What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-07-31 · 144 added, 111 removed, 628 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

2020 December 31,

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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Loss on extinguishment of debt — — — 3,196

Other income ( 756 ) ( 1,312 ) ( 1,106 ) ( 2,499 )

Other (income) loss ( 596 ) 804 ( 1,702 ) ( 1,695 )

(Loss) income before income taxes ( 7,462 ) 5,357 ( 8,636 ) 26,231

Income tax expense 309 1,698 2,501 4,513

Income tax (benefit) expense ( 1,076 ) 501 1,425 5,014

Net (loss) income $ ( 6,386 ) $ 4,856 $ ( 10,061 ) $ 21,217

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Lantheus Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Comprehensive (Loss) Income

(in thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net (loss) income $ ( 6,386 ) $ 4,856 $ ( 10,061 ) $ 21,217

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation 185 ( 33 ) ( 9 ) 111

Unrealized loss on cash flow hedges, net of tax ( 89 ) — ( 1,541 ) —

Total other comprehensive (loss) income ( 212 ) 88 ( 1,646 ) 144

Total other comprehensive income (loss) 96 ( 33 ) ( 1,550 ) 111

Comprehensive (loss) income $ ( 6,290 ) $ 4,823 $ ( 11,611 ) $ 21,328

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(in thousands)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Common Stock Additional

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Balance, June 30, 2020 66,808 $ 668 $ 657,669 $ ( 140,148 ) $ ( 2,606 ) $ 515,583

Six Months Ended June 30, 2019

Net loss — — — ( 6,386 ) — ( 6,386 )

Other comprehensive loss — — — — 96 96

Stock option exercises and employee stock plan purchases 32 — 344 — — 344

Vesting of restricted stock awards and units 13 1 ( 1 ) — — —

Shares withheld to cover taxes ( 3 ) ( 1 ) ( 49 ) — — ( 50 )

Stock-based compensation — — 3,992 — — 3,992

Balance, September 30, 2020 $ 66,850 $ 668 $ 661,955 $ ( 146,534 ) $ ( 2,510 ) $ 513,579

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

Lantheus Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(in thousands)

Nine Months Ended September 30, 2019

Common Stock Additional

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Balance, June 30, 2019 39,043 $ 390 $ 244,600 $ ( 151,779 ) $ ( 964 ) $ 92,247

Net income — — — 4,856 — 4,856

Other comprehensive loss — — — — ( 33 ) ( 33 )

Stock option exercises and employee stock plan purchases 49 1 1,019 — — 1,020

Vesting of restricted stock awards and units 153 2 ( 2 ) — — —

Shares withheld to cover taxes ( 16 ) ( 1 ) ( 346 ) — — ( 347 )

Stock-based compensation — — 3,423 — — 3,423

Balance, September 30, 2019 39,229 $ 392 $ 248,694 $ ( 146,923 ) $ ( 997 ) $ 101,166

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

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(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

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Amortization of debt related costs 199 809

Changes in fair value of contingent assets and liabilities 800 —

Loss on extinguishment of debt — 3,196

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Cash acquired in acquisition of business 17,562 —

Net cash provided by (used in) investing activities 2,609 ( 13,984 )

Net cash used in investing activities ( 1,127 ) ( 17,320 )

Financing activities

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(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Reconciliation to amounts within the condensed consolidated balance sheets

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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 Pharmaceuticals, Inc., a Delaware corporation (“Progenics”) for the period from June 19 through June 30, 2020 (see “Acquisition of Progenics” 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.

The accompanying unaudited condensed consolidated financial statements include the accounts of Holdings and its direct and indirect wholly-owned subsidiaries, including Progenics Pharmaceuticals, Inc., a Delaware corporation (“Progenics”) for the period from June 19 through September 30, 2020 (see “Acquisition of Progenics” 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.

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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 and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020 or any future period.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020 or any future period.

The condensed consolidated balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S.

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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 previously announced 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 “Merger”).

In accordance with the Merger Agreement, at the effective time of the Merger (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 targeted imaging agent designed to visualize prostate cancer currently a late stage clinical candidate (“PyL”).

In accordance with the Merger Agreement, at the effective time of the Merger (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, currently a late stage clinical candidate (“PyL”).

Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40 % of U.S.

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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 Transaction, exceed 19.9 % (which we estimate could be approximately $ 100 million) of the total consideration the Company pays in the Progenics Transaction.

No fractional shares of Holdings common stock have been or will be issued in the Merger, and Progenics’ former stockholders have received or will receive cash in lieu of any fractional shares of Holdings common stock.

No fractional shares of Holdings common stock were issued in the Merger, 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 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 Lantheus Stock Option converted on an exchange ratio determined based on the average of the 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 .

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 Lantheus Stock Option converted at an exchange ratio determined based on the average of the 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.

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Please refer to Note 8, “Business Combinations”, for further details on the acquisition.

On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic.

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption.

Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary.

Many organizations and individuals, including the Company and its employees, have taken additional steps to avoid or reduce infection, including having non-essential employees work from home and limiting travel.

These measures have disrupted normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and economies worldwide.

It is not clear when businesses or economies will return to their pre-COVID-19 operating status or productivity.

The Company experienced operational and financial impacts from the COVID-19 pandemic beginning late in the first quarter of 2020 and through the date of this filing, including the impact of stay-at-home mandates and advisories, and a decline in the volume of procedures and treatments using the Company’s products.

As a result of the COVID-19 pandemic, the Company undertook a thorough analysis of all of its discretionary expenses.

Beginning in the first quarter of 2020, the Company implemented certain cost reduction initiatives, including, among other things, reducing travel and promotional expenses, reducing the Company’s work week from five days to four , reducing salaries by between 20 % and 75 %, and implementing a hiring freeze through the balance of 2020.

In the latter half of June, the Company restored its work week back to five days and restored most salaries back to 100 % (other than executive team members whose salaries were restored in early July and directors whose compensation will remain at reduced levels for the balance of the calendar year).

In the first quarter of 2020, the Company implemented certain cost reduction initiatives.

For most of the second quarter, the Company reduced the Company’s work week from five days to four days and reduced the pay for employees by varying amounts depending on level of seniority.

During the second quarter of 2020, Progenics also implemented certain cost reduction initiatives and paused new enrollment in the Phase 2 trial of 1095 in metastatic castrate-resistant prostate cancer (“mCRPC”) patients to minimize the risk to subjects and healthcare providers during the pandemic.

New enrollment in that study restarted in October 2020.

GE Healthcare Limited (“GE Healthcare”), the Company’s development and commercialization partner for flurpiridaz F 18, also delayed enrollment in the second Phase 3 clinical trial of flurpiridaz F 18 because of the pandemic and resumed enrollment in the third quarter of 2020.

The severity of the on-going impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted.

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During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill.

measurement period, all adjustments are recorded in the condensed consolidated statements of operations as operating expenses or income.

After the measurement period, all adjustments are recorded in the condensed consolidated statements of operations as operating expenses or income.

Contingent Consideration Liabilities

The estimated fair value of contingent consideration liabilities, initially measured and recorded on the acquisition date, are considered to be a Level 3 instrument and are reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value.

The contingent consideration liabilities are recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in general and administrative expenses in the condensed consolidated statements of operations.

The estimated fair value is determined based on probability adjusted discounted cash flow and Monte Carlo simulation models that include significant estimates and assumptions pertaining to commercialization events and sales targets.

The estimated fair value is determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that include significant estimates and assumptions pertaining to commercialization events and sales targets.

The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.

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Upon permanent abandonment, the Company writes-off the remaining carrying amount of the associated IPR&D intangible asset.

IPR&D assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in our condensed consolidated statements of operations.

IPR&D assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in the Company’s condensed consolidated statements of operations.

Recent Accounting Pronouncements

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Recently Issued Accounting Standards Not Yet Adopted

Accounting Standards Adopted During the Six Months Ended June 30, 2020

Accounting Standards Adopted During the Nine Months Ended September 30, 2020

ASU 2020-04, “Reference Rate Reform (Topic 848)” This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Major Products/Service Lines by Segment (in thousands) 2020 2019 2020 2019

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License and royalty revenues

4,395 — 5,137 —

revenues 77,475 74,650 213,619 225,274

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The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis:

June 30, 2020

September 30, 2020

(in thousands) Total Fair

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Contingent consideration liabilities 17,200 — — 17,200

16,300 — — 16,300

Total liabilities $ 19,273 $ — $ 2,073 $ 17,200

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Total assets $ 39,530 $ 39,530 $ — $ —

(1) Includes purchase consideration of $ 3.7 million related to CVRs and $ 12.6 million of assumed contingent consideration liabilities.

During the three and six months ended June 30, 2020, there were no transfers into or out of Level 3.

During the three and nine months ended September 30, 2020, there were no transfers into or out of Level 3.

As part of the acquisition of Progenics, 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.

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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 following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs at June 30, 2020.

(in thousands) Fair Value at June 30, 2020 Valuation Technique Unobservable Input Assumption

The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs at September 30, 2020.

(in thousands) Fair Value at September 30, 2020 Valuation Technique Unobservable Input Assumption

Contingent receivable:

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Total $ 10,200

(in thousands) Fair Value at June 30, 2020 Valuation Technique Unobservable Input Assumption

(in thousands) Fair Value at September 30, 2020 Valuation Technique Unobservable Input Assumption

Contingent consideration liability:

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Total $ 17,200

For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated (in thousands):

For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated:

Financial Assets Financial Liabilities

(in thousands) Six Months Ended

June 30, 2020 Six Months Ended

June 30, 2020

(in thousands) Nine Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

Fair value, beginning of period $ — $ —

Progenics acquisition 10,100 16,300

Changes in fair value included in net loss 100 900

Fair value, end of period $ 10,200 $ 17,200

Changes in unrealized gains (losses) included in earnings $ — $ —

The change in fair value of the contingent financial asset and contingent financial liabilities of $ 0.8 million for the three and nine months ended September 30, 2020 were primarily due to the passage of time.

The Company provides for income taxes at the end of each interim 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.

The Company’s effective tax rate in fiscal 2020 differs from the U.S.

federal statutory rate of 21% principally due to the impact of state taxes, non-deductible transaction costs, and the accrual of interest on uncertain tax positions.

Cumulative adjustments to the tax provision are recorded in the interim period in which a change in the estimated annual effective tax rate is determined.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

Income tax expense $ 309 $ 1,698 $ 2,501 $ 4,513

Income tax (benefit) expense $ ( 1,076 ) $ 501 $ 1,425 $ 5,014

The Company regularly assesses its ability to realize its deferred tax assets.

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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 has recorded valuation allowances of $ 3.0 million against the net deferred tax assets of certain foreign subsidiaries, as well as a valuation allowance of $ 0.7 million against net state deferred tax assets due to the potential expiration of certain state tax losses and tax credits prior to utilization.

The Company has recorded valuation allowances of $ 3.2 million against the net deferred tax assets of certain foreign subsidiaries, as well as a valuation allowance of $ 0.7 million against net U.S.

deferred tax assets due to the potential expiration of certain tax losses and state tax credits prior to utilization.

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 taxing authorities.

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The transaction resulted in an ownership change of Progenics under Section 382 and a limitation on the utilization of Progenics’ pre-transaction tax attributes.

All pre-transaction research credits and Orphan drug credits have been removed from the balance sheet, and the gross carrying value of the tax loss carryforwards reduced to their realizable value on the opening balance sheet, in accordance with the Section 382 limitation.

Significant deferred tax liabilities arising from the purchase accounting basis step-up in identified intangibles were also recorded as part of the purchase accounting, resulting in a small net overall deferred tax liability for Progenics after the application of purchase accounting.

All of Progenics’ pre-transaction research credits and Orphan drug credits have been removed from the balance sheet, and the gross carrying value of the tax loss carryforwards reduced to their realizable value on the opening balance sheet, in accordance with the Section 382 limitation.

Deferred tax liabilities arising from the purchase accounting basis step-up in identified intangibles were also recorded as part of the purchase accounting, resulting in a small net overall deferred tax liability for Progenics after the application of purchase accounting.

Inventory consisted of the following:

(in thousands) June 30,

(in thousands) September 30,

2020 December 31,

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Property, plant and equipment, net, consisted of the following:

(in thousands) June 30,

(in thousands) September 30,

2020 December 31,

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Total property, plant and equipment, net $ 122,381 $ 116,497

Depreciation and amortization expense related to property, plant and equipment, net, was $ 2.7 million and $ 2.5 million for the three months ended June 30, 2020 and 2019, respectively, and $ 5.7 million and $ 5.0 million for the six months ended June 30, 2020 and 2019, respectively.

Depreciation and amortization expense related to property, plant and equipment, net, was $ 3.4 million and $ 2.5 million for the three months ended September 30, 2020 and 2019, respectively, and $ 9.1 million and $ 7.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company tests long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets may not be recoverable.

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The Company then estimated the fair values of the asset group based on their discounted cash flows.

The carrying value exceeded the fair value and as a result, the Company recorded a non-cash impairment of $ 7.3 million for the six months ended June 30, 2020 in cost of goods sold in the condensed consolidated statement of operations.

The carrying value exceeded the fair value and as a result, the Company recorded a non-cash impairment of $ 7.3 million for the nine months ended September 30, 2020 in cost of goods sold in the condensed consolidated statement of operations.

Business Combinations

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Future technologies did not meet the criteria for recognition separately from goodwill because they are part of the future development and growth of the business.

Goodwill of $ 42.1 million recognized in connection with the acquisition is not deductible for tax purposes and has not yet been assigned to operating segments.

The Company recognized $ 7.5 million and $ 8.9 million of acquisition-related costs, including legal, accounting, compensation arrangements and other related fees that were expensed when incurred in the three and six months ended June 30, 2020, respectively.

Goodwill of $ 42.1 million recognized in connection with the acquisition is not deductible for tax purposes and has been assigned to the U.S.

operating segment.

The Company recognized $ 1.6 million and $ 10.5 million of acquisition-related costs, including legal, accounting, compensation arrangements and other related fees that were expensed when incurred in the three and nine months ended September 30, 2020, respectively.

These costs are recorded in general and administrative expenses in the condensed consolidated statements of operations.

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Progenics has been included in the Company’s consolidated financial statements since the acquisition date.

Progenics contributed revenues of $ 1.0 million and a net loss of $ 3.2 million to the Company’s condensed consolidated statement of operations for the three and six months ended June 30, 2020.

Progenics contributed revenues of $ 5.9 million and $ 6.9 million, as well as a net loss of $ 12.6 million and $ 15.8 million to the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2020, respectively.

The following unaudited pro forma financial information presents the Company’s results as if the Progenics acquisition had occurred on January 1, 2019:

Six Months Ended

June 30, 2020 Six Months Ended

June 30, 2019

Nine Months Ended

September 30, 2020 Nine Months Ended

September 30, 2019

(in thousands) Amount Amount

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The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts and San Juan, Puerto Rico sites.

As of June 30, 2020, the liability is measured at the present value of the obligation expected to be incurred, of approximately $ 26.9 million.

As of September 30, 2020, the liability is measured at the present value of the obligation expected to be incurred, of approximately $ 26.9 million.

The following table provides a summary of the changes in the Company’s asset retirement obligations:

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Accretion expense 1,079

Balance at June 30, 2020 $ 13,602

Balance at September 30, 2020 $ 13,962

The Company is required to provide the U.S.

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Intangibles, net, consisted of the following:

June 30, 2020

September 30, 2020

(in thousands) Amortization Method Cost Accumulated Amortization Net

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Total $ 112,559 $ ( 105,223 ) $ 7,336

The Company recorded amortization expense for its intangible assets of $ 0.9 million and $ 0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $ 1.3 million and $ 0.9 million for the six months ended June 30, 2020 and 2019, respectively.

The Company recorded amortization expense for its intangible assets of $ 4.8 million and $ 0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.1 million and $ 1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

The below table summarizes the estimated aggregate amortization expense expected to be recognized on the above intangible assets:

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Long-Term Debt, Net, and Other Borrowings

As of June 30, 2020, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows:

As of September 30, 2020, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows:

(in thousands) Amount

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Total long-term debt, net and other borrowings $ 204,669

At June 30, 2020, the Company’s interest rate under the 2019 Term Facility was 3.4 %.

At September 30, 2020, the Company’s interest rate under the 2019 Term Facility was 3.4 %.

On June 19, 2020, the Company amended its 2019 Credit Agreement (“the Amendment”) as a result of the impact of the COVID-19 pandemic on the business and operations of the Company and the near-term higher level of indebtedness resulting from the Company’s decision not to immediately repay the Progenics debt secured by the RELISTOR royalties following the Company’s acquisition of Progenics.

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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.

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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 June 30, 2020, accumulated other comprehensive loss included $ 0.6 million of pre-tax deferred losses that are expected to be reclassified to earnings during the next 12 months.

At September 30, 2020, accumulated other comprehensive loss included $ 0.6 million of pre-tax deferred losses 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 sheet:

(in thousands) June 30, 2020 December 31, 2019

(in thousands) September 30, 2020 December 31, 2019

Derivatives type Classification

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Accumulated Other Comprehensive Loss

The components of Accumulated Other Comprehensive Loss, net of tax of $ 0.5 million and $ 0.0 million for the six months ended June 30, 2020 and June 30, 2019, respectively, consisted of the following:

The components of Accumulated Other Comprehensive Loss, net of tax of $ 0.5 million and $ 0.0 million for the nine months ended September 30, 2020 and 2019, respectively, consisted of the following:

(in thousands) Foreign currency translation Unrealized loss on cash flow hedges Accumulated other comprehensive loss

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Amounts reclassified to earnings — 243 243

Balance at June 30, 2020 $ ( 1,154 ) $ ( 1,452 ) $ ( 2,606 )

Balance at September 30, 2020 $ ( 969 ) $ ( 1,541 ) $ ( 2,510 )

Balance at January 1, 2019 $ ( 1,108 ) $ — $ ( 1,108 )

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Amounts reclassified to earnings — — —

Balance at June 30, 2019 $ ( 964 ) $ — $ ( 964 )

Balance at September 30, 2019 $ ( 997 ) $ — $ ( 997 )

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2020 2019 2020 2019

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Diluted (loss) income per common share $ ( 0.10 ) $ 0.12 $ ( 0.20 ) $ 0.53

Antidilutive securities excluded from diluted net income per common share 1,649 31 1,517 55

Other income consisted of the following:

Antidilutive securities excluded from diluted net (loss) income per common share 2,588 48 1,657 44

Other (Income) Loss

Other (income) loss consisted of the following:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

Foreign currency (losses) gains $ 94 $ 47 $ ( 220 ) $ 89

Tax indemnification income, net 554 802 1,109 1,604

Foreign currency (gains) losses $ ( 33 ) $ 96 $ 187 $ 7

Tax indemnification (income) expense, net ( 555 ) 762 ( 1,664 ) ( 842 )

Interest income ( 7 ) ( 54 ) ( 221 ) ( 613 )

Other ( 1 ) — ( 4 ) ( 247 )

Total other income $ 756 $ 1,312 $ 1,106 $ 2,499

Total other (income) loss $ ( 596 ) $ 804 $ ( 1,702 ) $ ( 1,695 )

Commitments and Contingencies

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If such loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.

As of June 30, 2020, the Company had the following material ongoing litigation in which the Company was a party:

As of September 30, 2020, the Company had the following material ongoing litigation in which the Company was a party:

RELISTOR Subcutaneous Injection

Between November 19, 2015 and September 18, 2017, Progenics, Salix, Valeant (now Bausch) and Wyeth filed multiple lawsuits against Mylan Pharmaceuticals and certain of its affiliates (collectively, “Mylan”) in the United States District Court for the District of New Jersey for infringement of certain U.S.

patents based upon Mylan’s filing of multiple ANDAs seeking to obtain approval to market a generic version of RELISTOR subcutaneous injection before some or all of those patents expire.

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As a result, trial on the merits in the lead action was adjourned, allowing trial, if necessary, to be consolidated with the lagging, second action.

Fact discovery has concluded in the lagging case, but deadlines for expert discovery have not yet been set.

On August 20, 2020, the parties agreed to dismiss all claims, affirmative defenses, and counterclaims in the lagging action and proceed to a full trial on the merits for the patents asserted in the lead action.

A date for trial has not yet been set.

On May 25, 2018, Mylan filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit (“CAFC”).

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Between December 6, 2016 and December 8, 2017, Progenics, Salix, Bausch, and Wyeth filed suit against Actavis, Actavis LLC, Teva Pharmaceuticals USA, Inc., and Teva Pharmaceuticals Industries Ltd.

(collectively, “Actavis”) in the United States District Court for the District of New Jersey for infringement of certain U.S.

(collectively, “Actavis”) in the Court for infringement of certain U.S.

patents based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR tablets before some or all of those patents expire.

The actions were later consolidated into a single action in the District of New Jersey.

The actions were later consolidated into a single action in the Court.

On May 6-9, 2019, a bench trial was held, and on July 17, 2019, the Court issued an Order finding the asserted claims of a certain U.S.

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The matter is currently pending on appeal at the CAFC and merits briefing is underway.

Actavis’s opening brief was filed February 6, 2020.

The deadline for Plaintiffs to file their responsive brief is currently September 15, 2020.

On June 13, 2019, Progenics, Salix, Bausch, and Wyeth filed another suit against Actavis in the United States District Court for the District of New Jersey for infringement of a separate, and at that time, recently granted U.S.

Actavis’s opening brief was filed

February 6, 2020.

The Plaintiffs filed their responsive brief on September 15, 2020.

Actavis’s reply brief is currently due on November 5, 2020.

On June 13, 2019, Progenics, Salix, Bausch, and Wyeth filed another suit against Actavis in the Court for infringement of a separate, and at that time, recently granted U.S.

patent based upon Actavis’s filing of an ANDA seeking to obtain approval to market a generic version of RELISTOR tablets before this patent expires.

Litigation in this action is underway, and fact discovery has not yet begun.

Litigation in this action is underway, and fact discovery has begun.

RELISTOR European Opposition Proceedings

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Each of these matters are on appeal with the European Patent Office.

Oral proceedings are set to occur on September 22, 2020, November 17, 2020 and November 18, 2020.

Oral proceedings for EP1615646 were held on September 22, 2020.

The decision under appeal was set aside and the case was remitted to the opposition division for further prosecution.

Oral proceedings are set to occur on November 17, 2020 and November 18, 2020 for EP2368553 and EP2368554, respectively.

For each of the above-described RELISTOR proceedings, Progenics and Bausch continue to cooperate closely to vigorously defend and enforce RELISTOR intellectual property rights.

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German PSMA-617 Litigation

On November 8, 2018, Molecular Insight Pharmaceuticals, Inc., a subsidiary of Progenics (“MIP”), filed a complaint against the University of Heidelberg (the “University”) in the District Court of Mannheim in Germany.

In this Complaint, MIP claimed that the discovery and development of PSMA-617 was related to work performed under a research collaboration sponsored by MIP.

MIP alleged that the University breached certain contracts with MIP and that MIP is the co-owner of inventions embodied in certain worldwide patent filings related to PSMA-617 that were filed by the University in its own name.

On February 27, 2019, Endocyte, Inc., a wholly owned subsidiary of Novartis AG, filed a motion to intervene in the German litigation.

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On March 6, 2020, MIP filed with the USPTO a notice stating that the Power of Attorney in certain pending US patent applications was signed by less than all applicants or owners of the applications.

On February 27, 2019, the German District Court set € 0.4 million as the amount MIP must deposit with the Court as security in the event of an unfavorable final decision on the merits of the dispute.

The Court held the first oral hearing in the case on August 6, 2019.

The Court considered procedural matters and granted the parties the right to make further submissions.

A further oral hearing occurred July 23, 2020, during which the Court heard live testimony from several witnesses.

Progenics is vigorously enforcing its rights in this German proceeding.

Because Progenics is the plaintiff, if unsuccessful in this proceeding, Progenics may also have liability for Court fees and fees and disbursements of defendant’s and intervenor’s counsel, such fees and disbursements to be at least partially covered by the aforementioned cash security deposited with the Court.

Because the outcome of litigation is uncertain, no assurance can be given as to how or when this German proceeding will ultimately be resolved.

Litigation Related to the Merger

Nine purported stockholders of Progenics filed ten lawsuits alleging, among other things, that Progenics and the members of the Progenics Board of Directors violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 17 C.F.R.

§ 244.100 and Rule 14a-9 promulgated under the Exchange Act, by misstating or omitting certain allegedly material information in the S-4 Registration Statement filed with the Securities and Exchange Commission (“SEC”) on November 12, 2019, the amended S-4 Registration Statement filed with the SEC on March 16, 2020, and/or the Schedule 14A proxy statement filed with the SEC on March 19, 2020 related to the Merger.

Two of the actions alleged that the Company and Plato Merger Sub, Inc.

(“Merger Sub”) violated Section 14(a) and/or Section 20(a) of the Exchange Act.

One of the actions further alleged that the members of the Progenics Board breached their fiduciary duties of care, loyalty and good faith to the stockholders of Progenics related to the Merger, that Progenics, the Company and Merger Sub aided and abetted such breaches of fiduciary duty, and that the Company and Merger Sub violated Section 14(a) of the Exchange Act.

All such lawsuits have been voluntarily dismissed, with the last of the cases dismissed on June 23, 2020.

On February 27, 2019, the German District Court set € 0.4 million as the amount MIP must deposit with the German District Court as security in the event of an unfavorable final decision on the merits of the dispute.

The German District Court held the first oral hearing in the case on August 6, 2019.

The German District Court considered procedural matters and granted the parties the right to make further submissions.

A further oral hearing occurred July 23, 2020, during which the German District Court heard live testimony from several witnesses, testifying on behalf of the defendants.

On August 24, 2020, the German District Court issued its decision dismissing MIP’s claims, stating that MIP failed to discharge its burden of proof in the matter.

On September 24, 2020, MIP filed a Notice of Appeal of the German District Court’s decision.

MIP is also considering its legal and procedural alternatives against the defendants in other jurisdictions and proceedings.

If MIP is not successful in its appeal, it will be responsible for the German District Court fees and fees and disbursements of defendant’s and intervenor’s counsel, both at first instance and on appeal.

Most of such fees and disbursements at first instance are covered by the aforementioned cash security deposited with the German District Court.

Because the outcome of litigation is uncertain, we cannot predict how or when this matter will ultimately be resolved.

Whistleblower Complaint

In July 2019, Progenics received notification of a complaint submitted by Dr.

Syed Mahmood, the former Vice President of Medical Affairs for Progenics, to the Occupational Safety and Health Administration of the United States Department of Labor (“DOL”), alleging that the termination of his employment by Progenics was in violation of Section 806 of the Sarbanes-Oxley Act of 2002 (“SOX”).

2002 (“SOX”).

Mahmood sought reinstatement to his former position of Vice President of Medical Affairs, back pay, front pay in lieu of reinstatement, interest, attorneys’ fees and costs incurred, and special damages.

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The DOL action has been dismissed and the matter will proceed in federal district court.

Progenics’ Answer to the Complaint is presently due by August 26, 2020.

Progenics filed an answer to Dr.

Mahmood’s complaint on August 26, 2020 and the initial pre-trial conference was held on September 16, 2020.

The Company believes the claims in this matter are without merit, and the Company has meritorious defenses to the claims.

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All goodwill has been allocated to the U.S.

operating segment, except for the goodwill recognized in connection with the Progenics acquisition which has not yet been assigned to operating segments.

operating segment.

The Company does not identify or allocate assets to its segments.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

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Loss on extinguishment of debt — — — 3,196

Other income ( 756 ) ( 1,312 ) ( 1,106 ) ( 2,499 )

Other (income) loss ( 596 ) 804 ( 1,702 ) ( 1,695 )

(Loss) income before income taxes $ ( 7,462 ) $ 5,357 $ ( 8,636 ) $ 26,231

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements