Lantheus Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data LANTHEUS HOLDINGS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 79 Consolidated Balance Sheets 81 Consolidated Statements of Operations 82 Consolidated Statements of Comprehensive (Loss) Income 83 Consolidated Statements of Changes in Stockholders’ Equity 84 Consolidated Statements of Cash Flows 85 Notes to Consolidated Financial Statements 87 78 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Lantheus Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lantheus Holdings, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Certain Intangible Assets in the Progenics Pharmaceuticals, Inc. Acquisition — Refer to Note 8 to the financial statements. Critical Audit Matter Description The Company completed the acquisition of Progenics Pharmaceuticals, Inc. (“Progenics”) common stock for a purchase price of $419.0 million on June 19, 2020 by means of an all-stock transaction. Management accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values at the date of acquisition, including to the currently marketed product intangible asset (“currently marketed product”) and in-process research and development intangible assets (“IPR&D assets”). Management estimated the fair value of the currently marketed product and IPR&D assets for the Progenics acquisition using the multi-period excess earnings method of the income approach. The fair value determination of the currently marketed product and IPR&D assets required management to make significant estimates and assumptions related to forecasted future cash flows, and the selection of the discount rates. We identified the valuation of the Company’s currently marketed product and IPR&D assets for the Progenics acquisition as a critical audit matter because of the significant estimates and assumptions used by management to determine the fair value of these assets. This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our valuation 79 Table of Contents specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasted future cash flows and the selection of the discount rates. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of the currently marketed product and IPR&D assets for the Progenics acquisition, including forecasted future cash flows and the selection of the discount rates included the following, among others: • We tested the effectiveness of controls over the valuation of the currently marketed product and IPR&D assets, including management’s controls over forecasted future cash flows, and the selection of discount rates. • We evaluated the appropriateness and consistency of the methods and assumptions used by management to forecast future cash flows and select the discount rates. • We assessed the reasonableness of management’s forecasted future cash flows by comparing the projections to historical results, and comparing the projections to certain peer companies, and internal and external market data and studies. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rates by: ◦ Testing the source information underlying determination of the discount rates and testing the mathematical accuracy of the calculation. ◦ Developing a range of independent estimates and comparing those to the discount rates selected by management. • We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Touche LLP Boston, Massachusetts February 25, 2021 We have served as the Company’s auditor since 2007. 80 Table of Contents Lantheus Holdings, Inc. Consolidated Balance Sheets (in thousands, except par value) December 31, 2020 2019 Assets Current assets Cash and cash equivalents $ 79,612 $ 92,919 Accounts receivable, net 54,002 43,529 Inventory 35,744 29,180 Other current assets 9,625 7,283 Assets held for sale 5,242 — Total current assets 184,225 172,911 Property, plant and equipment, net 120,171 116,497 Intangibles, net 376,012 7,336 Goodwill 58,632 15,714 Deferred tax assets, net 70,147 71,834 Other long-term assets 60,634 21,627 Total assets $ 869,821 $ 405,919 Liabilities and stockholders’ equity Current liabilities Current portion of long-term debt and other borrowings $ 20,701 $ 10,143 Accounts payable 16,284 18,608 Accrued expenses and other liabilities 41,726 37,360 Liabilities held for sale 1,793 — Total current liabilities 80,504 66,111 Asset retirement obligations 14,020 12,883 Long-term debt, net and other borrowings 197,699 183,927 Other long-term liabilities 63,393 28,397 Total liabilities 355,616 291,318 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; 66,875 and 39,251 shares issued and outstanding, respectively) 669 393 Additional paid-in capital 665,530 251,641 Accumulated deficit ( 149,946 ) ( 136,473 ) Accumulated other comprehensive loss ( 2,048 ) ( 960 ) Total stockholders’ equity 514,205 114,601 Total liabilities and stockholders’ equity $ 869,821 $ 405,919 The accompanying notes are an integral part of these consolidated financial statements. 81 Table of Contents Lantheus Holdings, Inc. Consolidated Statements of Operations (in thousands, except per share data) Year Ended December 31, 2020 2019 2018 Revenues $ 339,410 $ 347,337 $ 343,374 Cost of goods sold 200,649 172,526 168,489 Gross profit 138,761 174,811 174,885 Operating expenses Sales and marketing 40,901 41,888 43,159 General and administrative 69,270 61,244 50,167 Research and development 32,788 20,018 17,071 Total operating expenses 142,959 123,150 110,397 Operating (loss) income ( 4,198 ) 51,661 64,488 Interest expense 9,479 13,617 17,405 Loss on extinguishment of debt — 3,196 — Other (income) loss ( 2,198 ) 6,221 ( 2,465 ) (Loss) income before income taxes ( 11,479 ) 28,627 49,548 Income tax expense (benefit) 1,994 ( 3,040 ) 9,030 Net (loss) income $ ( 13,473 ) $ 31,667 $ 40,518 Net (loss) income per common share: Basic $ ( 0.25 ) $ 0.81 $ 1.06 Diluted $ ( 0.25 ) $ 0.79 $ 1.03 Weighted-average common shares outstanding: Basic 54,134 38,988 38,233 Diluted 54,134 40,113 39,501 The accompanying notes are an integral part of these consolidated financial statements. 82 Table of Contents Lantheus Holdings, Inc. Consolidated Statements of Comprehensive (Loss) Income (in thousands) Year Ended December 31, 2020 2019 2018 Net (loss) income $ ( 13,473 ) $ 31,667 $ 40,518 Other comprehensive (loss) income: Foreign currency translation 330 148 ( 74 ) Unrealized loss on cash flow hedges, net of tax ( 1,418 ) — — Total other comprehensive (loss) income ( 1,088 ) 148 ( 74 ) Comprehensive (loss) income $ ( 14,561 ) $ 31,815 $ 40,444 The accompanying notes are an integral part of these consolidated financial statements. 83 Table of Contents Lantheus Holdings, Inc. Consolidated Statements of Changes in Stockholders’ Equity (in thousands) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Amount Balance, January 1, 2018 37,765 $ 378 $ 232,960 $ ( 209,013 ) $ ( 1,034 ) $ 23,291 Net income — — — 40,518 — 40,518 Forfeiture of dividend equivalent right — — — 355 — 355 Other comprehensive loss — — — — ( 74 ) ( 74 ) Stock option exercises and employee stock plan purchases 223 2 1,578 — — 1,580 Vesting of restricted stock awards 672 7 ( 7 ) — — — Shares withheld to cover taxes ( 194 ) ( 2 ) ( 3,384 ) — — ( 3,386 ) Stock-based compensation — — 8,718 — — 8,718 Balance, December 31, 2018 38,466 385 239,865 ( 168,140 ) ( 1,108 ) 71,002 Net income — — — 31,667 — 31,667 Other comprehensive income — — — — 148 148 Stock option exercises and employee stock plan purchases 95 1 1,745 — — 1,746 Vesting of restricted stock awards 796 8 ( 8 ) — — — Shares withheld to cover taxes ( 106 ) ( 1 ) ( 2,453 ) — — ( 2,454 ) Stock-based compensation — — 12,492 — — 12,492 Balance, December 31, 2019 39,251 393 251,641 ( 136,473 ) ( 960 ) 114,601 Net loss — — — ( 13,473 ) — ( 13,473 ) Other comprehensive loss — — — — ( 1,088 ) ( 1,088 ) Stock option exercises and employee stock plan purchases 73 1 759 — — 760 Vesting of restricted stock awards and units 847 8 ( 8 ) — — — Shares withheld to cover taxes ( 141 ) ( 2 ) ( 2,127 ) — — ( 2,129 ) Issuance of common stock, net of $ 3,776 issuance costs 26,845 269 394,065 — — 394,334 Fair value of replacement stock options related to precombination services — — 7,125 — — 7,125 Stock-based compensation — — 14,075 — — 14,075 Balance, December 31, 2020 66,875 $ 669 $ 665,530 $ ( 149,946 ) $ ( 2,048 ) $ 514,205 The accompanying notes are an integral part of these consolidated financial statements. 84 Table of Contents Lantheus Holdings, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2020 2019 2018 Operating activities Net (loss) income $ ( 13,473 ) $ 31,667 $ 40,518 Adjustments to reconcile net (loss) income to net cash flows from operating activities: Depreciation, amortization and accretion 24,689 13,379 13,929 Impairment of long-lived assets 9,935 — — Amortization of debt related costs 119 978 1,279 Changes in fair value of contingent assets and liabilities ( 2,000 ) — — Loss on extinguishment of debt — 3,196 — Provision for excess and obsolete inventory 2,365 1,851 2,875 Stock-based compensation 14,075 12,492 8,718 Loss on disposal of assets 2,250 286 842 Deferred taxes ( 1,334 ) 9,725 5,762 Long-term income tax receivable ( 2,218 ) 10,635 ( 2,855 ) Long-term income tax payable and other long-term liabilities 2,828 ( 13,156 ) 3,219 Other 1,525 282 878 Increases (decreases) in cash from operating assets and liabilities: Accounts receivable ( 7,462 ) 156 ( 3,985 ) Inventory ( 8,459 ) 1,994 ( 8,690 ) Other current assets 1,941 ( 2,411 ) ( 661 ) Accounts payable ( 4,224 ) 3,233 ( 2,886 ) Accrued expenses and other liabilities ( 4,161 ) 6,077 2,250 Net cash provided by operating activities 16,396 80,384 61,193 Investing activities Capital expenditures ( 12,474 ) ( 22,061 ) ( 20,132 ) Proceeds from sale of assets — — 1,000 Lending on bridge loan ( 10,000 ) — — Cash acquired in acquisition of business 17,562 — — Net cash used in investing activities ( 4,912 ) ( 22,061 ) ( 19,132 ) Financing activities Proceeds from issuance of common stock 683 573 428 Equity issuance costs ( 3,777 ) — — Proceeds from issuance of long-term debt — 199,461 — Payments on long-term debt and other borrowings ( 15,491 ) ( 275,376 ) ( 2,862 ) Deferred financing costs ( 1,224 ) ( 2,258 ) — Proceeds from stock option exercises 77 1,173 1,152 Payments for minimum statutory tax withholding related to net share settlement of equity awards ( 2,129 ) ( 2,454 ) ( 3,386 ) Net cash used in financing activities ( 21,861 ) ( 78,881 ) ( 4,668 ) Effect of foreign exchange rates on cash and cash equivalents 152 76 ( 282 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 10,225 ) ( 20,482 ) 37,111 Cash and cash equivalents and restricted cash, beginning of year 92,919 113,401 76,290 Cash and cash equivalents and restricted cash, end of year $ 82,694 $ 92,919 $ 113,401 85 Table of Contents Lantheus Holdings, Inc. Consolidated Statements of Cash Flows (Continued) (in thousands) Year Ended December 31, 2020 2019 2018 Reconciliation to amounts within the consolidated balance sheets Cash and cash equivalents $ 79,612 $ 92,919 $ 113,401 Cash and cash equivalents included in assets held for sale 941 — — Restricted cash included in other long-term assets 2,141 — — Cash, cash equivalents and restricted cash at end of period $ 82,694 $ 92,919 $ 113,401 Year Ended December 31, 2020 2019 2018 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 9,368 $ 12,253 $ 15,869 Income taxes, net of refunds of $ 331 , $ 2 and $ 35 , respectively $ 340 $ 274 $ 90 Schedule of non-cash investing and financing activities Additions of property, plant and equipment included in liabilities $ 2,227 $ 4,175 $ 7,395 Consideration transferred in acquisition $ 419,009 $ — $ — The accompanying notes are an integral part of these consolidated financial statements. 86 Table of Contents Lantheus Holdings, Inc. Notes to Consolidated Financial Statements 1. Description of Business Lantheus Holdings, Inc., a Delaware corporation, is the parent company of Lantheus Medical Imaging, Inc. (“LMI”) and for the period from June 19 through December 31, 2020, Progenics Pharmaceuticals, Inc., a Delaware corporation (“Progenics”). See “Progenics Acquisition”. The Company develops, manufactures and commercializes innovative diagnostic and therapeutic agents and products that assist clinicians in the diagnosis and treatment of heart disease, cancer and other diseases. For the Company’s diagnostic agents, they believe that the resulting improved diagnostic information enables healthcare providers to better detect and characterize, or rule out, disease, potentially achieving improved patient outcomes, reducing patient risk and limiting overall costs for payers and the entire healthcare system. The Company’s commercial products are used by cardiologists, nuclear physicians, radiologists, internal medicine physicians, technologists and sonographers working in a variety of clinical settings. The Company sells its products to radiopharmacies, PMFs, integrated delivery networks, hospitals, clinics and group practices. The Company sells its products globally and has operations in the U.S. and Canada and third-party distribution relationships in Europe, Canada, Australia, Asia-Pacific and Latin America. Sales of the Company’s microbubble ultrasound enhancing agent, DEFINITY, are made in the U.S. and Canada through a DEFINITY direct sales team. In the U.S., the Company’s nuclear imaging products, including TechneLite, Xenon, NEUROLITE and Cardiolite, are primarily distributed through commercial radiopharmacies, the majority of which are controlled by or associated with GE Healthcare, Cardinal, UPPI, Jubilant Radiopharma and PharmaLogic. A small portion of the Company’s nuclear imaging product sales in the U.S. are made through the Company’s direct sales force to hospitals and clinics that maintain their own in-house radiopharmaceutical preparation capabilities. AZEDRA is also sold in the U.S. through an AZEDRA direct sales team. RELISTOR was licensed to Bausch, and the Company collects quarterly royalties based on those sales. The Company also maintains its own direct sales force in Canada for certain of its products. In Europe, Australia, Asia-Pacific and Latin America, the Company generally relies on third-party distributors to market, sell and distribute its nuclear imaging and ultrasound enhancing agent products, either on a country-by-country basis or on a multi-country regional basis. The Company’s headquarters are located in North Billerica, MA with offices in New York, NY, Somerset, NJ, Montreal, Canada and Lund, Sweden. 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 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 “Progenics Acquisition”). 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, 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. net sales generated by PyL 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 % (which the Company estimates could be approximately $ 100.0 million) of the total consideration the Company pays in the Progenics Acquisition. 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 at the Effective Time. Each Progenics stock option with a per share exercise price greater than $ 4.42 (an “out-of-the-money 87 Table of Contents 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 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. Holdings also assumed 34,000 in-the-money Progenics stock options and 6,507,342 out-of-the-money Progenics stock options, each converted into Replacement Stock Options as noted above. In addition, Lantheus assumed Progenics equity plans, which, on an as-converted basis, increased the number of Lantheus shares available for issuance by an aggregate of 4,211,290 shares prior to converting the stock options noted above, subject to certain limitations as to eligibility for issuance. Please refer to Note 8, “Business Combinations”, for further details on the acquisition. COVID-19 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. 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. While the impact of COVID-19 on the Company’s results of operations and cash flows has been, and is expected to continue to be, material, given the continually evolving nature of the pandemic, the Company is currently unable to accurately predict the impact of COVID-19 on its overall 2021 operations and financial results or cash flows for the foreseeable future and whether the impact of COVID-19 could lead to potential future impairments. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP. The consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications Certain immaterial reclassifications in the prior period consolidated statement of cash flows have been reclassified to conform to the current year period financial statement presentation. Reclassifications include $ 0.1 million and $ 0.3 million from provision for bad debt to other at December 31, 2019 and 2018, respectively, as well as $ 0.3 million and $ 0.8 million from other to loss on disposal of assets at December 31, 2019 and 2018, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The more significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, certain judgments regarding revenue recognition, goodwill, tangible and intangible asset valuation, inventory valuation, asset retirement obligations, contingent assets and liabilities, income tax liabilities and related indemnification receivable, deferred tax assets and liabilities and accrued expenses. Actual results could materially differ from those estimates or assumptions. 88 Table of Contents Revenue Recognition The Company recognizes revenue when it transfers control of promised goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods and services. See Note 3, “Revenue from Contracts with Customers” for further discussion on revenues. Accounts Receivable, net Accounts receivable consist of amounts billed and currently due from customers. The Company maintains an allowance for doubtful accounts for estimated losses. In determining the allowance, consideration includes the probability of recoverability based on past experience and general economic factors. Certain accounts receivable may be fully reserved when the Company becomes aware of any specific collection issues. Income Taxes The Company accounts for income taxes using an asset and liability approach. Income tax expense (benefit) represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax attributes are expected to be recovered or paid, and are adjusted for changes in tax rates and tax laws when such changes are enacted. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more-likely-than-not to be realized. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not that the future tax benefit will not be realized. The assessment of whether or not a valuation allowance is required involves weighing both positive and negative evidence, including both historical and prospective information, with greater weight given to evidence that is objectively verifiable. A history of recent losses is negative evidence that is difficult to overcome with positive evidence. In evaluating prospective information there are four sources of taxable income: reversals of taxable temporary differences, items that can be carried back to prior tax years (such as net operating losses), pre-tax income, and prudent and feasible tax planning strategies. Adjustments to the deferred tax valuation allowances are made in the period when those assessments are made. The Company accounts for uncertain tax positions using a two-step recognition threshold and measurement analysis method to determine the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized in the financial statements are recorded as adjustments to other long-term assets and liabilities, or adjustments to deferred taxes, or both. The Company records the related interest and penalties to income tax (benefit) expense. Net Income (Loss) per Common Share Basic earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, plus the potential dilutive effect of other securities if those securities were converted or exercised. During periods in which the Company incurs net losses, both basic and diluted loss per common share is calculated by dividing the net loss by the weighted-average shares of common stock outstanding and potentially dilutive securities are excluded from the calculation because their effect would be antidilutive. Cash and Cash Equivalents Cash and cash equivalents include savings deposits, certificates of deposit and money market funds that have original maturities of three months or less when purchased. Restricted Cash Restricted cash at December 31, 2020, represents primarily collateral for a letter of credit securing a lease obligation and a security deposit. The Company believes the carrying value of this asset approximates fair value. Concentration of Risks and Limited Suppliers Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. The Company periodically reviews its accounts receivable for collectability and provides for an allowance for doubtful accounts to the extent that amounts are not expected to be collected. The Company sells primarily to large national distributors, which in turn, resell the Company’s products. 89 Table of Contents As of December 31, 2020 and 2019, no customer accounted for greater than 10% of accounts receivable, net. No customer accounted for greater than 10% of revenues for the years ended December 31, 2020, 2019 and 2018. The Company relies on certain materials used in its development and manufacturing processes, some of which are procured from only one or a few sources. The failure of one of these suppliers to deliver on schedule could delay or interrupt the manufacturing or commercialization process and would adversely affect the Company’s operating results. In addition, a disruption in the commercial supply of, or a significant increase in the cost of one of the Company’s materials from these sources could have a material adverse effect on the Company’s business, financial position and results of operations. The Company has Mo-99 supply agreements with IRE of Belgium, running through December 31, 2022, and renewable by the Company on a year-to-year basis thereafter, and with ANSTO and NTP, running through December 31, 2021. The Company also has a Xenon supply agreement with IRE which runs through June 30, 2022, and which is subject to further extension. The Company currently relies on IRE as the sole supplier of bulk-unprocessed Xenon which the Company processes and finishes for its customers. The Company currently relies on JHS as its sole source manufacturer of DEFINITY, NEUROLITE, Cardiolite and evacuation vials for TechneLite. The following table sets forth revenues for each of the Company’s products representing 10% or more of revenues: Year Ended December 31, 2020 2019 2018 DEFINITY 62.8 % 62.6 % 53.3 % TechneLite 25.4 % 24.9 % 28.8 % Inventory Inventory includes material, direct labor and related manufacturing overhead and is stated at the lower of cost and net realizable value on a first-in, first-out basis. The Company records inventory when the Company takes title to the product. The Company assesses the recoverability of inventory to determine whether adjustments for excess and obsolete inventory are required. Inventory that is in excess of future requirements is written down to its estimated net realizable value based on product shelf life, forecasted demand and other factors. Inventory costs associated with product that has not yet received regulatory approval are capitalized if the Company believes there is probable future commercial use of the product and future economic benefits of the asset. If future commercial use of the product is not probable, then inventory costs associated with such product are expensed as incurred. As of December 31, 2020 and 2019, the Company had no capitalized inventories associated with product that did not have regulatory approval, respectively. Property, Plant and Equipment, net Property, plant & equipment are stated at cost. Replacements of major units of property are capitalized, and replaced properties are retired. Replacements of minor components of property and repair and maintenance costs are charged to expense as incurred. Certain costs to obtain or develop computer software are capitalized and amortized over the estimated useful life of the software. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are as follows: Class Range of Estimated Useful Lives Buildings 10 - 50 years Land improvements 15 - 40 years Machinery and equipment 3 - 15 years Furniture and fixtures 15 years Leasehold improvements Lesser of lease term or 15 years Computer software 3 - 5 years Upon retirement or other disposal of property, plant & equipment, the cost and related amount of accumulated depreciation are removed from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds is included in operating income. Included within machinery, equipment and fixtures are spare parts. Spare parts include replacement parts relating to plant & equipment and are either recognized as an expense when consumed or reclassified and capitalized as part of the related asset and depreciated over the remaining useful life of the related asset. 90 Table of Contents Business Combinations The Company accounts for business combinations using the acquisition method of accounting. The Company recognizes the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition. The Company assesses the fair value of assets acquired, including intangible assets, and liabilities assumed using a variety of methods. Each asset acquired and liability assumed is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount rates. Acquired IPR&D is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated with a business combination are expensed as incurred. 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. After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income. Goodwill Goodwill is not amortized but is instead tested for impairment at least annually and whenever events or circumstances indicate that it is more likely-than-not that they may be impaired. The Company has elected to perform the annual test for goodwill impairment as of October 31 of each year. In performing the Company’s annual assessment, the Company is permitted to first perform a qualitative test and if necessary, perform a quantitative test. If the Company is required to perform the quantitative impairment test of goodwill, the Company compares the fair value of a reporting unit to its carrying value. If the reporting unit’s carrying value exceeds its fair value, the Company would record an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value. The Company estimates the fair value of its reporting units using discounted cash flow or other valuation models, such as comparative transactions and market multiples. The Company did no t recognize any goodwill impairment charges during the years ended December 31, 2020, 2019 or 2018. Intangible and Long-Lived Assets The Company tests intangible and 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. The Company measures the recoverability of assets to be held and used by comparing the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If those assets are considered to be impaired, the impairment equals the amount by which the carrying amount of the assets exceeds the fair value of the assets. Any impairments are recorded as permanent reductions in the carrying amount of the assets. See Note 7, “Property, Plant and Equipment, Net” for further details on impairment. Long-lived assets, other than goodwill and other intangible assets that are held for sale are recorded at the lower of the carrying value or the fair market value less the estimated cost to sell. Intangible assets, consisting of patents, trademarks, customer relationships, a currently marketed product, licenses and developed technology related to the Company’s products are amortized in a method equivalent to the estimated utilization of the economic benefit of the asset. The Company’s in-process research and development (“IPR&D”) represents intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility or completion of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. Because obtaining regulatory approval can include significant risks and uncertainties, the eventual realized value of the acquired IPR&D projects may vary from their fair value at the date of acquisition. The Company classifies IPR&D acquired in a business combination as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Upon completion of the associated research and development efforts, the Company will determine the useful life and begin amortizing the assets to reflect their use over their remaining lives. 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 as of October 31 or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in the Company’s consolidated statements of operations. See Note 11, “Intangibles, net and Goodwill” for further details on impairment. 91 Table of Contents Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, product and environmental liability. The Company records accruals for those loss contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company does not recognize gain contingencies until realized. Fair Values of Financial Instruments The estimated fair values of the Company’s financial instruments, including its cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the carrying values of these instruments due to their short term nature. The estimated fair value of the Company’s long term debt approximates its carrying values as the applicable interest rates are subject to change with market interest rates. The estimated fair value of the Company’s royalty-backed long-term debt approximates its carrying value as the interest rate is in line with the market interest rates for this type of debt with the respective underlining collateral value. See note 4, “Fair Value of Financial Instruments”. 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 consolidated statements of operations. 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. Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement. 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. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged. Further, the Company must formally document the hedging relationship at inception and, on at least a quarterly basis, continually reevaluate the relationship to ensure it remains highly effective throughout the life of the hedge. The Company does not enter into derivative financial instruments for speculative or trading purposes. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. During the years ended December 31, 2020, 2019 and 2018, the Company incurred $ 5.2 million, $ 3.8 million and $ 4.0 million, respectively in advertising and promotion costs, which are included in sales and marketing in the consolidated statements of operations. Research and Development Research and development costs are expensed as incurred and relate primarily to the development of new products to add to the Company’s portfolio and costs related to its medical affairs and medical information functions. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and recognized as an expense as the goods are delivered or the related services are performed. Foreign Currency The consolidated statements of operations of the Company’s foreign subsidiaries are translated into U.S. Dollars using weighted-average exchange rates. The net assets of the Company’s foreign subsidiaries are translated into U.S. Dollars using the end of period exchange rates. The impact from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation adjustment account, which is included in accumulated other comprehensive loss in the consolidated balance sheets. Remeasurement of the Company’s foreign currency denominated transactions are included in net income. Transaction gains and losses are reported as a component of other (income) loss in the consolidated statements of operations. 92 Table of Contents Stock-Based Compensation The Company’s stock-based compensation cost is measured at the grant date of the stock-based award based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of the awards that will be forfeited. The Company estimates the fair value of each stock-based award on its measurement date using either the current market price of the stock, the Black-Scholes option valuation model or the Monte Carlo Simulation valuation model, whichever is most appropriate. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions such as stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. Expected volatility is based on the historical volatility of the Company’s stock price. The risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the awards’ expected lives. Expected lives are principally based on the Company’s historical exercise experience with previously issued awards. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future. Expense for performance restricted stock awards is recognized based upon the fair value of the awards on the date of grant and the number of shares expected to vest based on the terms of the underlying award agreement and the requisite service period(s). Other (Income) Loss Other (income) loss consisted of the following: Year Ended December 31, (in thousands) 2020 2019 2018 Foreign currency losses (gains) $ 260 $ ( 33 ) $ 557 Tax indemnification (income) expense, net ( 2,218 ) 10,635 ( 2,855 ) Interest income ( 238 ) ( 686 ) ( 167 ) Arbitration award — ( 3,453 ) — Other ( 2 ) ( 242 ) — Total other (income) loss $ ( 2,198 ) $ 6,221 $ ( 2,465 ) Comprehensive (Loss) Income Comprehensive (loss) income consists of net (loss) income and other gains and losses affecting stockholders’ equity that, under U.S. GAAP, are excluded from net income. For the Company, other comprehensive (loss) income consists of foreign currency translation gains and losses as well as unrealized gains and losses on cash flow hedges related to the Company’s interest rate swaps. The accumulated other comprehensive loss balance consists entirely of foreign currency translation gains and losses and unrealized gains and losses on cash flow hedges related to the Company’s interest rate swaps. Asset Retirement Obligations The Company’s compliance with federal, state, local and foreign environmental laws and regulations may require it to remove or mitigate the effects of the disposal or release of chemical substances in jurisdictions where it does business or maintains properties. The Company establishes accruals when those costs are legally obligated and can be reasonably estimated. Accrual amounts are estimated, which may include the assistance of third-party environmental specialists, and are based on currently available information, regulatory requirements, remediation strategies, historical experience, the relative shares of the total remediation costs, a relevant discount rate, and the time periods of when estimated costs can be reasonably predicted. Changes in these assumptions could impact the Company’s future reported results. The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts site. The Company considers its legal obligation to remediate its facilities upon a decommissioning of its radioactive-related operations as an asset retirement obligation. The fair value of a liability for asset retirement obligations is recognized in the period in which the liability is incurred. The liability is measured at the present value of the obligation expected to be incurred and is adjusted in subsequent periods as accretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying values of the related long-lived assets and depreciated over the assets’ useful lives. 93 Table of Contents The Company has identified conditional asset retirement obligations related to the future removal and disposal of asbestos contained in certain of the buildings located on the Company’s North Billerica, Massachusetts campus. The Company believes the asbestos is appropriately contained and it is compliant with all applicable environmental regulations. If these properties undergo major renovations or are demolished, certain environmental regulations are in place, which specify the manner in which asbestos must be handled and disposed. The Company is required to record the fair value of these conditional liabilities if they can be reasonably estimated. As of December 31, 2020 and 2019, sufficient information was not available to estimate a liability for such conditional asset retirement obligations as the obligations to remove the asbestos from these properties have indeterminable settlement dates. As such, no liability for conditional asset retirement obligations has been recorded in the accompanying consolidated balance sheets as of December 31, 2020 and 2019. Self-Insurance Reserves The Company’s consolidated balance sheets at December 31, 2020 and 2019 include $ 0.6 million of accrued liabilities associated with employee medical costs that are retained by the Company, respectively. The Company estimates the required liability of those claims on an undiscounted basis based upon various assumptions which include, but are not limited to, the Company’s historical loss experience and projected loss development factors. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents (frequency) and change in the ultimate cost per incident (severity). Recent Accounting Pronouncements Standard Description Effective Date for Company Effect on the Consolidated Financial Statements Accounting Standards Adopted During the Year Ended December 31, 2020 ASU 2020-04 and 2021-01, “Reference Rate Reform (Topic 848)” ASU 2020-04 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. ASU 2021-01 amends the previous standard to clarify certain expedient options are applicable to derivative instruments that use an interest rate for margining, discounting, or contract price alignment. January 1, 2020 The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326)” This ASU requires financial instruments measured at amortized cost and accounts receivable to be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information and reasonable and supportable forecasts that affect the collectability of the reported amount. January 1, 2020 The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. 94 Table of Contents 3. Revenue from Contracts with Customers Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services. To achieve this core principle, the Company applies the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation. Disaggregation of Revenue The following table summarizes revenue by revenue source and reportable segment as follows: Year Ended December 31, Major Products/Service Lines by Segment (in thousands) 2020 2019 2018 U.S. Product revenue, net (1) $ 284,885 $ 303,989 $ 288,580 License and royalty revenues 9,911 — — Total U.S. revenues 294,796 303,989 288,580 International Product revenue, net (1) 42,810 41,287 52,556 License and royalty revenues 1,804 2,061 2,238 Total International revenues 44,614 43,348 54,794 Total revenues $ 339,410 $ 347,337 $ 343,374 ______________________________ (1) The Company’s principal products include DEFINITY and TechneLite and are categorized within product revenue, net. The Company applies the same revenue recognition policies and judgments for all of its principal products. Product Revenue, Net The Company sells its products principally to hospitals and clinics, radiopharmacies and distributors. The Company considers customer purchase orders, which in some cases are governed by master sales or group purchasing organization agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 60 days from invoicing, the Company has elected to use the significant financing component practical expedient. The Company allocates the transaction price to each distinct product based on their relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs upon delivery to the customer. Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Frequently, the Company receives orders for products to be delivered over multiple dates that may extend across several reporting periods. The Company invoices for each delivery upon shipment and recognizes revenues for each distinct product delivered, assuming transfer of control has occurred. 95 Table of Contents The Company generally does not separately charge customers for shipping and handling costs, but any shipping and handling costs charged to customers are included in product revenue, net. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a current liability. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect product revenue and earnings in the period such variances become known. Rebates and Allowances: The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes a liability for such amounts, which is included in accrued expenses in the accompanying consolidated balance sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and administrative fees the Company is required to pay to group purchasing organizations. The Company estimates the amount of rebates and allowances that are explicitly stated in the Company’s contracts based on a combination of actual purchases and an estimate of the customer’s buying patterns. Product Returns: The Company generally offers customers a limited right of return due to non-conforming product. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls. Reserves for product returns are not significant to the Company due to the nature of its products including radiopharmaceutical products with limited half-lives. License and Royalty Revenues The Company has entered into licensing agreements, under which it licenses certain rights to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. The Company also has distribution licenses which are treated as combined performance obligations with the delivery of its products and are classified as product revenue, net. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the five-step approach stated earlier. The Company uses judgment in determining the number of performance obligations in a license agreement by assessing whether the license is distinct or should be combined with another performance obligation, as well as the nature of the license. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success. Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. 96 Table of Contents Milestone Payments: At the inception of each arrangement that includes development or sales milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and royalty revenues and earnings in the period of adjustment. At December 31, 2020, the Company is constraining variable consideration related to development milestone payments requiring regulatory approvals and sales milestone payments related to achievement of certain sales targets. Royalty Revenues: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Contract Costs The Company recognizes an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient to expense the costs as they are incurred, within sales and marketing expenses, since the amortization period is less than one year. The Company recognized certain revenues as follows: Year Ended December 31, (in thousands) 2020 2019 Amounts included in the contract liability at the beginning of the period $ 33 $ 33 The Company did not record any revenue related to performance obligations satisfied (or partially satisfied) in previous periods during the years ended December 31, 2020 and 2019. 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. 97 Table of Contents 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 consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The fair value of the interest rate swaps are 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 14, “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. Please refer to Note 8, “Business Combinations”, for further details on the acquisition. The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis: December 31, 2020 (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets: Money market $ 35,457 $ 35,457 $ — $ — Contingent receivable 11,300 — — 11,300 Total assets $ 46,757 $ 35,457 $ — $ 11,300 Liabilities: Interest rate swaps $ 1,908 $ — $ 1,908 $ — Contingent consideration liabilities 15,800 — — 15,800 Total liabilities $ 17,708 $ — $ 1,908 $ 15,800 December 31, 2019 (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets: Money market $ 39,530 $ 39,530 $ — $ — Total assets $ 39,530 $ 39,530 $ — $ — During the years ended December 31, 2020 and 2019, 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 98 Table of Contents 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. Refer to Note 1, “Description of Business” 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 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 and Monte Carlo simulation models that included 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. Significant changes in any of the probabilities of success or the probabilities as to the periods in which milestones will be achieved 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 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 19, 2020. (in thousands) Fair Value at June 19, 2020 Valuation Technique Unobservable Input Assumption Contingent receivable: Regulatory milestone $ 3,100 Probability adjusted discounted cash flow model Period of expected milestone achievement 2021 Probability of success 90 % Discount rate 23 % Royalties 7,000 Probability adjusted discounted cash flow model Probability of success 13 % - 77 % Discount rate 23 % Total $ 10,100 (in thousands) Fair Value at June 19, 2020 Valuation Technique Unobservable Input Assumption Contingent consideration liability: Net sales targets - PyL (CVRs) $ 3,700 Monte-Carlo simulation Period of expected milestone achievement 2022 - 2023 Discount rate 23 % 1095 commercialization milestone 2,200 Probability adjusted discounted cash flow model Period of expected milestone achievement 2026 Probability of success 45 % Discount rate 0.48 % Net sales targets - AZEDRA and 1095 10,700 Monte-Carlo simulation Probability of success 40 % - 100 % Discount rate 22 % - 23 % Total $ 16,600 99 Table of Contents The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs at December 31, 2020. (in thousands) Fair Value at December 31, 2020 Valuation Technique Unobservable Input Assumption Contingent receivable: Regulatory milestone $ 3,200 Probability adjusted discounted cash flow model Period of expected milestone achievement 2021 Probability of success 90 % Discount rate 24 % Royalties 8,100 Probability adjusted discounted cash flow model Probability of success 13 % - 77 % Discount rate 24 % Total $ 11,300 (in thousands) Fair Value at December 31, 2020 Valuation Technique Unobservable Input Assumption Contingent consideration liability: Net sales targets - PyL (CVRs) $ 4,200 Monte-Carlo simulation Period of expected milestone achievement 2022 - 2023 Discount rate 24 % 1095 commercialization milestone 2,200 Probability adjusted discounted cash flow model Period of expected milestone achievement 2026 Probability of success 45 % Discount rate 0.51 % Net sales targets - AZEDRA and 1095 9,400 Monte-Carlo simulation Probability of success 40 % - 100 % Discount rate 23 % - 24 % Total $ 15,800 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) Year Ended December 31, 2020 Year Ended December 31, 2020 Fair value, beginning of period $ — $ — Progenics acquisition 10,100 16,600 Changes in fair value included in net loss 1,200 ( 800 ) Fair value, end of period $ 11,300 $ 15,800 The change in fair value of the contingent financial asset and contingent financial liabilities resulted in a gain of $ 2.0 million for the year ended December 31, 2020 was primarily due to a change in the forecast for AZEDRA, changes in market conditions and the passage of time. 100 Table of Contents 5. Income Taxes The components of income before income taxes is summarized as follows: Year Ended December 31, (in thousands) 2020 2019 2018 U.S. $ ( 5,495 ) $ 25,432 46,945 International ( 5,984 ) 3,195 2,603 (Loss) income before income taxes $ ( 11,479 ) $ 28,627 $ 49,548 The income tax expense (benefit) is summarized as follows: Year Ended December 31, (in thousands) 2020 2019 2018 Current Federal $ — $ 287 $ ( 21 ) State 3,158 ( 13,166 ) 3,424 International 170 114 ( 135 ) 3,328 ( 12,765 ) 3,268 Deferred Federal ( 1,506 ) 8,712 7,821 State ( 178 ) 790 1,411 International 350 223 ( 3,470 ) ( 1,334 ) 9,725 5,762 Income tax expense (benefit) $ 1,994 $ ( 3,040 ) $ 9,030 The reconciliation of income taxes at the U.S. federal statutory rate to the actual income taxes is as follows: Year Ended December 31, (in thousands) 2020 2019 2018 U.S. statutory rate $ ( 2,411 ) $ 6,012 $ 10,405 Permanent items 1,406 3,210 152 Acquisition costs - Progenics 2,723 — — Recognition of deferred tax asset - assets held for sale ( 3,000 ) — — Section 162(m) 717 527 353 Uncertain tax positions 2,818 ( 13,156 ) 3,227 Other tax credits ( 1,065 ) ( 1,685 ) ( 742 ) State and local taxes 1,457 1,914 2,125 Foreign tax rate differential ( 254 ) ( 238 ) 30 Valuation allowance ( 318 ) ( 22 ) ( 4,073 ) Benefit of windfall related to stock compensation ( 128 ) ( 2,768 ) ( 1,760 ) Change in indemnification deferred tax asset ( 590 ) 2,531 ( 731 ) Other 639 635 44 Income tax expense (benefit) $ 1,994 $ ( 3,040 ) $ 9,030 101 Table of Contents The components of deferred income tax assets (liabilities) are as follows: December 31, (in thousands) 2020 2019 Deferred Tax Assets Federal benefit of state tax liabilities $ 5,867 $ 5,278 Reserves, accruals and other 32,030 15,026 Inventory obsolescence 404 550 Capitalized research and development 2,553 5,086 Amortization of intangibles other than goodwill 1,325 1,569 Net operating loss carryforwards 127,369 47,095 Depreciation 1,014 56 Deferred tax assets 170,562 74,660 Deferred Tax Liabilities Reserves, accruals and other ( 5,676 ) ( 881 ) Intangible assets ( 91,283 ) ( 707 ) Deferred tax liability ( 96,959 ) ( 1,588 ) Less: valuation allowance ( 3,456 ) ( 1,238 ) $ 70,147 $ 71,834 Recorded in the accompanying consolidated balance sheets as: Noncurrent deferred tax assets, net $ 70,147 $ 71,834 On June 19, 2020, the Company completed the Progenics Acquisition in a transaction that is expected to qualify as a tax-deferred reorganization under Section 368 of the Internal Revenue Code. The transaction resulted in an ownership change of Progenics under Section 382 of the Internal Revenue Code, and a limitation on the utilization of Progenics’ precombination tax attributes. All of Progenics’ precombination 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 of $ 92.3 million on acquired identified intangibles were recorded at acquisition resulting in a small net overall deferred tax liability for Progenics after the application of acquisition accounting. The Company also acquired estimated utilizable U.S. federal loss carryforwards of $ 338.7 million, tax-effected state loss carryforwards of $ 12.5 million and state tax credits of $ 2.5 million as a result of the Progenics acquisition. The utilization of these losses and credits is subject to annual limitations based on Sections 382 and 383 of the Internal Revenue Code. 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. During the fourth quarter of fiscal year 2018, the Company's Canada subsidiary entered an accumulated three year period of profitability, removing a strong item of negative evidence previously supporting the recording of a full valuation allowance. Management determined that the weight of the relevant positive evidence outweigh the negative evidence, and released the valuation allowance against its Canada subsidiary's net deferred tax assets, resulting in an income tax benefit of $ 4.0 million in fiscal 2018. The Company continues to record valuation allowances of $ 1.2 million against the net deferred tax assets of its U.K. subsidiary, $ 2.1 million against the net deferred tax assets of its Sweden subsidiary, and $ 0.1 million against certain domestic state tax credits and state loss carryforwards. The Company will continue to assess the level of the valuation allowance required. If the weight of negative evidence exists in future periods to again support the recording of a partial or full valuation allowance against the Company’s deferred tax assets, there would likely be a material negative impact on the Company’s results of operations in that future period. A summary of the changes in the Company’s valuation allowance is summarized below: 102 Table of Contents (in thousands) Amount Balance, January 1, 2019 $ 1,240 Charged to income tax (benefit) expense ( 22 ) Foreign currency 20 Release valuation allowance — Balance, December 31, 2019 1,238 Charged to income tax (benefit) expense 311 Foreign currency 31 Increase due to Progenics acquisition 2,479 Release valuation allowance ( 603 ) Balance, December 31, 2020 $ 3,456 The Company’s U.S. federal income tax returns are subject to examination for three years after the filing date of the return. The state and foreign income tax returns are subject to examination for periods varying from three to four years after filing, depending on the specific jurisdictions’ statutes of limitation, and in the case of Sweden, up to six years after the end of the financial year. At December 31, 2020, the Company has U.S. federal net operating loss carryovers of approximately $ 492.5 million,$ 354.5 million of which will expire between 2021 and 2037, and $ 138.0 million of which can be carried forward indefinitely. The Company’s state net operating losses are $ 18.0 million on a tax-effected basis, which will expire between 2021 and 2040. The Company also has U.S. federal research credits carryforwards of $ 2.4 million which will begin to expire in 2037. The Company has state research credit carryforwards of $ 4.2 million, which will expire between 2021 and 2035. The Company has state investment tax credit carryforwards of $ 2.6 million net of federal impact, $ 0.7 million of which have no expiration date, $ 1.8 million of which will expire between 2021 and 2023, and the remainder of which will fully expire by 2034. A reconciliation of the Company’s changes in uncertain tax positions for 2020 and 2019 is as follows: (in thousands) Amount Balance of uncertain tax positions as of January 1, 2019 $ 9,788 Additions related to current year tax positions — Reductions related to prior year tax positions ( 4,496 ) Settlements — Lapse of statute of limitations — Balance of uncertain tax positions as of December 31, 2019 5,292 Additions related to current year tax positions — Reductions related to prior year tax positions — Settlements — Lapse of statute of limitations — Balance of uncertain tax positions as of December 31, 2020 $ 5,292 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. Accordingly, a long-term receivable is recorded to account for the expected value to the Company of future indemnification payments, net of actual tax benefits received, to be paid on behalf of the Company by BMS. The tax indemnification receivable is recorded within other long-term assets. In accordance with the Company’s accounting policy, the change in the tax liability, 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 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. 103 Table of Contents As of December 31, 2020 and 2019, total liabilities for uncertain tax positions including interest and penalties were $ 29.9 million and $ 27.0 million, respectively, consisting of uncertain tax positions of $ 5.3 million, interest accruals of $ 23.5 million and $ 20.7 million, respectively, and penalty accruals of $ 1.0 million. As of December 31, 2020 and 2019, these liabilities were included in other long-term liabilities. Included in the 2020, 2019 and 2018 tax provisions are an expense of $ 2.8 million, a benefit of $ 13.2 million and an expense of $ 3.2 million, respectively, relating to accrual of interest, net of benefits for reversals of uncertain tax positions recognized upon settlements, effective settlements, or lapses of relevant statutes of limitation. The total long-term asset related to the indemnification was $ 20.8 million and $ 18.9 million at December 31, 2020 and 2019, respectively. Included in other (income) loss for the years ended December 31, 2020, 2019 and 2018, is tax indemnification expense (income), net of $( 2.2 ) million, $ 10.6 million and $( 2.9 ) million, respectively. The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was passed by the Congress and signed into law on March 27, 2020. The Company has reviewed the relevant measures of the Act. No material impacts of the Cares Act have been identified nor are any anticipated. On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was signed into law, modifying certain aspects of the CARES Act. This Act contains numerous provisions some of which may be beneficial to the Company. The Company is analyzing those impacts but has not yet concluded its analysis. 6. Inventory Inventory consisted of the following: December 31, (in thousands) 2020 2019 Raw materials $ 16,000 $ 11,417 Work in process 11,212 9,450 Finished goods 8,532 8,313 Total inventory $ 35,744 $ 29,180 7. Property, Plant and Equipment, Net Property, plant and equipment, net, consisted of the following: December 31, (in thousands) 2020 2019 Land $ 13,450 $ 13,450 Buildings 70,381 75,654 Machinery, equipment and fixtures 77,854 87,763 Computer software 23,644 20,739 Construction in progress 11,254 10,546 196,583 208,152 Less: accumulated depreciation and amortization ( 76,412 ) ( 91,655 ) Total property, plant and equipment, net $ 120,171 $ 116,497 Depreciation and amortization expense related to property, plant & equipment, net, was $ 12.5 million, $ 10.3 million and $ 10.1 million for the years ended December 31, 2020, 2019 and 2018, 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. During the three months ended March 31, 2020, as a result of a decline in expected future cash flows and the effect of COVID-19 related to certain other nuclear legacy manufacturing assets in the U.S. segment, the Company determined certain impairment triggers had occurred. Accordingly, the Company performed an undiscounted cash flow analysis as of March 31, 2020. Based on the undiscounted cash flow analysis, the Company determined that the manufacturing assets had net carrying values that exceeded their estimated undiscounted future cash flows. 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 year ended December 31, 2020 in cost of goods sold in the consolidated statement of operations. 104 Table of Contents In connection with a contract termination in the fourth quarter of 2020, the Company transferred ownership of certain manufacturing assets and recorded a non-cash loss on disposal of assets of $ 1.8 million as well as paid $ 0.5 million, all of which is recorded in cost of goods sold in the consolidated statement of operations. 8. Business Combinations On June 19, 2020, the Company completed the Progenics Acquisition. Progenics is an oncology company developing innovative medicines and artificial intelligence to Find, Fight and Follow cancer. The acquisition combines the commercialization, supply chain and manufacturing expertise of the Company with the currently commercialized products and R&D pipeline of Progenics. Progenics brings several commercial products and a pipeline of product candidates that will further diversify the Company’s commercial and clinical development portfolios. Under the terms of the Merger Agreement, the Company acquired all of the issued and outstanding shares of Progenics common stock for a purchase price of $ 419.0 million by means of an all-stock transaction, which includes Replacement Stock Options for precombination services as well as CVRs. The CVRs were accounted for as contingent consideration, the fair value of which was determined using a Monte-Carlo simulation. Additionally, the fair value of Replacement Stock Options related to precombination services was recorded as a component of consideration transferred. Finally, as a result of the acquisition, Lantheus effectively settled an existing bridge loan with Progenics at the recorded amount (principal and accrued interest) of $ 10.1 million, representing the effective settlement of a preexisting relationship. This effective settlement of the bridge loan was treated as a component of consideration transferred. The Company determined that the bridge loan was at market terms and no gain or loss was recorded upon settlement. The acquisition date fair value of the consideration transferred in the acquisition consisted of the following: (in thousands) Amount Issuance of common stock $ 398,110 Fair value of replacement stock options 7,125 Fair value of bridge loan settled at close 10,074 Fair value of contingent considerations (CVRs) 3,700 Total consideration transferred $ 419,009 The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. As of December 31, 2020, the Company finalized all measurement period adjustments related to the Progenics acquisition other than tax related balances. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made to the amounts initially recorded in June 2020. The measurement period adjustments primarily resulted from finalizing the fair values of certain intangible assets and liabilities and other changes to certain tangible assets and liability accounts. The related impact to net loss that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date is immaterial to the consolidated financial statements. 105 Table of Contents (in thousands) Amounts Recognized as of Acquisition Date (as previously reported) Measurement Period Adjustments Amounts Recognized as of Acquisition Date (as adjusted) Cash and cash equivalents $ 15,421 $ — $ 15,421 Accounts receivable 5,787 — 5,787 Inventory 915 160 1,075 Other current assets 3,250 434 3,684 Property, plant and equipment 14,972 — 14,972 Identifiable intangible assets (weighted-average useful life): — — Currently marketed product ( 15 years) 142,100 800 142,900 Licenses ( 11.5 years) 87,500 ( 1,700 ) 85,800 Developed technology ( 9 years) 3,000 ( 600 ) 2,400 IPR&D 150,900 200 151,100 Other long-term assets 37,631 — 37,631 Accounts payable ( 1,616 ) — ( 1,616 ) Accrued expenses and other liabilities ( 8,207 ) ( 80 ) ( 8,287 ) Other long-term liabilities ( 30,778 ) ( 380 ) ( 31,158 ) Long-term debt and other borrowings ( 40,200 ) — ( 40,200 ) Deferred tax liabilities ( 3,717 ) 299 ( 3,418 ) Goodwill 42,051 867 42,918 Total consideration transferred $ 419,009 $ — $ 419,009 Intangible assets acquired consist of currently marketed products, licenses, developed technology and IPR&D. The fair value of the acquired intangible assets was determined based on estimated future revenues, royalty rates and discount rates, among other variables and estimates. The acquired intangible assets subject to amortization were assigned useful lives based on the expected use of the assets and the regulatory and economic environment within which they are being used and are being amortized on a straight-line basis over the respective estimated useful lives. The estimated fair values of the IPR&D assets were determined based on the present values of the expected cash flows to be generated by the respective underlying assets. The Company used a discount rate of 23.0 % and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions. As part of the acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics, related to a prior sale of certain intellectual property. The estimated fair value of the acquired contingent receivable of $ 10.1 million was determined by applying a probability adjusted discounted cash flow model based on estimated future expected payments and recorded in other long-term assets. The goodwill recognized is attributable to future technologies that are not separately identifiable that could potentially add to the currently developed and pipeline products and Progenics’ assembled workforce. 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 $ 42.9 million recognized in connection with the acquisition is not deductible for tax purposes and has been assigned to a reporting unit within the U.S. reportable segment. The Company recognized $ 11.9 million of acquisition-related costs, including legal, accounting, compensation arrangements and other related fees that were expensed when incurred in the year ended December 31, 2020, respectively. These costs are recorded in general and administrative expenses in the consolidated statements of operations. Progenics Pro Forma Financial Information Progenics has been included in the Company’s consolidated financial statements since the acquisition date. Progenics contributed revenues of $ 12.4 million, as well as a net loss of $ 27.1 million to the Company’s consolidated statement of operations for the year ended December 31, 2020. The following unaudited pro forma financial information presents the Company’s results as if the Progenics acquisition had occurred on January 1, 2019: 106 Table of Contents Year Ended December 31, 2020 Year Ended December 31, 2019 (in thousands) Amount Amount Pro forma revenue $ 350,315 $ 382,323 Pro forma net loss $ 29,190 $ 42,032 The unaudited pro forma financial information for all periods presented adjusts for the effects of material business combination items, including amortization of acquired intangible assets, transaction-related costs, adjustments to interest expense related to the assumption of long-term debt, retention and severance bonuses and the corresponding income tax effects of each. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the acquisition actually taken place on January 1, 2019. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the acquisition, including, but not limited to, revenue enhancements, cost savings or operating synergies that the combined company may achieve as a result of the acquisition. 9. Assets Held for Sale During the fourth quarter of 2020, the Company entered into a stock purchase agreement (“SPA”) with one of its existing radiopharmacy customers to sell all of the stock of its Puerto Rican radiopharmacy servicing subsidiary. This event qualified for held for sale accounting 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 finalized on January 29, 2021. The purchase price for the stock sale was $ 18.0 million in cash and will also include a working capital adjustment once settled. 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. As part of the transaction, the Company and the buyer also entered into a customary transition services agreement and a long-term supply contract under which the Company will supply the buyer with certain of the Company’s products on commercial terms and under which the buyer has agreed to certain product minimum purchase commitments. The Company does not believe this sale of certain net assets in the international segment constituted a strategic shift that would have a major effect on its operations or financial results. As a result, this transaction is not classified as discontinued operations in the Company’s accompanying consolidated financial statements. The following table summarizes the major classes of assets and liabilities held for sale as of December 31, 2020: 107 Table of Contents (in thousands) Amount Current Assets: Cash and cash equivalents $ 941 Accounts receivable, net 2,191 Inventory 420 Other current assets 43 Total current assets 3,595 Non-Current Assets: Property, plant & equipment, net 761 Intangibles, net 96 Other long-term assets 790 Total assets held for sale $ 5,242 Current Liabilities: Accounts payable $ 224 Accrued expense and other liabilities 661 Total current liabilities 885 Non-Current Liabilities: Asset retirement obligations 302 Other long-term liabilities 606 Total liabilities held for sale $ 1,793 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 prior to its subsequent sale as discussed in Note 23, “Subsequent Events”, San Juan, Puerto Rico sites. As of December 31, 2020, the liability for the San Juan, Puerto Rico site is recorded in liabilities held for sale. As of December 31, 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: (in thousands) Amount Balance, January 1, 2020 $ 12,883 Transfer to liabilities held for sale ( 302 ) Accretion expense 1,439 Balance, December 31, 2020 $ 14,020 The Company is required to provide the U.S. Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurance demonstrating the Company’s ability to fund the decommissioning of its North Billerica, Massachusetts production facility upon closure, although the Company does not intend to close the facility. The Company has provided this financial assurance in the form of a $ 28.2 million surety bond. 108 Table of Contents 11. Intangibles, Net and Goodwill Intangibles, net, consisted of the following: December 31, 2020 (in thousands) Amortization Method Cost Accumulated Amortization Net Trademarks Straight-Line $ 13,540 $ ( 10,958 ) $ 2,582 Customer relationships Accelerated 96,865 ( 93,770 ) 3,095 Currently marketed product Straight-Line 142,900 ( 5,053 ) 137,847 Licenses Straight-Line 85,800 ( 4,008 ) 81,792 Developed technology Straight-Line 2,400 ( 144 ) 2,256 IPR&D N/A 148,440 — 148,440 Total $ 489,945 $ ( 113,933 ) $ 376,012 December 31, 2019 (in thousands) Amortization Method Cost Accumulated Amortization Net Trademarks Straight-Line $ 13,540 $ ( 10,407 ) $ 3,133 Customer relationships Accelerated 99,019 ( 94,816 ) 4,203 Total $ 112,559 $ ( 105,223 ) $ 7,336 The Company recorded amortization expense for its intangible assets of $ 10.8 million, $ 1.8 million and $ 2.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The Company performed its annual impairment test of its IPR&D assets as of October 31, 2020. As a result of a timing delay in the development of an AZEDRA IPR&D asset due to the impact of COVID-19, the Company determined that the carrying value of $ 18.3 million exceeded the fair value of the asset. Accordingly, the Company recorded a non-cash impairment charge of $ 2.7 million for the year ended December 31, 2020 in research and development expenses in the consolidated statements of operations. The estimated fair value of the AZEDRA IPR&D asset was determined based on the present values of the expected cash flows. The Company used a discount rate of 23.0 % and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions. The below table summarizes the estimated aggregate amortization expense expected to be recognized on the above intangible assets: (in thousands) Amount 2021 $ 18,628 2022 18,504 2023 17,898 2024 17,824 2025 17,766 2026 and thereafter 136,952 Total $ 227,572 Goodwill by reportable segment consisted of the following: (in thousands) U.S. Total Balance, January 1, 2020 $ 15,714 $ 15,714 Acquisition (1) 42,918 42,918 Balance, December 31, 2020 $ 58,632 $ 58,632 (1) Refer to Note 8, “Business Combinations” for additional details related to the Progenics acquisition 109 Table of Contents 12. Accrued Expenses and Other Liabilities Accrued expenses are comprised of the following: December 31, (in thousands) 2020 2019 Compensation and benefits $ 17,669 $ 15,100 Freight, distribution and operations 5,653 6,260 Accrued rebates, discounts and chargebacks 9,350 6,985 Accrued professional fees 2,925 6,917 Other 6,129 2,098 Total accrued expenses and other liabilities $ 41,726 $ 37,360 13. Long-Term Debt, Net, and Other Borrowings As of December 31, 2020, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows: (in thousands) Amount 2021 $ 20,452 2022 26,296 2023 22,055 2024 148,750 Total principal outstanding 217,553 Unamortized debt premium, net 954 Unamortized debt issuance costs ( 602 ) Finance lease liabilities 495 Total 218,400 Less: current portion ( 20,701 ) Total long-term debt, net, and other borrowings $ 197,699 In June 2019, the Company refinanced its previous $ 275.0 million five-year term loan agreement (the “2017 Term Facility”) with a new five-year $ 200.0 million term loan facility (the “2019 Term Facility” and the loans thereunder, the “2019 Term Loans”). In addition, the Company replaced its previous $ 75.0 million five-year revolving credit facility (the “2017 Revolving Facility”) with a new $ 200.0 million five-year revolving credit facility (the “2019 Revolving Facility” and, together with the 2019 Term Facility, the “2019 Facility”). The terms of the 2019 Facility are set forth in the Credit Agreement, dated as of June 27, 2019 (the “2019 Credit Agreement”), by and among Holdings, the Company, the lenders from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent and collateral agent. The Company has the right to request an increase to the 2019 Term Facility or request the establishment of one or more new incremental term loan facilities, in an aggregate principal amount of up to $ 100.0 million, plus additional amounts, in certain circumstances. The net proceeds of the 2019 Term Facility, together with approximately $ 73.0 million of cash on hand, were used to refinance in full the aggregate remaining principal amount of the loans outstanding under the 2017 Term Facility and pay related interest, transaction fees and expenses. No amounts were outstanding under the 2017 Revolving Facility at that time. The Company accounted for the refinancing of the 2017 Term Facility as a debt extinguishment and the 2017 Revolving Facility as a debt modification by evaluating the refinancing on a creditor by creditor basis. The Company recorded a loss on extinguishment of debt of $ 3.2 million related to the write-off of unamortized debt issuance costs and debt discounts. In addition, the Company incurred and capitalized $ 2.8 million of new debt issuance costs and debt discounts related to the refinancing. 2019 Term Facility The 2019 Term Loans under the 2019 Term Facility bear interest, with pricing based from time to time at the Company’s election at (i) LIBOR plus a spread ranging from 1.25 % to 2.25 % as determined by the Company’s total net leverage ratio (as defined in the 2019 Credit Agreement) or (ii) the Base Rate (as defined in the 2019 Credit Agreement) plus a spread ranging from 0.25 % to 1.25 % as determined by the Company’s total net leverage ratio. The use of the LIBOR is expected to be phased out by the end of 2021. The 2019 Credit Agreement allows for a replacement interest rate in the event the LIBOR is phased out. 110 Table of Contents The Company is permitted to voluntarily prepay the 2019 Term Loans, in whole or in part, without premium or penalty. The 2019 Term Facility requires the Company to make mandatory prepayments of the outstanding 2019 Term Loans in certain circumstances. The 2019 Term Loans mature in June 2024. At December 31, 2020, the Company’s interest rate under the 2019 Term Facility was 3.4 %. 2019 Revolving Facility Under the terms of the 2019 Revolving Facility, the lenders thereunder agreed to extend credit to the Company from time to time until June 27, 2024 consisting of revolving loans (the “Revolving Loans” and, together with the 2019 Term Loans, the “Loans”) in an aggregate principal amount not to exceed $ 200.0 million (the “Revolving Commitment”) at any time outstanding. The 2019 Revolving Facility includes a $ 20.0 million sub-facility for the issuance of letters of credit (the “Letters of Credit”). The 2019 Revolving Facility includes a $ 10.0 million sub-facility for swingline loans (the “Swingline Loans”). The Letters of Credit, Swingline Loans and the borrowings under the 2019 Revolving Facility are expected to be used for working capital and other general corporate purposes. The Revolving Loans under the 2019 Revolving Facility bear interest, with pricing based from time to time at the Company’s election at (i) LIBOR plus a spread ranging from 1.25 % to 2.25 % as determined by the Company’s total net leverage ratio or (ii) the Base Rate plus a spread ranging from 0.25 % to 1.25 % as determined by the Company’s total net leverage ratio. The 2019 Revolving Facility also includes a commitment fee, which ranges from 0.15 % to 0.30 % as determined by the Company’s total net leverage ratio. The Company is permitted to voluntarily prepay the Revolving Loans, in whole or in part, or reduce or terminate the Revolving Commitment, in each case, without premium or penalty. On any business day on which the total amount of outstanding Revolving Loans and Letters of Credit exceeds the total Revolving Commitment, the Company must prepay the Revolving Loans in an amount equal to such excess. As of December 31, 2020, there were no outstanding borrowings under the 2019 Revolving Facility. 2019 Facility Covenants The 2019 Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds. The 2019 Facility requires the Company to be in quarterly compliance, measured on a trailing four quarter basis, with two financial covenants. The minimum interest coverage ratio, commencing with the fiscal quarter ending September 30, 2019, must be at least 3.00 to 1.00. The Company may elect to increase the maximum total net leverage ratio by 0.50 to 1.00 (subject to a maximum of 4.25 to 1.00) up to two separate times during the term of the 2019 Facility in connection with any Material Acquisition (as defined in the Credit Agreement). The 2019 Facility contains usual and customary restrictions on the ability of the Company and its subsidiaries to: (i) incur additional indebtedness (ii) create liens; (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; (iv) sell certain assets; (v) pay dividends on, repurchase or make distributions in respect of capital stock or make other restricted payments; (vi) make certain investments; (vii) repay subordinated indebtedness prior to stated maturity; and (viii) enter into certain transactions with its affiliates. Upon an event of default, the administrative agent under the Credit Agreement will have the right to declare the Loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced. The 2019 Facility is guaranteed by Holdings and Lantheus MI Real Estate, LLC, and obligations under the 2019 Facility are generally secured by first priority liens over substantially all of the assets of each of LMI, Holdings and Lantheus MI Real Estate, LLC (subject to customary exclusions set forth in the transaction documents) owned as of June 27, 2019 or thereafter acquired. 2020 Amendment 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 Progenics Acquisition. The Company accounted for the Amendment as a debt modification and capitalized $ 1.2 million of associated costs. The Amendment provides for, among other things, modifications to LMI’s financial maintenance covenants. The covenant related to Total Net Leverage Ratio (as defined in the Amended Credit Agreement) has been waived from the date of the Amendment through December 31, 2020. The maximum total net leverage ratio and interest coverage ratio permitted by the financial covenant is displayed in the table below: 2020 Amended Credit Agreement 111 Table of Contents Period Total Net Leverage Ratio Q1 2021 5.50 to 1.00 Q2 2021 3.75 to 1.00 Thereafter 3.50 to 1.00 Period Interest Coverage Ratio Q4 2020 to Q1 2021 2.00 to 1.00 Thereafter 3.00 to 1.00 The Amendment also introduces a new financial covenant requiring Consolidated Liquidity (as defined in the Amended Credit Agreement) to be no less than $ 150.0 million. The Consolidated Liquidity covenant is tested on a continuing basis beginning on the date of the Amendment and ending on the date on which LMI delivers a compliance certificate for the fiscal quarter ending March 31, 2021. For the period beginning on the date of the Amendment and ending on the Adjustment Date (as defined in the Amended Credit Agreement) for the fiscal quarter ending March 31, 2021, loans under the Amended Credit Agreement bear interest at LIBOR plus 3.25 % or the Base Rate plus 2.25 %. On and after the Adjustment Date for the fiscal quarter ending on March 31, 2021, loans bear interest at LIBOR plus a spread that ranges from 1.50 % to 3.00 % or the Base Rate plus a spread that ranges from 0.50 % to 2.00 %, in each case based on LMI’s Total Net Leverage Ratio. The commitment fee applicable to the Revolving Facility is 0.50 % until the Adjustment Date for the fiscal quarter ending March 31, 2021. On and after the Adjustment Date for the fiscal quarter ending on March 31, 2021, the commitment fee ranges from 0.15 % to 0.40 % based on LMI’s Total Net Leverage Ratio. Royalty-Backed Loan On June 19, 2020, as a result of the acquisition, the Company assumed Progenics outstanding debt as of such date in the amount of $ 40.2 million. Progenics, through a wholly-owned subsidiary MNTX Royalties Sub LLC (“MNTX Royalties”), entered into a $ 50.0 million loan agreement (the “Royalty-Backed Loan”) with a fund managed by HealthCare Royalty Partners III, L.P. (“HCRP”) on November 4, 2016. Under the terms of the Royalty-Backed Loan, the lenders have no recourse to Progenics or any of its assets other than the right to receive royalty payments from the commercial sales of RELISTOR products owed under Progenics’ license agreement with Salix Pharmaceuticals, Inc., a wholly-owned subsidiary of Bausch Health Companies Inc. (“Bausch”). The RELISTOR royalty payments will be used to repay the principal and interest on the loan. The Royalty-Backed Loan bears interest at a per annum rate of 9.5 % and matures on June 30, 2025. On June 22, 2020, HCRP waived the automatic acceleration of the Royalty-Backed Loan that otherwise would have been triggered by the consummation of the Progenics Acquisition and MNTX Royalties agreed not to prepay the loan until after December 31, 2020. Under the terms of the loan agreement, payments of interest and principal, if any, are made on the last day of each calendar quarter out of RELISTOR royalty payments received since the immediately-preceding payment date. On each payment date, 50 % of RELISTOR royalty payments received since the immediately-preceding payment date in excess of accrued interest on the loan are used to repay the principal of the loan, with the balance retained by the Company. Starting on September 30, 2021, all of the RELISTOR royalties received since the immediately-preceding payment date will be used to repay the interest and outstanding principal balance until the balance is fully repaid. 14. 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 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 December 31, 2020, accumulated other comprehensive loss included $ 0.7 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 consolidated balance sheet: 112 Table of Contents (in thousands) December 31, 2020 December 31, 2019 Derivatives type Classification Liabilities: Interest rate swap Accrued expenses and other liabilities $ 1,908 $ — 15. Accumulated Other Comprehensive Loss The components of Accumulated Other Comprehensive Loss, net of tax of $ 0.5 million and $ 0.0 million for the year ended December 31, 2020 and 2019, respectively, consisted of the following: (in thousands) Foreign currency translation Unrealized loss on cash flow hedges Accumulated other comprehensive loss Balance at January 1, 2020 $ ( 960 ) $ — $ ( 960 ) Other comprehensive income (loss) before reclassifications 330 ( 1,833 ) ( 1,503 ) Amounts reclassified to earnings — 415 415 Balance at December 31, 2020 $ ( 630 ) $ ( 1,418 ) $ ( 2,048 ) Balance at January 1, 2019 $ ( 1,108 ) $ — $ ( 1,108 ) Other comprehensive income before reclassifications 148 — 148 Amounts reclassified to earnings — — — Balance at December 31, 2019 $ ( 960 ) $ — $ ( 960 ) 16. Stock-Based Compensation Equity Incentive Plans As of December 31, 2020, the Company’s approved equity incentive plans included the 2015 Equity Incentive Plan (“2015 Plan”), the 2013 Equity Incentive Plan (“2013 Plan”), and the 2008 Equity Incentive Plan (“2008 Plan”). These plans are administered by the Board of Directors and permit the granting of stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalent rights (“DERs”) to employees, officers, directors and consultants of the Company. The Company has certain stock option and restricted stock awards outstanding under each of its equity incentive plans but, upon adoption of the 2015 Plan, no longer grants new equity awards under its 2008 and 2013 Plans. The Company adopted its 2015 Plan in June 2015 and subsequently amended the plan in April 2016, 2017 and 2019 which increased the common stock reserved for issuance under the plan to an aggregate 6,580,277 shares. The Company assumed Progenics equity plans due to the acquisition as discussed in Note 1, “Description of Business”. Stock-based compensation expense recognized in the consolidated statements of operations is summarized below: Year Ended December 31, (in thousands) 2020 2019 2018 Cost of goods sold $ 2,820 $ 2,091 $ 1,140 Sales and marketing 1,821 1,953 1,244 General and administrative 7,333 6,990 4,990 Research and development 2,101 1,458 1,344 Total stock-based compensation expense $ 14,075 $ 12,492 $ 8,718 Stock Options Stock option awards under the 2015 Plan are granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. All option awards have a ten-year contractual term. 113 Table of Contents A summary of option activity for 2020 is presented below: Total Stock Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance at January 1, 2020 272,224 $ 17.44 Options granted 2,027,744 $ 19.44 Options exercised ( 8,868 ) $ 8.72 Options cancelled and forfeited ( 715,881 ) $ 19.47 Outstanding at December 31, 2020 1,575,219 $ 19.03 4.8 229,390 Exercisable at December 31, 2020 1,271,041 $ 19.72 3.8 228,958 The table below summarizes the key weighted-average assumptions used in valuing stock options granted: Year Ended December 31, 2020 Expected volatility 71.1 % Risk-free interest rate 0.3 % Expected life (in years) 3.5 Expected dividend yield — All options granted during the year ended December 31, 2020 represent Replacement Stock Options issued in connection with the Progenics Acquisition, of which $ 7.1 million related to precombination services for awards that had vested prior to the acquisition and was recorded as a component of consideration transferred in the Progenics Acquisition. The unvested Replacement Stock Options have remaining vesting terms ranging from 0.1 years to 3.7 years and will be recognized as expense over the requisite service period. There were no options granted during the years ended December 31, 2019 and 2018. The weighted average grant-date fair value for stock option awards granted during the fiscal year ended December 31, 2020 was $ 5.67 per option. During the years ended December 31, 2020, 2019 and 2018, 8,868 , 67,558 and 192,550 options were exercised having aggregate intrinsic values of $ 0.1 million, $ 0.6 million and $ 2.4 million, respectively. As of December 31, 2020, there was $ 1.9 million of unrecognized compensation expense related to outstanding stock options, which is expected to be recognized over a weighted-average period of 2.3 years. Restricted Stock A summary of restricted stock awards and restricted stock units activity for 2020 is presented below: Shares Weighted- Average Grant Date Fair Value Per Share Nonvested balance at January 1, 2020 1,031,772 $ 15.20 Granted 786,006 $ 15.00 Vested ( 610,804 ) $ 12.45 Forfeited ( 99,108 ) $ 15.53 Nonvested balance at December 31, 2020 1,107,866 $ 16.58 Restricted stock generally vest over 3 years. As of December 31, 2020, there was $ 11.8 million of unrecognized compensation expense related to outstanding restricted stock, which is expected to be recognized over a weighted-average period of 1.9 years. The weighted average grant-date fair value for restricted stock granted during the fiscal years ended December 31, 2020, 2019 and 2018 was $ 15.00 , $ 23.33 and $ 15.46 per share, respectively. The total fair value of restricted stock vested in fiscal years 2020, 2019 and 2018 was $ 7.6 million, $ 6.8 million and $ 4.3 million, respectively. 114 Table of Contents Performance Restricted Stock Awards Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly. The performance targets include the achievement of internal performance targets only. A summary of performance restricted stock award activity for 2020 is presented below: Shares Weighted- Average Grant Date Fair Value Per Share Nonvested balance at January 1, 2020 226,010 $ 16.62 Granted 9,767 $ 16.40 Vested ( 235,777 ) $ 16.40 Forfeited — $ — Nonvested balance at December 31, 2020 — $ — The total fair value of the performance restricted stock vested in fiscal year 2020 was $ 3.9 million. Performance restricted stock awards granted in 2020 relate to the Company’s overachievement of performance targets. There were no performance restricted stock awards granted during the years ended December 31, 2019 and 2018. Total Stockholder Return Restricted Stock Awards (“TSR Awards”) During the years ended December 31, 2020, 2019 and 2018, the Company granted total stockholder return (“TSR”) Awards that include a three-year market condition where the performance measurement period is three years . Vesting of the TSR Awards is based on the Company’s level of attainment of specified TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year period and is also subject to the continued employment of the grantees. The number of shares that are earned over the performance period ranges from 0 % to 200 % of the initial award. The fair value of these awards are based on a Monte Carlo Simulation valuation model with the following assumptions: Year Ended December 31, 2020 2019 2018 Expected volatility 53.3 % 71.7 % 84.3 % Risk-free interest rate 0.7 % 2.4 % 2.4 % Expected life (in years) 2.8 2.9 2.8 Expected dividend yield — — — A summary of TSR Award activity for 2020 is presented below: Shares Weighted- Average Grant Date Fair Value Per Share Nonvested balance at January 1, 2020 306,230 $ 30.56 Granted 220,971 $ 23.43 Vested — $ — Forfeited ( 35,430 ) $ 27.47 Nonvested balance at December 31, 2020 491,771 $ 27.58 As of December 31, 2020, there was $ 6.2 million of unrecognized compensation expense related to outstanding performance restricted stock which is expected to be recognized over a weighted-average period of 1.8 years. The weighted average grant-date fair value for TSR Awards granted during the fiscal years ended December 31, 2020, 2019 and 2018 was $ 23.43 , $ 39.92 and $ 22.76 per share, respectively. 115 Table of Contents 17. Leases Adoption of ASC Topic 842, “Leases” The Company adopted ASC 842 on January 1, 2019, using the prospective approach which provides a method for recording existing leases at adoption using the effective date of the standard as its initial application date. ASC 842 generally requires all leases to be recognized on the balance sheet. In addition, the Company elected the relief package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company not to reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for any existing leases. The reported results for 2020 and 2019 reflect the application of ASC 842 guidance. The adoption of ASC 842 resulted in the recording of an additional lease asset and lease liability of approximately $ 1.1 million as of January 1, 2019. ASC 842 did not materially impact the Company’s consolidated results of operations, equity or cash flows as of the adoption date or for the periods presented. Leases The Company determines if an arrangement is a lease at inception. The Company has operating and finance leases for vehicles, corporate offices and certain equipment. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Lease agreements with lease and non-lease components are accounted for separately. As the Company’s leases do not provide an implicit rate, the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company assumed two operating leases as a result of the Progenics acquisition related to office space at the World Trade Center in New York City, pursuant to a lease agreement expiring in September 2030 and a radiopharmaceutical manufacturing facility in Somerset, New Jersey under a sublease agreement expiring in November 2028, which were recorded as of June 19, 2020, for $ 18.6 million and $ 0.6 million, respectively. The Company excluded the Puerto Rico operating lease amounts classified as held for sale as of December 31, 2020. Leases with an initial term of 12 months or less are not recorded on the balance sheet as the Company has elected to apply the short-term lease exemption. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating and finance lease assets and liabilities are as follows: (in thousands) Classification December 31, 2020 December 31, 2019 Assets Operating Other long-term assets $ 18,441 $ 935 Finance Property, plant and equipment, net 525 348 Total leased assets $ 18,966 $ 1,283 Liabilities Current Operating Accrued expenses and other liabilities $ 1,164 $ 193 Finance Current portion of long-term debt and other borrowings 249 143 Noncurrent Operating Other long-term liabilities 17,501 812 Finance Long-term debt, net and other borrowings 246 186 Total leased liabilities $ 19,160 $ 1,334 The components of lease expense were as follows: 116 Table of Contents (in thousands) Year Ended December 31, 2020 Year Ended December 31, 2019 Operating lease expense $ 1,471 $ 223 Finance lease expense Amortization of ROU assets 196 167 Interest on lease liabilities 21 11 Short-term lease expense 70 91 Total lease expense $ 1,758 $ 492 Other information related to leases were as follows: December 31, 2020 December 31, 2019 Weighted-average remaining lease term (Years): Operating leases 9.7 4.8 Finance leases 2.4 2.5 Weighted-average discount rate: Operating leases 4.4 % 5.1 % Finance leases 5.3 % 5.4 % (in thousands) Year Ended December 31, 2020 Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 1,202 230 Operating cash flows from finance leases 21 11 Financing cash flows from finance leases 207 190 ROU assets obtained in exchange for lease obligations: Operating leases 19,210 — Finance leases 373 379 Future minimum lease payments under non-cancellable leases as of December 31, 2020 were as follows: (in thousands) Operating Leases (1) Finance Leases 2021 $ 1,964 $ 231 2022 2,213 216 2023 2,255 78 2024 2,297 — 2025 2,340 — Thereafter 12,170 — Total future minimum lease payments 23,239 525 Less: interest 4,574 30 Total $ 18,665 $ 495 (1) Amounts exclude lease payments of $ 0.9 million associated with its Puerto Rico subsidiary that is classified as held for sale 117 Table of Contents 18. Net (Loss) Income Per Common Share A summary of net (loss) income per common share is presented below: Year Ended December 31, (in thousands, except per share amounts) 2020 2019 2018 Net (loss) income $ ( 13,473 ) $ 31,667 $ 40,518 Basic weighted-average common shares outstanding 54,134 38,988 38,233 Effect of dilutive stock options — 75 61 Effect of dilutive restricted stock — 1,050 1,207 Diluted weighted-average common shares outstanding 54,134 40,113 39,501 Basic (loss) income per common share $ ( 0.25 ) $ 0.81 $ 1.06 Diluted (loss) income per common share $ ( 0.25 ) $ 0.79 $ 1.03 Antidilutive securities excluded from diluted net (loss) income per common share 3,175 50 424 19. Commitments and Contingencies Purchase Commitments The Company has entered into purchasing arrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis. As of December 31, 2020, future payments required under purchase commitments are as follows: (in thousands) Amount 2021 $ 4,132 2022 2,066 Total $ 6,198 The Company has entered into agreements which contain certain percentage volume purchase requirements. The Company has excluded these future purchase commitments from the table above since there are no minimum purchase commitments or payments under these agreements. License Agreements The Company has entered into license agreements in which fixed payments have been committed to be paid on an annual basis. As of December 31, 2020, future fixed payments required under license agreements are $ 0.7 million. The Company may be required to pay additional amounts up to approximately $ 90.6 million in contingent payments under the Company’s license agreements. These contingent payments include potential milestone or contractual payment obligations contingent upon the achievement or occurrence of future milestones or events and the amounts and timing of such potential obligations are unknown or uncertain. Legal Proceedings From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. In addition, the Company has in the past been, and may in the future be, subject to investigations by governmental and regulatory authorities, which expose it to greater risks associated with litigation, regulatory or other proceedings, as a result of which the Company could be required to pay significant fines or penalties. The costs and outcome of litigation, regulatory or other proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to the Company and could have a material adverse effect on the Company’s results of operations or financial condition. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations. If a matter is both probable to result in material liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible material loss or range of loss. If such loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements. 118 Table of Contents As of December 31, 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 (the “NJ Court”) 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. These actions were later consolidated into two separate actions in the District of New Jersey. On May 1, 2018, in the lead action, the NJ Court granted Plaintiffs’ motion for partial summary judgment as to the validity of a particular claim that Mylan had admitted it infringed. On May 23, 2018, the NJ Court entered an order for final judgment in favor of Plaintiffs and against Mylan on that particular claim. 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. 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. On May 25, 2018, Mylan filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit (“CAFC”). On April 8, 2020, the CAFC issued its decision reversing the NJ Court’s grant of summary judgment and remanding for further proceedings. On June 22, 2020, Plaintiffs filed a petition for rehearing/rehearing en banc, and on July 24, 2020, that petition was denied. On December 23, 2020, Plaintiffs and Mylan entered into a Settlement and License Agreement (the “Mylan Settlement Agreement”) relating to the actions in the NJ Court. The Mylan Settlement Agreement provides for a full settlement and release by both Plaintiffs and Mylan for all claims that were or could have been asserted in the district court cases and all resulting damages or other remedies. Plaintiffs and Mylan filed a Stipulated Order of Dismissal after the execution of the Mylan Settlement Agreement, and the matter has been dismissed. RELISTOR Tablets - Actavis 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 NJ 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 NJ Court. On May 6-9, 2019, a bench trial was held, and on July 17, 2019, the NJ Court issued an Order finding the asserted claims of a certain U.S. patent valid and infringed. The NJ Court additionally ordered that the effective date of any approval of Actavis’s ANDA may not be earlier than the expiration date of that patent. Actavis filed an appeal of the NJ Court’s decision with the CAFC on August 13, 2019. The matter is currently pending on appeal at the CAFC and merits briefing has concluded. Actavis’s opening brief was filed February 6, 2020. The Plaintiffs filed their responsive brief on September 15, 2020. Actavis’s reply brief was filed on December 7, 2020. On June 13, 2019, Progenics, Salix, Bausch, and Wyeth filed another suit against Actavis in the NJ 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. On February 12, 2021, Plaintiffs and Actavis entered into a Settlement and License Agreement (the “Actavis Settlement Agreement”) relating to the actions in the NJ Court and the related Federal Circuit appeal. The Actavis Settlement Agreement provides for a full settlement and release by both Plaintiffs and Actavis of all claims that were or could have been asserted in the NJ Court cases and all resulting damages or other remedies. Plaintiffs and Actavis have further agreed to file a Stipulation and Order to dismiss the pending district court action and a Motion for Voluntary Dismissal of the appeal. RELISTOR European Opposition Proceedings In addition to the above described ANDA notifications, in October 2015, Progenics received notices of opposition to three European patents relating to methylnaltrexone. Notices of opposition were filed separately by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. Between May 11, 2017 and July 4, 2017, the opposition division provided notice that the three European patents would be revoked. Each of these matters were appealed to the European Patent Office. 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. The deadline for written submissions prior to an oral hearing is July 27, 2021. The oral hearing is set for September 27, 2021. On November 13, 2020, Progenics withdrew the appeal for EP2368553 and EP2368554. Notices of 119 Table of Contents termination of the proceedings with revocation of the patent were issued on November 23, 2020 for EP2368553 and EP2368554. Because the outcome of litigation is uncertain, the Company cannot predict how or when this matter will ultimately be resolved. 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 in Mannheim, Germany (the “German District Court”). 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. On February 27, 2019, Endocyte, Inc., a wholly owned subsidiary of Novartis AG, filed a motion to intervene in the German litigation. Endocyte is the exclusive licensee of the patent rights that are the subject of the German proceedings. On November 27, 2018, MIP requested that the European Patent Office (“EPO”) stay the examination of a certain European Patent (EP) and related Divisional Applications, pending a decision from the German District Court on MIP’s Complaint. On December 10, 2018, the EPO granted MIP’s request and stayed the examination of the patent and patent applications effective November 27, 2018. MIP filed a Confirmation of Ownership with the United States Patent and Trademark Office (“USPTO”) in corresponding U.S. patent applications (U.S. Serial Nos. 15/131,118; 15/805,900; 16/038,729, 16/114,988, 16/510,495, 16/551,198). MIP’s filing with the USPTO takes the position that, in light of the collaboration and contracts between MIP and the University, MIP is the co-owner of these pending U.S. patent applications (U.S. Serial Nos. 16/510,495, 16/551,198). On March 6, 2020, MIP filed with the USPTO a notice stating that the Power of Attorney in certain pending U.S. 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 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. MIP filed a Notice of Appeal of the German District Court’s decision on September 24, 2020 and filed its appeal brief on November 26, 2020. Responsive briefs are due on March 12, 2021. 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 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, the Company 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”). Dr. 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. In March 2020, Dr. Mahmood filed a complaint in the U.S. District Court for the Southern District of New York (as permitted by SOX because the DOL had not issued a decision within 180 days). Dr. Mahmood’s federal complaint asserted claims of violation of Section 806 of SOX. The DOL action has been dismissed. 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 parties entered into mediation in connection with Dr. Mahmood’s complaint on December 8, 2020, and the matter was settled pursuant to a Confidential Negotiated Settlement Agreement dated December 30, 2020. A Stipulation of Dismissal with Prejudice was then filed with the court, and the matter was dismissed with prejudice. 20. 401(k) Plan The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S. employees. The 401(k) Plan covers U.S. employees who meet certain eligibility requirements. Under the terms of the 401(k) Plan, the employees may elect to make tax-deferred contributions through payroll deductions within statutory and plan limits, and the Company may elect to make non-elective discretionary contributions. The Company may also make optional contributions to the 401(k) Plan for any plan year at its discretion. 120 Table of Contents Expense recognized by the Company for matching contributions made to the 401(k) Plan was $ 0.8 million, $ 2.1 million and $ 1.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. 21. Segment Information The Company reports two operating segments, U.S. and International, based on geographic customer base. The results of these operating segments are regularly reviewed by the Company’s chief operating decision maker, the President and Chief Executive Officer. The Company’s segments derive revenues through the manufacture, marketing, selling and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging. The Company does not identify or allocate assets to its segments other than goodwill. Management is in the process of evaluating the Company’s operating and reporting structure. The Company anticipates this evaluation, which it expects to complete during 2021, may result in a change to the Company’s existing operating segment reporting structure. Selected information regarding the Company’s segments are provided as follows: Year Ended December 31, (in thousands) 2020 2019 2018 Revenue by product and geography from external customers U.S. DEFINITY $ 207,270 $ 211,777 $ 178,440 TechneLite 69,729 72,534 74,042 Other nuclear 36,864 36,231 48,935 Rebates and allowances ( 19,067 ) ( 16,553 ) ( 12,837 ) Total U.S. Revenues 294,796 303,989 288,580 International DEFINITY 6,046 5,731 4,633 TechneLite 16,512 14,058 24,816 Other nuclear 22,060 23,574 25,349 Rebates and allowances ( 4 ) ( 15 ) ( 4 ) Total International Revenues 44,614 43,348 54,794 Worldwide DEFINITY 213,316 217,508 183,073 TechneLite 86,241 86,592 98,858 Other nuclear 58,924 59,805 74,284 Rebates and allowances ( 19,071 ) ( 16,568 ) ( 12,841 ) Total Revenues $ 339,410 $ 347,337 $ 343,374 Year Ended December 31, (in thousands) 2020 2019 2018 Operating income U.S. $ ( 10,363 ) $ 44,275 $ 56,327 International 6,165 7,386 8,161 Total operating (loss) income ( 4,198 ) 51,661 64,488 Interest expense 9,479 13,617 17,405 Loss on extinguishment of debt — 3,196 — Other (income) loss ( 2,198 ) 6,221 ( 2,465 ) (Loss) income before income taxes $ ( 11,479 ) $ 28,627 $ 49,548 Depreciation and amortization U.S. $ 23,007 $ 11,673 $ 12,278 International 244 414 491 Total depreciation and amortization $ 23,251 $ 12,087 $ 12,769 121 Table of Contents December 31, (in thousands) 2020 2019 Long-lived assets U.S. $ 120,147 $ 115,560 International (1) 24 937 Total long-lived assets $ 120,171 $ 116,497 ________________________________ (1) 2020 Amount excludes Puerto Rico as the Company has identified its Puerto Rico entity as held for sale. 22. Valuation and Qualifying Accounts (in thousands) Balance at Beginning of Year Charged to Income Deductions from Reserves (1) Other Adjustments Balance at End of Year Allowance for doubtful accounts Year ended December 31, 2020 $ 942 $ 313 $ ( 160 ) $ ( 7 ) $ 1,088 Year ended December 31, 2019 $ 1,119 $ 146 $ ( 323 ) $ — $ 942 Year ended December 31, 2018 $ 977 $ 321 $ ( 179 ) $ — $ 1,119 Rebates and allowances Year ended December 31, 2020 $ 6,985 $ 19,675 $ ( 16,706 ) $ ( 604 ) $ 9,350 Year ended December 31, 2019 $ 4,654 $ 16,729 $ ( 14,237 ) $ ( 161 ) $ 6,985 Year ended December 31, 2018 $ 2,860 $ 13,202 $ ( 11,047 ) $ ( 361 ) $ 4,654 ________________________________ (1) Amounts charged to deductions from allowance for doubtful accounts represent the write-off of uncollectible balances and represent payments for rebates and allowances. 122 Table of Contents 23. Subsequent Events On January 29, 2021, the Company sold all of the stock of its Puerto Rican radiopharmacy servicing subsidiary to PharmaLogic Holdings Corp. (“PharmaLogic”) pursuant to its previously announced Securities Purchase Agreement. The Company and PharmaLogic also entered into a long-term supply agreement under which the Company will continue to supply the Puerto Rico operations with certain products to meet a percentage of PharmaLogics’ commercial requirements. As previously disclosed, the purchase price paid for the transaction is $ 18.0 million in cash, subject to working capital and other customary adjustments. The Company expects to record a gain on the sale. Proceeds from this transaction will be used in the Company’s core businesses and product pipeline. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.