Lantheus Holdings(LNTH) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Lantheus reported strong revenue growth driven by PYLARIFY, but a net loss due to a significant AZEDRA impairment, alongside robust operating cash flow Condensed Consolidated Balance Sheets Total assets slightly increased to $1.35 billion driven by higher cash, while liabilities rose and equity saw a minor decrease Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $470,863 | $415,652 | | Intangibles, net | $219,863 | $315,285 | | Total assets | $1,349,284 | $1,321,258 | | Liabilities & Equity | | | | Total current liabilities | $276,388 | $247,701 | | Long-term debt, net | $558,536 | $557,712 | | Total liabilities | $903,768 | $874,111 | | Total stockholders' equity | $445,516 | $447,147 | Condensed Consolidated Statements of Operations Revenues increased significantly, but a substantial rise in cost of goods sold, including an impairment charge, led to an operating and net loss Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $300,784 | $208,880 | | Gross Profit | $77,076 | $129,070 | | Operating (Loss) Income | $(9,344) | $58,925 | | Net (Loss) Income | $(2,807) | $42,962 | | Diluted EPS | $(0.04) | $0.61 | - The significant increase in Cost of Goods Sold to $223.7 million in Q1 2023 from $79.8 million in Q1 2022 was a primary driver of the net loss[11] Condensed Consolidated Statements of Cash Flows Operating cash flow significantly increased due to non-cash adjustments, while investing activities included the Cerveau acquisition, ending with strong cash reserves Q1 2023 vs Q1 2022 Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $108,500 | $10,264 | | Net cash used in investing activities | $(44,513) | $(1,390) | | Net cash used in financing activities | $(8,669) | $(2,179) | | Net increase in cash | $55,220 | $6,846 | - A major non-cash adjustment reconciling net loss to operating cash flow was a $132.1 million impairment of long-lived assets[22] - Investing activities included $35.3 million for the acquisition of assets, identified as the Cerveau acquisition[22][94] Notes to Condensed Consolidated Financial Statements Key notes highlight PYLARIFY-driven revenue growth, a significant AZEDRA impairment, the Cerveau acquisition, upcoming CVR payments, and recent debt refinancing Revenue by Product Category (in thousands) | Product Category | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total radiopharmaceutical oncology | $196,187 | $94,104 | | - PYLARIFY | $195,470 | $92,777 | | Total precision diagnostics | $95,617 | $86,198 | | - DEFINITY | $68,824 | $58,328 | | Strategic partnerships and other | $8,980 | $28,578 | - In March 2023, the company stopped development for a future indication of AZEDRA, leading to a non-cash impairment charge of $15.6 million in R&D and $116.4 million in cost of goods sold[64] - On February 6, 2023, the company acquired Cerveau and its PET imaging agent MK-6240 for an upfront payment of approximately $35.3 million, with potential for future milestone and royalty payments[94][95] - The company expects to pay $99.7 million in Q2 2023 to satisfy its Contingent Value Rights (CVR) obligation related to PYLARIFY's 2022 sales performance[32][43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth driven by PYLARIFY, the net loss from AZEDRA impairment, strategic acquisitions, and debt refinancing, affirming sufficient liquidity Results of Operations Revenue growth was driven by PYLARIFY and DEFINITY, but gross profit declined due to a significant AZEDRA impairment charge in COGS and R&D Revenue Change by Category (in thousands) | Category | Q1 2023 | Q1 2022 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Total radiopharmaceutical oncology | $196,187 | $94,104 | $102,083 | 108.5% | | Total precision diagnostics | $95,617 | $86,198 | $9,419 | 10.9% | | Strategic partnerships and other | $8,980 | $28,578 | $(19,598) | (68.6)% | | Total revenues | $300,784 | $208,880 | $91,904 | 44.0% | - The decrease in gross profit was primarily due to the impairment of the AZEDRA currently marketed intangible asset[156] - Sales and marketing expenses increased by $12.3 million due to continued promotional activities for PYLARIFY[158] - Research and development expenses increased by $18.3 million, driven by the AZEDRA IPR&D asset impairment loss of $15.6 million[162] Liquidity and Capital Resources Strong liquidity is supported by cash reserves and operating cash flow, with recent debt refinancing and an upcoming CVR payment, ensuring sufficient funding for future operations Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2023 | | :--- | :--- | | Net cash provided by operating activities | $108,500 | | Net cash used in investing activities | $(44,513) | | Net cash used in financing activities | $(8,669) | - In December 2022, the company issued $575.0 million in 2.625% Convertible Senior Notes due 2027, with net proceeds of approximately $557.8 million[122][178] - The company also replaced its prior credit facility with a new $350.0 million five-year revolving credit facility, which was undrawn as of March 31, 2023[120][175] - The company expects to make a $99.7 million payment in the second quarter of 2023 to fully satisfy its CVR obligations from the Progenics acquisition[130][184] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposures since December 31, 2022 - There have been no material changes in the company's market risk exposures since December 31, 2022[190] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[191] - No changes occurred in the company's internal control over financial reporting during Q1 2023 that have materially affected, or are reasonably likely to materially affect, these controls[192] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no material ongoing litigation as of March 31, 2023 - The company did not have any material ongoing litigation as of March 31, 2023[93][195] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2022[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased shares for employee tax obligations, has remaining repurchase authorization, and does not intend to pay dividends - A total of 154,146 shares were purchased during the quarter, reflecting shares withheld to satisfy employee tax obligations on vested equity awards[199] - The company has a remaining authorization to repurchase up to $75.0 million of its common stock[198][199] - The company did not pay dividends and does not intend to in the foreseeable future, expecting to retain earnings for growth and debt repayment[200] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - The company reports no defaults upon senior securities[201] Item 5. Other Information No other information was reported under this item - The company reports no other information under this item[203]