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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-36569
LANTHEUS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 35-2318913
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
331 Treble Cove Road01862
North Billerica,MA 
(Address of principal executive offices) (Zip Code)
(978)671-8001
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareLNTHThe Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   


Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act)    Yes      No  
The registrant had 68,634,063 shares of common stock, $0.01 par value, outstanding as of April 22, 2022.


LANTHEUS HOLDINGS, INC.
TABLE OF CONTENTS
Page


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Lantheus Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except par value)
March 31,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$105,355 $98,508 
Accounts receivable, net172,283 89,336 
Inventory34,249 35,129 
Other current assets12,860 12,818 
Total current assets324,747 235,791 
Property, plant and equipment, net116,959 116,772 
Intangibles, net340,204 348,510 
Goodwill61,189 61,189 
Deferred tax assets, net47,868 62,764 
Other long-term assets42,199 38,758 
Total assets$933,166 $863,784 
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt and other borrowings$12,878 $11,642 
Accounts payable22,383 20,787 
Accrued expenses and other liabilities142,396 58,068 
Total current liabilities177,657 90,497 
Asset retirement obligations21,514 20,833 
Long-term debt, net and other borrowings159,369 163,121 
Other long-term liabilities58,776 124,894 
Total liabilities417,316 399,345 
Commitments and contingencies (See Note 19)
Stockholders’ equity
Preferred stock ($0.01 par value, 25,000 shares authorized; no shares issued and outstanding)
  
Common stock ($0.01 par value, 250,000 shares authorized; 68,570 and 67,739 shares issued and outstanding, respectively)
686 677 
Additional paid-in capital691,516 685,472 
Accumulated deficit(178,263)(221,225)
Accumulated other comprehensive income (loss)1,911 (485)
Total stockholders’ equity515,850 464,439 
Total liabilities and stockholders’ equity$933,166 $863,784 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Lantheus Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
20222021
Revenues$208,880 $92,509 
Cost of goods sold79,810 51,479 
Gross profit129,070 41,030 
Operating expenses
Sales and marketing20,354 14,173 
General and administrative37,588 16,138 
Research and development12,203 10,360 
Total operating expenses70,145 40,671 
Gain on sale of assets 15,263 
Operating income58,925 15,622 
Interest expense1,509 2,718 
Gain on extinguishment of debt (889)
Other income(485)(549)
 Income before income taxes57,901 14,342 
Income tax expense14,939 5,334 
Net income$42,962 $9,008 
Net income per common share:
Basic$0.63 $0.13 
Diluted$0.61 $0.13 
Weighted-average common shares outstanding:
Basic68,008 67,094 
Diluted70,051 67,714 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Lantheus Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
Net income$42,962 $9,008 
Other comprehensive income:
Foreign currency translation140 102 
Unrealized gain on cash flow hedges, net of tax2,256 706 
Total other comprehensive income2,396 808 
Comprehensive income$45,358 $9,816 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Lantheus Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands)

Three Months Ended March 31, 2022
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity
SharesAmount
Balance, January 1, 202267,739 $677 $685,472 $(221,225)$(485)$464,439 
Net income— — — 42,962 — 42,962 
Other comprehensive income— — — — 2,396 2,396 
Stock option exercises and employee stock plan purchases296 3 5,931 — — 5,934 
Vesting of restricted stock awards and units645 7 (7)— —  
Shares withheld to cover taxes(110)(1)(5,503)— — (5,504)
Stock-based compensation— — 5,623 — — 5,623 
Balance, March 31, 202268,570 $686 $691,516 $(178,263)$1,911 $515,850 


Three Months Ended March 31, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmount
Balance, January 1, 202166,875 $669 $665,530 $(149,946)$(2,048)$514,205 
Net income— — — 9,008 — 9,008 
Other comprehensive income— — — — 808 808 
Stock option exercises and employee stock plan purchases155 1 2,379 — — 2,380 
Vesting of restricted stock awards and units489 5 (5)— —  
Shares withheld to cover taxes(85)(1)(1,598)— — (1,599)
Stock-based compensation— — 3,317 — — 3,317 
Balance, March 31, 202167,434 $674 $669,623 $(140,938)$(1,240)$528,119 


The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Lantheus Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
Operating activities
Net income$42,962 $9,008 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization and accretion11,786 8,123 
ARO acceleration293  
Amortization of debt related costs246 (61)
Changes in fair value of contingent assets and liabilities18,400 300 
Gain on extinguishment of debt (889)
Provision for excess and obsolete inventory2,519 1,395 
Stock-based compensation5,623 3,317 
Gain on sale of assets (15,263)
Deferred taxes14,180 4,581 
Long-term income tax receivable(396)(573)
Long-term income tax payable and other long-term liabilities779 728 
Other829 655 
(Decreases) increases in cash from operating assets and liabilities:
Accounts receivable(85,155)(2,346)
Inventory(1,634)3,889 
Other current assets(104)(536)
Other long-term assets(533) 
Accounts payable1,506 4,110 
Accrued expenses and other liabilities(1,037)(6,620)
Net cash provided by operating activities10,264 9,818 
Investing activities
Capital expenditures(3,190)(2,520)
Proceeds from sale of assets, net1,800 15,823 
Net cash (used in) provided by investing activities(1,390)13,303 
Financing activities
Payments on long-term debt and other borrowings(2,609)(35,572)
Proceeds from stock option exercises5,357 2,043 
Proceeds from issuance of common stock577 337 
Payments for minimum statutory tax withholding related to net share settlement of equity awards(5,504)(1,599)
Net cash used in financing activities(2,179)(34,791)
Effect of foreign exchange rates on cash, cash equivalents and restricted cash151 (21)
Net increase (decrease) in cash, cash equivalents and restricted cash6,846 (11,691)
Cash, cash equivalents and restricted cash, beginning of period100,651 82,694 
Cash, cash equivalents and restricted cash, end of period$107,497 $71,003 





5


Lantheus Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
Reconciliation to amounts within the condensed consolidated balance sheets
  Cash and cash equivalents$105,355 $68,861 
  Restricted cash included in other long-term assets2,142 2,142 
      Cash, cash equivalents and restricted cash at end of period$107,497 $71,003 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Lantheus Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note Regarding Company References and Trademarks
Unless the context otherwise requires, references to the “Company” and “Lantheus” refer to Lantheus Holdings, Inc. and its direct and indirect wholly-owned subsidiaries, references to “Holdings” refer to Lantheus Holdings, Inc. and not to any of its subsidiaries, references to “LMI” refer to Lantheus Medical Imaging, Inc., the direct subsidiary of Holdings, references to “Progenics” refer to Progenics Pharmaceuticals, Inc., a wholly-owned subsidiary of LMI, and references to “EXINI” refer to EXINI Diagnostics AB, a wholly-owned subsidiary of Progenics. Solely for convenience, the Company refers to trademarks, service marks and trade names without the TM, SM and ® symbols. Those references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent permitted under applicable law, its rights to its trademarks, service marks and trade names.
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Holdings and its direct and indirect wholly-owned subsidiaries, including Progenics (as of the Closing Date, as defined below), and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement have been included. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022 or any future period.
The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities Exchange Commission (“SEC”) on February 24, 2022.
Progenics Acquisition
On June 19, 2020 (the “Closing Date”), pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 20, 2020 (the “Merger Agreement”), by and among Holdings, Plato Merger Sub, Inc., a wholly-owned subsidiary of Holdings (“Merger Sub”), and Progenics, Holdings completed the acquisition of Progenics by means of a merger of Merger Sub with and into Progenics, with Progenics surviving such merger as a wholly-owned subsidiary of Holdings (the “Progenics Acquisition”). Subsequently, on June 22, 2020, Holdings contributed all of the capital stock of Progenics to LMI, thereby making Progenics an indirect subsidiary of Holdings.
In accordance with the Merger Agreement, at the effective time of the Progenics Acquisition (the “Effective Time”), each share of Progenics common stock, par value $0.0013 per share, issued and outstanding immediately prior to the Effective Time (other than shares of Progenics common stock owned by Holdings, Progenics or any of their wholly-owned subsidiaries) was automatically cancelled and converted into the right to receive (i) 0.31 (the “Exchange Ratio”) of a share of Holdings common stock, par value $0.01 per share, and (ii) one contingent value right (a “CVR”) tied to the financial performance of PyL (18F-DCFPyL), Progenics’ prostate-specific membrane antigen (“PSMA”) targeted imaging agent designed to visualize prostate cancer. This agent was approved by the U.S. Food and Drug Administration (“FDA”) on May 26, 2021 under the name PYLARIFY (piflufolastat F 18), and the commercial launch of this agent began in June 2021. Each CVR entitles its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PYLARIFY in 2022 and 2023 in excess of $100.0 million and $150.0 million, respectively. In no event will the Company’s aggregate payments in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9% of the total consideration the Company pays in the Progenics Acquisition (which the Company currently estimates could be approximately $100.0 million). The Company expects to issue any applicable cash payments related to the CVRs as early as the first quarter of 2023 and the first quarter of 2024. No fractional shares of Holdings common stock were issued in the Progenics Acquisition, and Progenics’ former stockholders have received cash in lieu of any fractional shares of Holdings common stock. In addition, in accordance with the Merger Agreement, at the Effective Time, each Progenics stock option with a per share exercise price less than or equal to $4.42 (an “in-the-money Progenics stock option”) received in exchange for each such in-the money Progenics stock option: (i) an option to purchase Holdings common stock (each, a “Replacement Stock Option”) converted based on the Exchange Ratio, and (ii) a vested or unvested CVR depending on whether the underlying in-the-money Progenics stock option was vested or unvested at the Effective Time. Each Progenics stock option with a per share exercise price greater than $4.42 (an “out-of-the-money Progenics stock option”) received in exchange for such out-of-the-money Progenics stock options a Replacement Stock Option converted at an exchange ratio determined based on the average of the
7

volume weighted average price per share of common stock of Progenics and Lantheus Holdings prior to the Effective Time, which exchange ratio was 0.31, the same as the Exchange Ratio. As a result of the acquisition, Holdings issued 26,844,877 shares of Holdings common stock and 86,630,633 CVRs to former Progenics stockholders and option holders.
2. Summary of Significant Accounting Policies
Recent Accounting Pronouncements

The Company has not adopted any new accounting standards during the three months ended March 31, 2022.
3. Revenue from Contracts with Customers
The following table summarizes revenue by revenue source as follows:
Three Months Ended
March 31,
Major Products/Service Lines (in thousands)20222021
    Product revenue, net(1)
$180,009 $87,319 
    License and royalty revenues(2)
28,871 5,190 
Total revenues$208,880 $92,509 
________________________________
(1)The Company’s principal products include PYLARIFY, DEFINITY and TechneLite and are categorized within product revenue, net. The Company applies the same revenue recognition policies and judgments for all its principal products.
(2)The Company recognized $24.0 million license revenue in the first quarter of 2022 related to an agreement with Novartis Pharma AG. Please refer to Note 19, “Commitments and Contingencies” for further details on the license agreement.
The Company classifies its revenues into three product categories: precision diagnostics, radiopharmaceutical oncology, and strategic partnerships and other revenue. Precision diagnostics includes DEFINITY, TechneLite and other imaging diagnostic products. Radiopharmaceutical oncology consists primarily of PYLARIFY and AZEDRA. Strategic partnerships and other revenue includes strategic partnerships and other arrangements related to other products of the Company, such as royalty revenue from our license of RELISTOR.
On January 31, 2022, the Company entered into a global settlement agreement with Novartis Pharma AG (“Novartis”), Advanced Accelerator Applications USA, Inc. (“AAA”), Endocyte, Inc. (“Endocyte”) and their affiliates (the “Novartis Agreement”) to settle certain disputes between the parties. Under the Novartis Agreement, Novartis agreed to make a lump sum payment to the Company, as well as to reimburse the Company for certain fees and expenses in connection with the German litigation (please refer to Note 19 “Commitments and Contingencies”) and the Company agreed to license certain intellectual property to Novartis. In addition, the Company agreed to supply PYLARIFY for clinical purposes at an arms-length value which will be recorded in the future as product is provided. In accordance with the Company's ASC 606, Revenue from Contracts with Customers, assessment, Novartis is considered to be a customer. The Company determined that the $24.0 million constituted a single element which was satisfied on the date of the execution of the Novartis Agreement. The Company determined that the license of intellectual property carried a fair value of $24.0 million. As such, the Company assigned the value to the fair value of the license, which constitutes the entire transaction price and does not require further allocation. The Company determined that the $24.0 million represented the point at which the licensee was able to use and benefit from the license and recognized revenue when the license was granted to Novartis upon execution of the Novartis Agreement. The Company recognized the $24.0 million fee as revenue on its consolidated statement of operations for the quarter ended March 31, 2022. The Company received the $24.0 million payment in April 2022.
Revenue by product category on a net basis is as follows:
8

Three Months Ended
March 31,
(in thousands)20222021
   DEFINITY$58,328 $55,971 
   TechneLite22,605 22,800 
   Other precision diagnostics5,265 6,984 
Total precision diagnostics86,198 85,755 
   PYLARIFY92,777  
   Other radiopharmaceutical oncology1,327 1,500 
Total radiopharmaceutical oncology94,104 1,500 
Strategic partnerships and other revenue28,578 5,254 
Total revenues$208,880 $92,509 
The Company’s performance obligations are typically part of contracts that have an original expected duration of one year or less. As such, the Company is not disclosing the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) as of the end of the reporting period.
4. Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability of fair value measurements, financial instruments are categorized based on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.
The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of money market funds, interest rate swaps, a contingent receivable and contingent consideration liabilities. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the condensed consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The fair value of the interest rate swaps is determined based on observable market-based inputs, including interest rate curves and reflects the contractual terms of these instruments, including the period to maturity. Please refer to Note 13, “Derivative Instruments”, for further details on the interest rate swaps. The Company recorded a contingent receivable and the contingent consideration liabilities resulting from the Progenics Acquisition at fair value based on inputs that are not observable in the market.
9

The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis:
March 31, 2022
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
   Money market$38,986 $38,986 $ $ 
   Interest rate swaps3,387  3,387  
   Contingent receivable8,900   8,900 
Total assets$51,273 $38,986 $3,387 $8,900 
Liabilities:
   Contingent consideration liabilities$104,200 $ $ $104,200 
Total liabilities$104,200 $ $ $104,200 
December 31, 2021
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
   Money market$40,140 $40,140 $ $ 
   Interest rate swaps357  357  
   Contingent receivable9,300   9,300 
Total assets$49,797 $40,140 $357 $9,300 
Liabilities:
   Contingent consideration liabilities$86,200 $ $ $86,200 
Total liabilities$86,200 $ $ $86,200 

During the three months ended March 31, 2022, there were no transfers into or out of Level 3.
As part of the Progenics Acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics from CytoDyn Inc. related to a prior sale of certain intellectual property. The Company has the right to receive $5.0 million upon regulatory approval and a 5% royalty on net sales of approved products. The Company considers the contingent receivable a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flows that included significant estimates and assumptions pertaining to regulatory events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.
As part of the Progenics Acquisition, the Company issued CVRs and recorded the fair value as part of consideration transferred. Each CVR entitles its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PYLARIFY in 2022 and 2023 in excess of $100.0 million and $150.0 million, respectively, subject to a maximum cap (which the Company currently estimates could be approximately $100.0 million). Refer to Note 1, “Basis of Presentation” for further details on the CVRs. Additionally, the Company assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”). These contingent consideration liabilities include potential payments of up to $70.0 million if the Company attains certain net sales targets primarily for AZEDRA and 1095 and a $5.0 million 1095 commercialization milestone. Additionally, there is a potential payment of up to $10.0 million related to a 1404 commercialization milestone. The Company’s total potential payments related to the 2013 Acquisition are approximately $85.0 million. The Company considers the contingent consideration liabilities relating to the CVRs and the 2013 Acquisition, each a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value of these was determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs with respect to 1095 and 1404 are the probabilities of achieving regulatory approval of those development projects and subsequent commercial success.
Significant changes in any of the probabilities of success, the probabilities as to the periods in which sales targets and milestones will be achieved, discount rates or underlying revenue forecasts would result in a significantly higher or lower fair value measurement. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the condensed consolidated statements of operations. The Company can give no assurance that the actual
10

amounts paid, if any, in connection with the contingent consideration liabilities, including the CVRs, will be consistent with any recurring fair value estimate of such contingent consideration liabilities.
The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs at March 31, 2022.

Fair Value atAssumptions
(in thousands)March 31, 2022December 31, 2021Valuation TechniqueUnobservable InputMarch 31, 2022December 31, 2021
Contingent receivable:
Regulatory milestone$2,500 $2,500 Probability adjusted discounted cash flow modelPeriod of expected milestone achievement20222022
Probability of success70 %70 %
Discount rate18 %17 %
Royalties6,400 6,800 Probability adjusted discounted cash flow model
Probability of success
10% - 60%
10% - 60%
Discount rate18 %17 %
Total$8,900 $9,300 

Fair Value atAssumptions
(in thousands)March 31, 2022December 31, 2021Valuation TechniqueUnobservable InputMarch 31, 2022December 31, 2021
Contingent consideration liability:
Net sales targets - PYLARIFY (CVRs)$91,700 $73,200 Monte Carlo simulationPeriod of expected milestone achievement and sales targets2022 - 20232022 - 2023
Discount rate18 %17 %
1095 commercialization milestone1,800 1,900 Probability adjusted discounted cash flow model
Period of expected milestone achievement20262026
Probability of success40 %40 %
Discount rate2.1 %1.3 %
Net sales targets - AZEDRA and 109510,700 11,100 Monte Carlo simulation
Probability of success and sales targets
40% - 100%
40% - 100%
Discount rate
17% - 18%
16% - 17%
Total$104,200 $86,200 
For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated:

11

Financial AssetsFinancial Liabilities
(in thousands)Three Months Ended
March 31,
Three Months Ended
March 31,
2022202120222021
Fair value, beginning of period$9,300 $11,300 $86,200 $15,800 
Changes in fair value included in net income(400)900 18,000 1,200 
Fair value, end of period$8,900 $12,200 $104,200 $17,000 
The change in fair value of the contingent financial asset and contingent financial liabilities, including the CVRs, resulted in an expense of $18.4 million for the three months ended March 31, 2022 and was primarily due to changes in revenue forecasts, changes in market conditions, an increase in discount rates and the passage of time. The Company expects to issue any applicable cash payments related to the CVRs as early as the first quarter of 2023 and the first quarter of 2024. As of March 31, 2022, the Company has $83.3 million in current liabilities and $8.4 million in long term liabilities to account for the expected payments related to the CVRs.
5. Income Taxes
The Company calculates income taxes at the end of each reporting period based on the estimated effective tax rate for the full year, adjusted for any discrete events which are recorded in the period they occur. Cumulative adjustments to the tax provision are recorded in the reporting period in which a change in the estimated annual effective tax rate is determined. The Company’s income tax expense is presented below:            
Three Months Ended
March 31,
(in thousands)20222021
Income tax expense$14,939 $5,334 
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence, and weighed the objective evidence and expected impact. The Company assessed the need for a valuation allowance against certain state tax credit carryforwards added through the Progenics Acquisition. The Company continues to retain other valuation allowances of $1.2 million against the net deferred tax assets of its U.K. subsidiary, and $2.0 million against the net deferred tax assets of its Sweden subsidiary.
In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into a tax indemnification agreement with BMS under which BMS agreed to indemnify the Company for any payments made to settle those uncertain tax positions with the state taxing authorities. Accordingly, a long-term receivable is recorded to account for the expected value to the Company of future indemnification payments to be paid on behalf of the Company by BMS, net of actual tax benefits received by the Company. The tax indemnification receivable is recorded within other long-term assets.
In accordance with the Company’s accounting policy, the change in the tax liabilities, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. As these reserves change adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the remaining receivable from BMS continues to be considered recoverable by the Company, there will be no effect on net income and no net cash outflows related to these liabilities.
The Company finalized the accounting for the Progenics Acquisition for income taxes in the first quarter of 2021 resulting in a reduction of deferred tax assets, primarily related to state research credit carryforwards and an increase to goodwill of $2.6 million.
6. Inventory
Inventory consisted of the following:
        
12

(in thousands)March 31,
2022
December 31,
2021
Raw materials$13,861 $15,505 
Work in process13,071 13,042 
Finished goods7,317 6,582 
Total inventory$34,249 $35,129 
Inventory costs associated with products that have not yet received regulatory approval are capitalized if the Company believes there is probable future commercial use of the product and future economic benefit of the asset. If future commercial use of the product is not probable, then inventory costs associated with such product are expensed during the period the costs are incurred. As of December 31, 2021, the Company had $6.1 million of such product costs included in inventories related to DEFINITY that had been manufactured through the Company’s in-house manufacturing capabilities. The Company received regulatory approval for the manufacture of DEFINITY at its new in-house manufacturing facility during the first quarter of 2022 and has no inventory pending regulatory approval as of March 31, 2022.
7. Property, Plant and Equipment, Net
Property, plant and equipment, net, consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Land$13,450 $13,450 
Buildings73,560 73,559 
Machinery, equipment and fixtures84,983 83,608 
Computer software24,766 24,384 
Construction in progress12,186 10,686 
208,945 205,687 
Less: accumulated depreciation and amortization(91,986)(88,915)
Total property, plant and equipment, net$116,959 $116,772 
Depreciation and amortization expense related to property, plant and equipment, net, was $3.1 million and $3.0 million for the three months ended March 31, 2022 and 2021, respectively.
8. Accrued Expenses and Other Liabilities and Other Long-Term Liabilities
Accrued expenses and other liabilities and other long-term liabilities are comprised of the following:
(in thousands)March 31,
2022
December 31,
2021
Compensation and benefits$10,629 $22,730 
Freight, distribution and operations26,581 16,157 
Accrued rebates, discounts and chargebacks10,793 10,977 
Accrued professional fees3,596 2,850 
Short-term contingent liability (Note 4)83,300  
Other7,497 5,354 
Total accrued expenses and other liabilities$142,396 $58,068 
Operating lease liabilities (Note 16)$16,207 $16,546 
Long-term contingent liability (Note 4)20,900 86,200 
Other long-term liabilities21,669 22,148 
Total other long-term liabilities$58,776 $124,894 
9. Sale of Puerto Rico Subsidiary
During the fourth quarter of 2020, the Company entered into a stock purchase agreement (the “SPA”) with one of its existing radiopharmacy customers to sell all the stock of its Puerto Rico radiopharmacy subsidiary. The assets were classified as held for sale
13

and the Company determined that the fair value of the net assets being sold significantly exceeded the carrying value as of December 31, 2020. The transaction was consummated on January 29, 2021.
The purchase price for the stock sale was $18.0 million in cash, including a holdback amount of $1.8 million which the Company received during the first quarter of 2022; the purchase price also included a working capital adjustment. The SPA contains customary representations, warranties and covenants by each of the parties. Subject to certain limitations, the buyer will be indemnified for damages resulting from breaches or inaccuracies of the Company’s representations, warranties and covenants in the SPA.
The Company determined that this sale of certain net assets did not constitute a strategic shift that had a major effect on the Company’s operations or financial results. As a result, this transaction was not classified as discontinued operations in the Company’s accompanying condensed consolidated financial statements.
The following table summarizes the major classes of assets and liabilities sold as of January 29, 2021 (date of sale):
(in thousands)
January 29, 2021
Current Assets:
Cash and cash equivalents
$540 
Accounts receivable, net
1,959 
Inventory
530 
Other current assets
65 
Total current assets
3,094 
Non-Current Assets:
Property, plant & equipment, net
780 
Intangibles, net
96 
Other long-term assets
774 
Total assets held for sale
$4,744 
Current Liabilities:
Accounts payable
$185 
Accrued expense and other liabilities
369 
Total current liabilities
554 
Non-Current Liabilities:
Asset retirement obligations
306 
Other long-term liabilities
588 
Total liabilities held for sale
$1,448 

The sale resulted in a pre-tax book gain of $15.3 million, which was recorded within operating income in the condensed consolidated statements of operations for the three months ended March 31, 2021.
10. Asset Retirement Obligations
The Company considers its legal obligation to remediate its facilities upon a decommissioning of its radioactive-related operations as an asset retirement obligation. The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts and Somerset, New Jersey sites. As of March 31, 2022, the liability is measured at the present value of the obligation expected to be incurred, of approximately $26.4 million.
The following table provides a summary of the changes in the Company’s asset retirement obligations:
14

(in thousands)Amount
Balance at January 1, 2022$20,833 
Accretion expense388 
Accelerated Costs293 
Balance at March 31, 2022$21,514 
In December 2021, the Company evaluated the accretion timeline of an asset group due to a revision in the planned period of use at the North Billerica site. As a result of the accelerated timeline, the Company determined the asset group’s present value exceeded the current value recorded as of December 31, 2021. Accordingly, the Company recorded a non-cash adjustment of $5.3 million to anticipate a revision in the end of useful life by the end of 2022.
The Company is required to provide the Massachusetts Department of Public Health and New Jersey Department of Environmental Protection financial assurance demonstrating the Company’s ability to fund the decommissioning of its North Billerica, Massachusetts and Somerset, New Jersey production facilities upon closure, although the Company has no current plans to close the facilities. The Company has provided this financial assurance in the form of a $28.2 million surety bond.
11. Intangibles, Net
Intangibles, net, consisted of the following:
March 31, 2022
(in thousands)Useful Lives
(in years)
Amortization MethodCostAccumulated AmortizationNet
Trademarks
15 - 25
Straight-Line$13,540 $(11,648)$1,892 
Customer relationships
15 - 25
Accelerated96,962 (94,856)2,106 
Currently marketed products
9 - 15
Straight-Line275,700 (29,416)246,284 
Licenses
11 - 16
Straight-Line85,800 (13,441)72,359 
Developed technology9Straight-Line2,400 (477)1,923 
IPR&DN/AN/A15,640 — 15,640 
   Total$490,042 $(149,838)$340,204 


December 31, 2021
(in thousands)Useful Lives
(in years)
Amortization MethodCostAccumulated AmortizationNet
Trademarks
15 - 25
Straight-Line$13,540 $(11,510)$2,030 
Customer relationships
15 - 25
Accelerated96,880 (94,630)2,250 
Currently marketed product
9 - 15
Straight-Line275,700 (23,345)252,355 
Licenses
11 - 16
Straight-Line85,800 (11,555)74,245 
Developed technology9Straight-Line2,400 (410)1,990 
IPR&DN/AN/A15,640 — 15,640 
   Total$489,960 $(141,450)$348,510 


The Company recorded amortization expense for its intangible assets of $8.3 million and $4.7 million for the three months ended March 31, 2022 and 2021, respectively.
In May 2021, PyL (18F-DCFPyL) was approved by the FDA under the name PYLARIFY. Accordingly, the Company reclassified the associated asset of $132.8 million from IPR&D to currently marketed products and commenced amortization of the asset.
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The below table summarizes the estimated aggregate amortization expense expected to be recognized on the above intangible assets:
(in thousands)Amount
Remainder of 2022$24,923 
202332,634 
202432,563 
202532,508 
202632,497 
2027 and thereafter169,439 
   Total$324,564 
12. Long-Term Debt, Net, and Other Borrowings
As of March 31, 2022, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows:
(in thousands)Amount
Remainder of 2022$8,750 
202315,000 
2024148,750 
Total principal outstanding172,500 
Unamortized debt discount(448)
Unamortized debt issuance costs(387)
Finance lease liabilities582 
Total172,247 
Less: current portion(12,878)
Total long-term debt, net and other borrowings$159,369 


At March 31, 2022, the Company’s interest rate under the five-year secured term loan facility, which matures on June 30, 2024 (the “2019 Term Facility” and the loans thereunder, the “2019 Term Loans”) was 2.2%.
On March 31, 2021, the Company voluntarily repaid in full the entire outstanding principal on the original $50.0 million loan agreement (the “Royalty-Backed Loan”) with a fund managed by HealthCare Royalty Partners III, L.P. in the amount of $30.9 million, which included a prepayment amount of $0.5 million, and terminated the agreement governing the Royalty-Backed Loan. The Company recorded a gain on extinguishment of debt of $0.9 million related to the write-off of an unamortized debt premium offset by the prepayment amount.
13. Derivative Instruments
The Company uses interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt. In March 2020, the Company entered into interest rate swap contracts to fix the LIBOR rate on a notional amount of $100.0 million through May 31, 2024. The average fixed LIBOR rate on the interest rate swaps is approximately 0.82%. This agreement involves the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreement without an exchange of the underlying principal amount. The interest rate swaps were designated as cash flow hedges. In accordance with hedge accounting, the interest rate swaps are recorded on the Company’s condensed consolidated balance sheets at fair value, and changes in the fair value of the swap agreements are recorded to other comprehensive loss and reclassified to interest expense in the period during which the hedged transaction affected earnings or it will become probable that the forecasted transaction would not occur. At March 31, 2022, accumulated other comprehensive income included $1.0 million of pre-tax deferred gains that are expected to be reclassified to earnings during the next 12 months.
The following table presents the location and fair value amounts of derivative instruments reported in the condensed consolidated balance sheets:
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(in thousands)March 31, 2022December 31, 2021
Derivatives typeClassification
Assets:
   Interest rate swapOther long-term assets$3,387 $357 
14. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of tax of $0.9 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively, consisted of the following:
(in thousands)Foreign currency translationUnrealized loss on cash flow hedgesAccumulated other comprehensive loss
Balance at January 1, 2022$(754)$269 $(