Lantheus Holdings(LNTH) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, including balance sheets, statements of operations, cash flows, and notes on key events Condensed Consolidated Balance Sheets As of June 30, 2021, total assets slightly decreased to $857.8 million from $869.8 million at year-end 2020, reflecting a stable balance sheet Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Items (in thousands) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $857,802 | $869,821 | | Total Current Assets | $186,213 | $184,225 | | Intangibles, net | $365,259 | $376,012 | | Goodwill | $61,189 | $58,632 | | Total Liabilities | $349,662 | $355,616 | | Total Current Liabilities | $73,826 | $80,504 | | Long-term debt, net | $169,249 | $197,699 | | Total Stockholders' Equity | $508,140 | $514,205 | Condensed Consolidated Statements of Operations In Q2 2021, revenues grew 53.1% to $101.1 million, but increased operating expenses led to a net loss of $26.7 million, compared to a $7.0 million net loss in Q2 2020 Condensed Consolidated Statements of Operations (in thousands) | (in thousands) | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $101,064 | $66,010 | $193,573 | $156,714 | | Gross Profit | $46,088 | $25,848 | $87,118 | $63,850 | | Total Operating Expenses | $72,869 | $31,393 | $113,540 | $62,270 | | Operating (Loss) Income | $(26,781) | $(5,545) | $(11,159) | $1,580 | | Net Loss | $(26,657) | $(7,012) | $(17,649) | $(3,675) | | Diluted Net Loss per Share | $(0.39) | $(0.16) | $(0.26) | $(0.09) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $35.7 million for the six months ended June 30, 2021, while financing activities used $35.5 million mainly for debt repayments Cash Flow Summary (in thousands) | (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,687 | $7,252 | | Net cash provided by investing activities | $10,647 | $2,609 | | Net cash used in financing activities | $(35,506) | $(10,218) | | Net increase (decrease) in cash | $10,948 | $(469) | Notes to Condensed Consolidated Financial Statements Notes detail key accounting events, including the Progenics acquisition and PYLARIFY FDA approval, revenue drivers, contingent liability changes, the sale of the Puerto Rico subsidiary, and segment restructuring - The company completed its acquisition of Progenics on June 19, 2020. PYLARIFY, a key product from this acquisition, was approved by the FDA on May 26, 2021, and its commercial launch has begun[30][31] Revenue by Product Category (in thousands) | Revenue by Product Category (in thousands) | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Precision diagnostics | $90,356 | $62,933 | $176,111 | $151,274 | | Radiopharmaceutical oncology | $2,812 | $2,183 | $4,312 | $4,151 | | Strategic partnerships and other | $7,896 | $894 | $13,150 | $1,289 | | Total revenues | $101,064 | $66,010 | $193,573 | $156,714 | - The fair value of contingent consideration liabilities, primarily related to PYLARIFY CVRs, increased from $15.8 million at year-end 2020 to $43.8 million at June 30, 2021. This change resulted in a non-cash expense of $25.9 million for the six-month period[47][53] - On January 29, 2021, the company sold its Puerto Rico radiopharmacy subsidiary for $18.0 million in cash, resulting in a pre-tax gain of $15.3 million[77][78][82] - In the first quarter of 2021, the company changed its operating and reporting structure to a single business segment, reflecting a consolidated worldwide management approach[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting 53.1% Q2 2021 revenue growth driven by DEFINITY and Progenics, key factors like PYLARIFY launch and Mo-99 supply, and strong liquidity with $35.7 million operating cash flow Key Factors Affecting Our Results Key factors influencing performance include ongoing COVID-19 impacts, the PYLARIFY launch requiring significant investment, anticipated growth for DEFINITY, and challenges with Mo-99 supply chain and third-party manufacturing reliance - On May 27, 2021, the FDA approved PYLARIFY, a PET imaging agent for prostate cancer. The commercial launch is underway, with availability expanding across the U.S. throughout 2021[121][122] - The company anticipates continued sales growth for DEFINITY, its fastest-growing and highest-margin product, which held an estimated 80% U.S. market share as of December 31, 2020[133] - The company faces logistical and supplier challenges in its Mo-99 supply chain, which is critical for its TechneLite generators. A prolonged disruption from one of its three main suppliers could have a substantial negative effect on business[140] - The integration of the Progenics acquisition has increased the complexity of the business and added substantial clinical development expenses for pipeline products like 1095 and AZEDRA[145][148][150] Results of Operations Q2 2021 revenues increased 53.1% to $101.1 million driven by DEFINITY sales, but operating expenses more than doubled to $72.9 million due to contingent liability adjustments and PYLARIFY launch costs, resulting in a $26.7 million net loss Results of Operations Summary (in thousands) | (in thousands) | Q2 2021 | Q2 2020 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenues | $101,064 | $66,010 | $35,054 | 53.1% | | Gross Profit | $46,088 | $25,848 | $20,240 | 78.3% | | Total Operating Expenses | $72,869 | $31,393 | $41,476 | 132.1% | | Net Loss | $(26,657) | $(7,012) | $(19,645) | 280.2% | - The increase in General and Administrative expenses of $22.5 million in Q2 2021 was primarily driven by a $25.6 million fair value adjustment to contingent assets and liabilities, mainly related to the PYLARIFY CVRs[168] - Sales and Marketing expenses increased by $11.3 million in Q2 2021 due to the integration of the Progenics organization and preparation activities for the PYLARIFY launch[166] Liquidity and Capital Resources The company maintained solid liquidity with $91.5 million cash and $35.7 million operating cash flow for H1 2021, making $38.1 million debt payments including the $30.9 million Progenics loan, and has access to a $200.0 million revolving credit facility Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,687 | $7,252 | | Net cash provided by investing activities | $10,647 | $2,609 | | Net cash used in financing activities | $(35,506) | $(10,218) | - On March 31, 2021, the company voluntarily repaid in full the entire outstanding principal of $30.9 million on the Royalty-Backed Loan assumed in the Progenics acquisition[197] - As of June 30, 2021, the company had $91.5 million of cash and cash equivalents and access to a $200.0 million revolving credit facility[202][190] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in several ongoing legal matters inherited from the Progenics acquisition, including European patent opposition proceedings, litigation in Germany over PSMA-617 inventions, and a U.S. patent post-grant review petition - The company is appealing a German court's decision that dismissed its claims of co-ownership of inventions related to PSMA-617, which were filed by the University of Heidelberg[102][105][106] - A competitor, Advanced Accelerator Applications USA, Inc., has filed a petition for post-grant review challenging the validity of claims in one of the company's U.S. patents (No. 10,640,461)[107] Item 1A. Risk Factors This section updates key risks, including potential side effects of DEFINITY leading to a new label contraindication, heavy dependence on a few large radiopharmacy customers, and financial risks from Contingent Value Rights (CVRs) related to PYLARIFY sales - In April 2021, the FDA and the company agreed to add a contraindication to the DEFINITY label for patients with a prior history of allergic reactions to polyethylene glycol (PEG), an inactive ingredient[214] - The company is heavily dependent on a few large radiopharmacy customers, such as Cardinal and RLS, for the distribution of its nuclear imaging products in the U.S., creating customer concentration risk[215] - The CVRs issued in the Progenics acquisition could result in substantial future cash payments based on PYLARIFY sales and require recurring fair value estimates, which can impact financial statements and are based on significant management assumptions[218][219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2021, the company withheld 9,465 shares for employee tax obligations, had no share repurchase program, and reiterated its policy of not paying dividends to retain earnings for growth and debt repayment - The company withheld 9,465 shares to cover employee taxes on vested equity awards during Q2 2021. No formal share repurchase program is in effect[222][223] - The company does not currently intend to pay dividends and expects to retain future earnings to finance business growth and repay debt[224] Other Items (Items 3, 4, 5, 6) This section confirms standard corporate disclosures, reporting no defaults on senior securities, no mine safety disclosures, no other material information, and lists the exhibits filed with the Form 10-Q - The company reported no defaults on senior securities (Item 3), no mine safety disclosures (Item 4), and no other information (Item 5) for the reporting period[225][226][227]