions of the manufacturer, may be subject to allegations under the False Claims Act and other laws and regulations.

Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant penalties for each item of false information. The FSS contract also contains extensive disclosure and certification requirements. If we overcharge the government in connection with the FSS contract, whether due to a misstated FCP or otherwise, we will be required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and any response to government investigation or enforcement action, would be expensive and time consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

To the extent we choose to participate in these government healthcare programs, these and other requirements may affect our ability to profitably sell any product candidate for which we obtain marketing approval. The requirements under the Medicaid Drug Rebate Program, 340B program, FSS and TRICARE programs could reduce the revenue we may generate from any program candidates that are commercialized in the future and could adversely affect our business and operating results.

Our relationship with customers and third-party payors is subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations. These laws are described in greater detail in the risk factor titled, “If we fail to comply with applicable healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.” These laws include, but are not limited to:

Healthcare Reform

The United States government, state legislatures and many foreign jurisdictions have shown significant interest in implementing cost-containment programs or policies to limit the growth of healthcare costs, as radioactive waste disposal, radioactive material licenses,including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, the ACA substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical and device industries. The ACA contains provisions that, among other things, may reduce the profitability of drug products, including through increased shipping costs relatedrebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care utilization, and certain annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs. The ACA made several changes to the radioactivityMedicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate. The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and by enlarging the population potentially eligible for Medicaid drug benefits.

Other legislative changes since the ACA was enacted include the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals for spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reductions. In concert with subsequent legislation, this has resulted in aggregate reductions of Medicare payments to providers of, on average, 2% per fiscal year through 2031. Sequestration is currently set at 2% and will increase to 2.25% for the first half of fiscal year 2030, to 3% for the second half of fiscal year 2030, and to 4% for the remainder of the sequestration period that lasts through the first six months of fiscal year 2031. As long as these cuts remain in effect, they could adversely impact payment for any of our products that are less than $100,000 annually.reimbursed under Medicare, once commercialized.

SeasonalityCongress and CMS have authority to revise reimbursement rates and to implement coverage restrictions. Cost-reduction initiatives and changes in coverage implemented through legislation or regulation could decrease reimbursement for or utilization of any approved products, which in turn could affect the price we can receive for those products. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payment from commercial payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

The Company believes that some seed implantation procedures are deferred around physician vacations (particularlyForeign Regulation

In addition to regulations in the summer months), holidays,United States, we may be subject to a number of significant regulations in other jurisdictions regarding research, clinical trials, approval, manufacturing, distribution, marketing and medical conventionspromotion, safety reporting, privacy and conferences resultingpricing and reimbursement. These requirements and restrictions vary from country to country, but in a seasonal influence onmany instances are similar to the Company’s business. These factors cause a momentary decline in revenue which management believes is ultimately realized in prior or following periods. Because a material portion of the Company’s business is dependent on three customers, physician practices or facilities, simultaneous or extended vacations by the physicians at these facilities or by our single largest physician whose total revenue alone represents a material portion of the Company’s businessUnited States' requirements, and failure to comply with them could cause significant dropshave similar negative effects as noncompliance in the Company’s productivity during those reporting periods.United States.

Employees

As of September 23, 2021, IsorayMarch 15, 2024, we employed 67119 individuals, of which 61116 were full-time employees and 3 were part-time employees. The Company’sOf these 119 employees, 18 have M.D., Ph.D. or PharmD degrees. Our future success will depend, in part, on its ability to attract, retain and motivate highly qualified sales, technical and management personnel. From time to time, the Companywe may employ independent consultants or contractors to support itsour research and development, marketing, sales, accounting and administrative organizations. None

Corporate Information

On February 14, 2023, Isoray, Inc. changed its corporate name to Perspective Therapeutics, Inc. ("Perspective" or the "Company"), and its stock symbol changed to “CATX” from “ISR” shortly thereafter. Perspective Therapeutics (formerly known as Isoray, Inc. and Century Park Pictures Corporation) was incorporated in Minnesota in 1983 and reincorporated to Delaware on December 28, 2018. On July 28, 2005, Isoray Medical, Inc. (“Isoray”) became a wholly owned subsidiary of the Company’s employees are represented by any collective bargaining unit. On September 23, 2021,Company pursuant to a merger. Isoray was formed under Delaware law on June 15, 2004, and on October 1, 2004, acquired two affiliated predecessor companies that began operations in 1998. Isoray, a Delaware corporation, develops, manufactures and sells isotope-based medical products and devices for the treatment of cancer and other malignant diseases. Isoray is headquartered in Richland, WA. Isoray International LLC (“International”), a Washington limited liability company, was formed on November 27, 2007, and is a wholly owned subsidiary of the Company. International has entered into various international distribution agreements. Viewpoint Molecular Targeting, Inc. ("Viewpoint"), a Delaware corporation, became a wholly owned subsidiary of the Company employed seven direct sales people.on February 3, 2023 pursuant to the merger. Viewpoint is an alpha-particle radiopharmaceutical company in the alpha-emitter market, developing oncology therapeutics and complementary imaging agents. Perspective Therapeutics Ltd, an Australian registered company, was formed on April 14, 2023 as a wholly owned subsidiary of the Company.

CompetitionAvailable Information

Our website address is www.perspectivetherapeutics.com. Information on this website is not a part of this Form 10-K. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and executive officers, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission ("SEC"). The Company competes inSEC maintains a market characterized by technological innovation, extensive research efforts,website (www.sec.gov) that contains reports, proxy and significant competition. In general,information statements, and other information regarding issuers that file electronically with the Isoray Cesium-131 brachytherapy seed competes with conventional methods of treating localized cancer,SEC, including but not limited to, all forms of prostatectomy surgery and external beam radiation therapy which includes intensity modulated radiation therapy, stereotactic radiosurgery and proton therapy, as well as competing permanent and temporary brachytherapy devices.us.

Management believesInformation regarding our corporate governance, including the Company’s patented Cesium-131 separation processcharters of our audit committee, our nominations and corporate governance committee and our compensation committee, and our Codes of Conduct and Ethics is likelyavailable on our website (www.perspectivetherapeutics.com). We will provide copies of any of the foregoing information without charge upon request to provide a sustainable competitive advantageMark Austin, Vice President of Finance and maintain the Company as the sole producer of medical Cesium-131. Production of Cesium-131 also requires specialized facilities that represent high cost and long lead time if not readily available. In addition, a competitor would need to develop a method for isotope attachment and seed assembly, would need to conduct testing to meet NRC and FDA requirements, and would need to obtain regulatory clearances before marketing a competing device. Best Medical received FDA 510(k) clearance to market a Cesium-131 seed on June 6, 1993, but to date, twenty-eight years later, have not produced any Cesium-131 products for sale.

The permanent brachytherapy seed market includes companies that manufacture and/or distribute Cesium-131, Iodine-125 (I-125) and Palladium-103 (Pd-103). The Company believes the performance characteristics of Cesium-131, specifically the shorter half-life and higher energy than either Pd-103 or I-125, will ultimately prove to be advantageous. Both other permanent brachytherapy isotopes, I-125 and Pd-103, were introduced to the market prior to Cesium-131, allowing many customers to become comfortable with the performance of both isotopes and requiring the Company to overcome these preferences to convert customers to Cesium-131.Corporate Controller, 2401 Elliott Avenue, Suite 320, Seattle, WA 98121.