What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-25 · 276 added, 305 removed, 193 unchanged (75% of the section changed)

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“Risk Factors” and “Cautionary Note Regarding Forward Looking Statements.” included in this Annual Report on Form 10-K.

We are an established leader and fully integrated provider of innovative imaging diagnostics, targeted therapeutics, and artificial intelligence solutions to Find, Fight and Follow serious medical conditions.

Clinicians use our imaging agents and products across a range of imaging modalities, including echocardiography and nuclear imaging.

We 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.

Our commercial products are used by cardiologists, nuclear physicians, radiologists, internal medicine physicians, technologists and sonographers working in a variety of clinical settings.

We sell our products to radiopharmacies, PMFs, integrated delivery networks, hospitals, clinics and group practices.

We sell our products globally and operate our business in two reportable segments, which are further described below:

Segment produces and markets our medical imaging agents and products throughout the U.S.

In the U.S., we primarily sell our products to radiopharmacies, PMFs, integrated delivery networks, hospitals, clinics and group practices.

• International Segment operations consist of direct distribution in Canada and Puerto Rico, as well as third-party distribution relationships in Europe, Canada, Australia, Asia-Pacific and Latin America and our EXINI business in Sweden.

We are in the process of evaluating our operating and reporting structure.

We anticipate this evaluation, which we expect to complete during 2021, may result in a change to our existing operating segment reporting structure.

Progenics Acquisition

On June 19, 2020, we completed the Progenics Acquisition.

Progenics is an oncology company focused on developing and commercializing innovative targeted medicines and artificial intelligence to Find, Fight and Follow cancer.

Progenics’ portfolio of products and product candidates includes, among other things, therapeutic agents designed to target cancer (AZEDRA, 1095 and PSMA TTC), diagnostic imaging agents designed to target PSMA for prostate cancer (PyL and 1404), RELISTOR for OIC, AI imaging technologies and leronlimab being developed for HIV infection and COVID-19 applications.

Progenics’ current revenue is generated from two principal sources:

first, royalties, development and commercial milestones from strategic partnerships, including royalties from Bausch from sales of RELISTOR;

and second, AZEDRA sales.

Holdings issued 26,844,877 shares of Holdings common stock and 86,630,633 CVRs to former Progenics stockholders in connection with the Progenics Acquisition.

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 at an exchange ratio of 0.31.

We are an established leader and fully integrated provider committed to innovative imaging diagnostics, targeted therapeutics, and artificial intelligence solutions to Find, Fight and Follow serious medical conditions.

We classify our products in three revenue categories:

precision diagnostics, radiopharmaceutical oncology, and strategic partnerships and other revenue.

Our leading precision diagnostic products assist HCPs Find and Follow diseases in non-oncologic conditions.

Our radiopharmaceutical oncology diagnostics and therapeutics help HCPs Find, Fight and Follow cancer.

Our strategic partnerships and other revenue category focuses on facilitating precision medicine through the use of biomarkers, digital solutions and radiotherapeutic platforms, and also includes our license of RELISTOR to Bausch.

Our commercial products are used by cardiologists, internal medicine physicians, nuclear medicine physicians, oncologists, radiologists, sonographers, technologists and urologists working in a variety of clinical settings.

We believe that our diagnostic products provide improved diagnostic information that enables HCPs to better detect and characterize, or rule out, disease, with the potential to achieve better patient outcomes, reduce patient risk and limit overall costs for payors and throughout the healthcare system.

We produce and market our products throughout the U.S., selling primarily to clinics, group practices, hospitals, integrated delivery networks and radiopharmacies.

We sell our products outside the U.S.

through a combination of direct distribution in Canada and third party distribution relationships in Europe, Canada, Australia, Asia-Pacific, Central America and South America.

Our headquarters are located in North Billerica, MA, with additional offices in Somerset, NJ;

Montreal, Canada and Lund, Sweden.

In the first quarter of 2021, we completed the evaluation of our operating and reporting structure, including the impact on our business of the acquisition of Progenics, and the sale of our Puerto Rico subsidiary, which resulted in a change in our operating segments to one reportable business segment.

Key Factors Affecting Our Results

Our 2021 financial performance will reflect full year results of the Progenics business, whereas current year only incorporated results since the June 19, 2020 acquisition date.

We also expect that the anticipated approval and launch of PyL during fiscal year 2021 may result in increased revenues.

Our 2021 financial performance reflects full year results of the Progenics business, whereas the year ended December 31, 2020 only incorporates results since the June 19, 2020 closing date of the Progenics Acquisition.

Our business and financial performance have been, and continue to be, affected by the following:

COVID-19 Pandemic

The global COVID-19 pandemic has had, and will continue to have, a material impact on our business.

Towards the end of the first quarter of 2020 we began to experience, and through the date of this filing we are continuing to experience, impacts to our business and operations related to the COVID-19 pandemic, including the impact of stay-at-home mandates and advisories, and a decline in the volume of procedures and treatments using our products.

For example, there has been a reduction in the number of

echocardiograms performed in 2020 (approximately 31.5 million) as compared to the number performed in 2019 (approximately 35.1 million), in each case, according to a third party source.

In addition, there has been a substantial reduction in pulmonary ventilation studies in which our Xenon is used because of institutional concerns and professional society guidelines relating to the possible spread of COVID-19 to technicians and other patients, given that Xenon is both inhaled and exhaled by the patient.

As a result, Xenon sales have decreased.

We expect Xenon sales to continue to be at reduced levels so long as COVID-19 precautions remain in place.

We cannot predict the magnitude or duration of the pandemic’s impact on our business.

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

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

For most of the second quarter of 2020, we reduced our work week from five days to four days and reduced the pay for our personnel by varying amounts, depending on level of seniority.

We can give no assurances that we will not have to take additional cost reduction measures if the pandemic continues to adversely affect the volume of procedures and treatments using our products.

During the second quarter of 2020, Progenics also implemented certain cost reduction initiatives, and new enrollment in the Phase 2 trial of 1095 in mCRPC patients was paused to minimize the risk to subjects and healthcare providers during the pandemic.

New enrollment in that study restarted in October 2020.

GE Healthcare, our development and commercialization partner for flurpiridaz F 18, also delayed enrollment in the second Phase 3 clinical trial because of the pandemic and resumed enrollment in the third quarter of 2020.

While we are currently unable to estimate the impact of COVID-19 on our overall 2020 operations and financial results, we ended the fourth quarter of 2020 with $79.6 million of cash and cash equivalents.

With our available liquidity and prudent expense management, we believe we will be able to maintain a state of preparedness to resume full business activities to support our customers as external conditions allow, although we can give no assurances that we will have sufficient liquidity if the pandemic continues to adversely affect the volume of procedures and treatments using our products for an extended period of time.

PYLARIFY Approval and Commercial Launch

On May 27, 2021, we announced that the U.S.

Food and Drug Administration (“FDA”) had approved PYLARIFY, an F 18-labeled PET imaging agent targeting prostate-specific membrane antigen (“PSMA”).

PYLARIFY is a product in our radiopharmaceutical oncology product category.

We commercially launched PYLARIFY in the U.S.

in June 2021.

PYLARIFY is a radioactive diagnostic agent indicated for PET imaging of PSMA-positive lesions in men with prostate cancer with suspected metastasis who are candidates for initial definitive therapy and with suspected recurrence based on elevated serum prostate-specific antigen (“PSA”) levels.

PYLARIFY works by binding to PSMA, a protein that is overexpressed on the surface of more than 90% of primary and metastatic prostate cancer cells.

PYLARIFY works with PET/CT technology to produce a combined PET/CT scan that enables the reader of the PET/CT scan to detect and locate the disease.

According to the American Cancer Society, prostate cancer is the second most common cancer in American men -- one in eight American men will be diagnosed with prostate cancer in their lifetimes and over 3.1 million American men are living with prostate cancer today.

Based on estimates from third party sources regarding the incidence of prostate cancer in men in the U.S., we believe the market potential for PSMA PET imaging agents could be up to 220,000 annual scans, comprised of 90,000 scans for patients with intermediate, unfavorable or high/very high risk of suspected metastases of prostate cancer and 130,000 scans for patients with

suspected recurrence of prostate cancer.

Because we are in the process of launching this imaging agent, we can give no assurance as to how clinical practice may evolve or what our ultimate market penetration may be.

The approval of PYLARIFY was based on data from two Company-sponsored pivotal studies (“OSPREY” and “CONDOR”) designed to establish the safety and diagnostic performance of PYLARIFY across the prostate cancer disease continuum.

Results from OSPREY (Cohort A) demonstrated improvement in specificity and positive predictive value of PYLARIFY PET imaging over conventional imaging in men at risk for metastatic prostate cancer prior to initial definitive therapy.

CONDOR studied men with biochemical recurrent prostate cancer.

In patients with biochemical recurrent prostate cancer and non-informative baseline imaging, PYLARIFY demonstrated high correct localization and detection rates, including in patients with early recurrent disease with low, but rising, PSA blood levels (median PSA 0.8 ng/mL).

Upon commercial launch in June 2021, PYLARIFY was immediately available in select parts of the U.S.

Over the course of the remainder of 2021, PYLARIFY availability expanded into additional regions and is now broadly available nationwide.

We continue to expand our geographic coverage, customer contracting and market access coverage to serve our customers and the U.S.

prostate cancer community.

The commercial launch of PYLARIFY is complex and expensive.

During 2021, we hired additional employees to assist us with the commercialization of PYLARIFY, including in sales, marketing, reimbursement, quality and medical affairs.

To manufacture PYLARIFY, we assembled and qualified a nationwide network of PMFs with radioisotope-producing cyclotrons that make F 18, which has a 110-minute half-life, so PYLARIFY is manufactured and distributed rapidly to end-users.

After being made on a cyclotron at a PMF, the F 18 is then combined with certain chemical ingredients in specially designed chemistry synthesis boxes to manufacture PYLARIFY.

The finished PYLARIFY is then quality control tested and transferred to a radiopharmacist who prepares and dispenses patient-specific doses of the final product.

Because each of the PMFs manufacturing these products is deemed by the FDA to be a separate manufacturing site, each has to be separately approved by the FDA.

Although PYLARIFY is now broadly available nationwide and we continue to qualify additional PMFs, we can give no assurance that the FDA will continue to approve PMFs in accordance with our planned roll-out schedule.

If FDA approval of manufacturing sites is delayed or withdrawn, our future business, results of operations, financial condition and cash flows could be adversely affected.

In addition to the network of PMFs, we have also been working with academic medical centers in the U.S.

that have radioisotope-producing cyclotrons and which have expressed an interest in manufacturing PYLARIFY.

Under this initiative, we would enter into a fee-for-service arrangement under which the academic medical center’s PMF would manufacture and supply batches of PYLARIFY, and its radiopharmacy would prepare patient-ready unit doses, in each case for and on behalf of us.

We would then sell those unit doses to the academic medical center’s hospitals and clinics, and in some instances, to additional customers in the academic medical center’s geographic area, in each case, under separate purchase agreements.

The academic medical center’s PMF’s ability to manufacture and supply batches of PYLARIFY will be subject to FDA approval, and we can give no assurance that the FDA will approve such PMFs in accordance with our planned roll-out schedule.

Our commercial launch also required obtaining adequate coding, coverage and payment for PYLARIFY, including not only coverage from Medicare, Medicaid and other government payors, as well as private payors, but also appropriate payment levels, to adequately cover our customers’ costs of using PYLARIFY in PET/CT imaging procedures.

We received notification that our HCPCS code, which enables streamlined billing, went into effect as of January 1, 2022.

In addition, effective January 1, 2022, the CMS granted Transitional Pass-Through Payment Status in the hospital outpatient setting (“TPT Status”) for PYLARIFY, enabling traditional Medicare to provide an incremental payment for PET/CT scans performed with PYLARIFY in that setting.

TPT Status for PYLARIFY is expected to expire December 31, 2024.

After TPT Status expires, under current Medicare rules, PYLARIFY, similar to other diagnostic radiopharmaceuticals, would not be separately reimbursed in the hospital outpatient setting but rather would be included as part of the facility fee a hospital otherwise receives for a PET/CT imaging procedure, and the facility fee does not always cover the cost of a drug used in the procedure.

We can give no assurance that any CMS reimbursement in the hospital outpatient setting that follows the expiration of TPT Status will be adequate to cover the cost of PYLARIFY used in a PET/CT imaging procedure.

We actively pursue patents in connection with PYLARIFY, both in the U.S.

and internationally.

for PYLARIFY, we have four Orange Book-listed patents, including composition of matter patents, which expire in 2030 and 2037.

Outside of the U.S., we are currently pursuing additional PYLARIFY patents to obtain similar patent protection as in the U.S.

PYLARIFY AI Clearance and Use

During 2021, we also announced that our subsidiary, EXINI, was granted 510(k) clearance by the FDA in the U.S.

and received CE marking in Europe for aPROMISE.

We commercially launched aPROMISE under the name PYLARIFY AI in the U.S.

in November 2021.

PYLARIFY AI is artificial intelligence medical device software developed to assist with the reading and quantification of PYLARIFY scans.

The technology automatically analyzes a PSMA PET/CT image to segment anatomical regions – 51 bones and 12 soft tissue organs.

This image segmentation enables automated localization, detection and quantification of potential PSMA-avid lesions in a PSMA PET/CT image, which is then incorporated into a standardized report for physicians.

Anticipated Continued Growth of DEFINITY and Expansion of Our Ultrasound Microbubble Franchise

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and internationally.

for DEFINITY we now own a total of four Orange Book-listed method of use patents, one of which expires in 2035 and three of which expire in 2037, as well as additional manufacturing patents that are not Orange Book-listed expiring in 2021, 2023 and 2037.

for DEFINITY RT, we now own a total of five Orange Book-listed patents, including a composition of matter patent which expires in 2035.

Outside of the U.S., while our original DEFINITY patent protection and regulatory exclusivity have generally expired, we are currently prosecuting additional DEFINITY and DEFINITY RT patents to obtain similar patent protection as in the U.S.

for DEFINITY, we have four Orange Book-listed method of use patents, one of which expires in 2035 and three of which expire in 2037, as well as additional manufacturing patents that are not Orange Book-listed expiring in 2023 and 2037.

for DEFINITY RT, we have five Orange Book-listed patents, including a composition of matter patent which expires in 2035.

Outside of the U.S., we are currently pursuing additional DEFINITY and DEFINITY RT patents to obtain similar patent protection as in the U.S.

The Orange Book-listed patents include a patent on the use of VIALMIX RFID which expires in 2037;

additional VIALMIX RFID patent applications have been submitted in major markets throughout the world.

we have submitted additional VIALMIX RFID patent applications in major markets throughout the world.

Hatch-Waxman Act - Even though our longest duration Orange Book-listed DEFINITY patent extends until March 2037, because our Orange Book-listed composition of matter patent expired in June 2019, we may face generic DEFINITY challengers in the near to intermediate term.

Under the Hatch-Waxman Act, the FDA can approve Abbreviated New Drug Applications (“ANDAs”) for generic versions of drugs if the ANDA applicant demonstrates, among other things, that (i) its generic candidate is the same as the innovator product by establishing bioequivalence and providing relevant chemistry, manufacturing and product data, and (ii) the marketing of that generic candidate does not infringe an Orange Book-listed patent or that an Orange Book-listed patent is invalid.

With respect to any Orange Book-listed patent covering the innovator product, the ANDA applicant must give a notice to the innovator (a “Notice”) that the ANDA applicant certifies that its generic candidate will not infringe the innovator’s Orange Book-listed patent or that the Orange Book-listed patent is invalid.

The innovator can then challenge the ANDA applicant in court within 45 days of receiving that Notice, and FDA approval to commercialize the generic candidate will be stayed (that is, delayed) for up to 30 months (measured from the date on which a Notice is received) while the patent dispute between the innovator and the ANDA applicant is resolved in court.

month stay could potentially expire sooner if the courts determine that no infringement had occurred or that the challenged Orange Book-listed patent is invalid or if the parties otherwise settle their dispute.

As of the date of filing of this Annual Report on Form 10-K, we have not received any Notice from an ANDA applicant.

If we were to (i) receive any such Notice in the future, (ii) bring a patent infringement suit against the ANDA applicant within 45 days of receiving that Notice, and (iii) successfully obtain the full 30 month stay, then the ANDA applicant would be precluded from commercializing a generic version of DEFINITY prior to the expiration of that 30 month stay period and, potentially, thereafter, depending on how the patent dispute is resolved.

Solely by way of example and not based on any knowledge we currently have, if we received a Notice from an ANDA applicant in March 2021 and the full 30 month stay was obtained, then the ANDA applicant would be precluded from commercialization until at least September 2023.

If we received a Notice some number of months in the future and the full 30 month stay was obtained, the commercialization date would roll forward in the future by the same calculation.

• DEFINITY RT - In November 2020, the FDA approved our supplemental new drug application (sNDA) for DEFINITY RT.

DEFINITY RT is a modified formulation of DEFINITY that allows both storage and shipment at room temperature (DEFINITY’s previously approved formulation requires refrigerated storage).

The modified formulation provides clinicians an additional choice and allows for greater utility of this formulation in broader clinical settings.

We believe DEFINITY RT will become commercially available later in 2021, although that timing cannot be assured.

Given its physical characteristics, we believe DEFINITY RT is also well-suited for inclusion in kits requiring microbubbles for other indications and applications (including in kits developed by third parties of the type described in the paragraph entitled New Clinical Applications below).

• VIALMIX RFID – In August 2020, we announced the FDA approved our sNDA for our next-generation activation device designed specifically for both DEFINITY and DEFINITY RT.

The activation rate and time are controlled by VIALMIX RFID through the use of radio-frequency identification technology (“RFID”) to ensure reproducible activation of DEFINITY and DEFINITY RT.

The RFID tag, which is affixed to the vial label, enables the DEFINITY or DEFINITY RT vial to be appropriately activated when utilized with the VIALMIX RFID activation device.

• New Clinical Applications - As we continue to look for other opportunities to expand our microbubble franchise, we are evaluating new indications and clinical applications beyond echocardiography and ultrasound enhancing agent imaging generally.

• In April 2019, we announced a strategic development and commercial collaboration with Cerevast Medical, Inc.

(“Cerevast”) in which our microbubble will be used in connection with Cerevast’s ocular ultrasound device to improve blood flow in occluded retinal veins in the eye.

Retinal vein occlusion is one of the most common causes of vision loss worldwide.

• In December 2019, we announced a strategic commercial supply agreement with CarThera for the use of our microbubbles in combination with SonoCloud, a proprietary implantable device in development for the treatment of recurrent glioblastoma.

Glioblastoma is a lethal and devastating form of brain cancer with median survival of 15 months after diagnosis.

• In October 2020, we announced a strategic collaboration with Insightec Ltd.

(“Insightec”) which will use our microbubbles in connection with Insightec’s transcranial guided focused ultrasound device for the treatment of glioblastoma as well as other neurodegenerative conditions.

• In-House Manufacturing - We have completed construction of specialized, in-house manufacturing capabilities at our North Billerica, Massachusetts facility for DEFINITY and, potentially, other sterile vial products.

We believe the investment in these efforts will allow us to better control DEFINITY manufacturing and inventory, reduce our costs in a potentially more price competitive environment, and provide us with supply chain redundancy.

We currently expect to make use of this in-house manufacturing capability in late 2021, although that timing cannot be assured.

• DEFINITY in China - In March 2020 in connection with our Chinese development and distribution arrangement with Double-Crane Pharmaceutical Company (“Double-Crane”), we filed an Import Drug License application with the National Medical Products Administration, or the NMPA, for the use of DEFINITY for the echocardiography indication.

We believe this is an important milestone in our efforts to commercialize DEFINITY in China.

Double-Crane is also in the process of analyzing the clinical results relating to the liver and kidney indications and will also work with us to prepare an Import Drug License application for those indications.

Integration of the Progenics Acquisition

The ultimate success of the Progenics Acquisition will depend on our ability to successfully combine the business of Progenics with our own and realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies and revenue growth from the combination.

If we are unable to achieve these objectives within the anticipated time frame, or at all, the

anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of our common stock may suffer.

Our combined business is now significantly larger and more complex than our business was immediately prior to the consummation of the Progenics Acquisition.

Our ability to successfully manage this combined business will depend upon our ability to continue to integrate the two separate businesses and manage the combined business with its increased scale and scope, and increased costs and complexity.

We have incurred, and expect to continue to incur, substantial expenses in connection with the integration of the Progenics business with our own.

There are a large number of processes, policies, procedures, operations, technologies and systems that have been, or must be, integrated, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits.

The substantial majority of these costs have been, and will continue to be, non-recurring expenses related to the Progenics Acquisition, facilities and systems consolidation costs.

We may also incur additional costs to maintain employee morale and to attract, motivate or retain management personnel or key employees.

Under the Hatch-Waxman Act, the FDA can approve Abbreviated New Drug Applications (“ANDAs”) for generic versions of drugs if the ANDA applicant demonstrates, among other things, that (i) its generic candidate is the same as the innovator product by establishing bioequivalence and providing relevant chemistry, manufacturing and product data, and (ii) either the marketing of that generic candidate does not infringe the Orange Book-listed patent(s) or the Orange Book-listed patent(s) is invalid.

Similarly, the FDA can approve a Section 505(b)(2) NDA from an applicant that relies on some of the information required for marketing approval to come from studies which the applicant does not own or have a legal right of reference.

With respect to the Orange Book-listed patent(s) covering an innovator product, the ANDA applicant or the Section 505(b)(2) applicant (if relying on studies related to the innovator product) (together, the “Applicant”) must give a notice (a “Notice”) to the innovator of its certification that its generic candidate will not infringe the innovator’s Orange Book-listed patent(s) or that the Orange Book-listed patent(s) is invalid.

The innovator can then file suit against the Applicant within 45 days of receiving the Notice, and FDA approval to commercialize the generic candidate will be stayed (that is, delayed) for up to 30 months (measured from the date on which a Notice is received) while the patent dispute between the innovator and the Applicant is resolved in court.

The 30-month stay could potentially expire sooner if the courts determine that no infringement had occurred or that the challenged Orange Book-listed patent is invalid or if the parties otherwise settle their dispute.

As of the date of filing of this Annual Report on Form 10-K, we have not received any Notice from an Applicant.

If we were to (i) receive any such Notice in the future, (ii) bring a patent infringement suit against the Applicant within 45 days of receiving that Notice, and (iii) successfully obtain the full 30-month stay, then the Applicant would be precluded from commercializing a generic version of DEFINITY prior to the expiration of that 30-month stay period and, potentially, thereafter, depending on how the patent dispute is resolved.

Solely by way of example and not based on any knowledge we currently have, if we received a Notice from an Applicant in March 2022 and the full 30-month stay were obtained, then the Applicant would be precluded from commercialization until at least September 2024.

If we received a Notice some number of months in the future and the full 30-month stay were obtained, the commercialization date would roll forward in the future by the same number of months.

In the event a 505(b)(2) applicant does not rely on studies related to the innovator product, the 30-month stay would not apply, but additional clinical studies may be required.

• DEFINITY RT - DEFINITY RT became commercially available in the fourth quarter of 2021.

A modified formulation of DEFINITY that allows both storage and shipment at room temperature, DEFINITY RT provides clinicians an additional choice and allows for greater utility of this formulation in broader clinical settings.

• VIALMIX RFID - VIALMIX RFID, our next-generation activation device designed specifically for both DEFINITY and DEFINITY RT, became commercially available in the fourth quarter of 2021.

The activation rate and time are controlled by VIALMIX RFID through the use of radio-frequency identification technology (“RFID”) to ensure reproducible activation of

DEFINITY and DEFINITY RT.

The RFID tag, which is affixed to the vial label, enables the DEFINITY or DEFINITY RT vial to be appropriately activated with the VIALMIX RFID activation device.

Global Mo-99 Supply

We currently have Mo-99 supply agreements with Institute for Radioelements (“IRE”), running through December 31, 2022, and renewable by us on a year-to-year basis thereafter, and with NTP and ANSTO, running through December 31, 2021.

We also have a Xenon supply agreement with IRE which runs through June 30, 2022, and which is subject to further extension.

We currently have Mo-99 supply agreements with Institute for Radioelements (“IRE”), running through December 31, 2022, with auto-renewal provisions and terminable upon notice of non-renewal, and with NTP Radioisotopes (“NTP”), acting for itself and on behalf of its subcontractor, the Australian Nuclear Science and Technology Organisation (“ANSTO”), running through March 31, 2022, and for which we are currently negotiating an extension.

We also have a Xenon supply agreement with IRE which runs through December 31, 2023, with auto-renewal provisions and terminable upon notice of non-renewal.

Although we have a globally diverse Mo-99 supply with IRE in Belgium, NTP in South Africa, and ANSTO in Australia, we still face supplier and logistical challenges in our Mo-99 supply chain.

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A prolonged disruption of service from one of our three Mo-99 processing sites or one of their main Mo-99-producing reactors could have a substantial negative effect on our business, results of operations, financial condition and cash flows.

We are also pursuing additional sources of Mo-99 from potential new producers to further augment our current supply.

In November 2014, we entered into a strategic arrangement with SHINE for the future supply of Mo-99.

Under the terms of the supply agreement, SHINE will provide Mo-99 produced using its proprietary LEU-solution technology for use in our TechneLite generators once SHINE’s facility becomes operational and receives all necessary regulatory approvals, which SHINE now estimates will occur in 2022.

However, we cannot assure you that SHINE or any other possible additional sources of Mo-99 will result in commercial quantities of Mo-99 for our business, or that these new suppliers together with our current suppliers will be able to deliver a sufficient quantity of Mo-99 to meet our needs.

To augment our current supply of Mo-99, we have a strategic arrangement with SHINE Medical Technologies LLC (“SHINE”) for the future supply of Mo-99.

Under the terms of the supply agreement, entered into in November 2014, SHINE will provide Mo-99 produced using its proprietary LEU-solution technology for use in our TechneLite generators once SHINE’s facility becomes operational and receives all necessary regulatory approvals, which SHINE now estimates will occur in 2023.

The term of this arrangement provides for three years of supply of Mo-99.

However, we cannot assure you that SHINE will be able to produce commercial quantities of Mo-99 for our business, or that SHINE together with our current suppliers will be able to deliver a sufficient quantity of Mo-99 to meet our needs.

Inventory Supply

We obtain a substantial portion of our imaging agents from a third party supplier.

JHS is currently our sole source manufacturer of DEFINITY, NEUROLITE, Cardiolite and evacuation vials, the latter being an ancillary component for our TechneLite generators.

We are currently seeking approval from certain foreign regulatory authorities for JHS to manufacture certain of our products.

Until we receive these approvals, we will face continued limitations on where we can sell those products outside of the U.S.

JHS is currently a significant supplier of DEFINITY and our sole source manufacturer of NEUROLITE, Cardiolite and evacuation vials, the latter being an ancillary component for our TechneLite generators.

In addition to JHS, we rely on SBL as our sole source manufacturer of DEFINITY RT.

We have also completed construction of specialized, in-house manufacturing capabilities at our North Billerica, Massachusetts facility, which will also allow us to optimize our costs and reduce our supply chain risk.

We can give no assurance as to when or if we will be successful in these efforts or that we will be able to successfully manufacture any additional commercial products at our North Billerica, Massachusetts facility.

Our new manufacturing agreement with JHS relating to DEFINITY, NEUROLITE and Cardiolite expires in December 2027.

In 2021, we have constructed a specialized in-house manufacturing facility at our North Billerica campus for purposes of producing DEFINITY and, potentially, other sterile vial products.

On February 22, 2022, we received FDA approval of our sNDA, authorizing commercial manufacturing of DEFINITY at our new facility.

DEFINITY manufactured at this facility became commercially available on February 23, 2022.

We believe this investment will allow us to better manage DEFINITY manufacturing and inventory, reduce our costs in a potentially more price competitive environment, and provide us with supply chain redundancy.

Radiopharmaceuticals are decaying radioisotopes with half-lives ranging from a few hours to several days.

These products cannot be kept in inventory because of their limited shelf lives and are subject to just-in-time manufacturing, processing and distribution, which takes place at our North Billerica, Massachusetts facility.

COVID-19 Pandemic

The global COVID-19 pandemic has had, and may continue to have, a material impact on our business.

Towards the end of the first quarter of 2020 we began to experience, and through the date of this filing we are continuing to experience, impacts to our business and operations related to the COVID-19 pandemic, including the impact of hospital staffing challenges, vaccination mandates, employee absences due to illness, and a decline in the volume of certain procedures and treatments using our products.

Although some of the restrictions, including stay-at-home mandates, imposed in response to the COVID-19 pandemic have been lifted in much of the U.S., and there has been a rapid rollout and development of multiple vaccines and boosters, the resurgence of COVID-19 infections continued to impact certain aspects of our business during the fourth quarter of 2021.

For example, we believe sales of DEFINITY were impacted by hospital nursing and sonographer shortages, and sales of AZEDRA were impacted by treatment capacity constraints in hospitals, treatment deferrals and cancellations by patients, and access restrictions by hospitals.

In addition, there has been a substantial reduction in pulmonary ventilation studies in which our product, Xenon, is used because of institutional concerns and professional society guidelines relating to the possible spread of COVID-19 to technicians and other patients, because

Xenon is both inhaled and exhaled by the patient.

Our Xenon sales through the fourth quarter of 2021 continued to be at reduced levels, we expect these reduced levels to continue for at least as long as COVID-19 precautions remain in place, and we can give no assurance that Xenon sales will return to historic levels.

The pandemic could still have a future negative impact on our business, particularly if there are additional resurgences as a result of mutations or other variations to the virus that further increase its communicability or its impact on certain populations, geographic regions and the healthcare system, including elective procedures and hospital access.

Research and Development Expenses

To remain a leader in the marketplace, we have historically made substantial investments in new product development, including, among other things, our flurpiridaz F 18 clinical development program, the expenses of which are now being borne by GE Healthcare.

The Progenics Acquisition brings additional and substantial clinical development expense.

The PyL NDA filed with the

FDA on September 29, 2020, was accepted and granted priority review with PDUFA action date of May 28, 2021.

For 1095, the ARROW Phase 2 study in mCRPC patients had been paused to minimize risk to subjects and healthcare providers during the pandemic, and new enrollment in that study restarted in October 2020.

In addition, the Company’s development activities for PSMA AI are on-going.

Our investments in these additional clinical activities will increase our operating expenses and impact our results of operations and cash flow, and we can give no assurances as to whether any of these clinical development candidates will be approved.

New Initiatives

In addition to integrating the new assets and programs resulting from the Progenics Acquisition, we continue to seek ways to further expand our portfolio of products and product candidates and how best to optimize the value of our current assets, evaluating a number of different opportunities to collaborate with others or to acquire or in-license additional products, product candidates, businesses and technologies to drive our future growth.

As the Progenics Acquisition indicates, we are particularly interested in expanding our presence in oncology, in both radiotherapeutics and diagnostics.

In May 2019, we commenced an initiative to build out our Pharma Services capabilities by entering into a strategic collaboration and license agreement with NanoMab, a privately-held biopharmaceutical company focusing on the development of next generation radiopharmaceuticals for cancer precision medicine.

We believe this collaboration will provide the first broadly-available PD-L1 imaging biomarker research tool to pharmaceutical companies and academic centers conducting clinical trials on immuno-oncology treatments, including combination therapies.

We have also expanded our Pharma Services offering to include PyL for pharmaceutical companies developing PSMA-targeted therapies and have entered into PyL clinical supply agreements with each of Regeneron, Bayer and POINT BioPharma for use of PyL in prostate cancer drug development programs.

We can give no assurance as to when or if any of these Pharma Services collaborations will be successful or accretive to earnings.

To remain a leader in the marketplace, we have historically made and will continue to make substantial investments in new product development and lifecycle management for existing products.

• For PYLARIFY, our development of PYLARIFY resulted in approval by the FDA in May 2021.

• For 1095, the ARROW Phase 2 study in mCRPC patients was paused to minimize risk to subjects and healthcare providers during the pandemic, and new enrollment in that study restarted in October 2020.

In the fourth quarter of 2021, we completed an interim analysis of the ARROW Phase 2 study and are continuing that study without modifications.

We currently expect to complete enrollment in the ARROW Phase 2 study later in 2022.

• For LMI 1195, we have commenced a Phase 3 clinical trial for the use of LMI 1195 for the diagnosis and management of neuroblastoma tumors in pediatric and adult populations.

We expect to initiate approximately 20 clinical sites in the U.S.

to enroll approximately 100 patients with known or suspected neuroblastoma.

• We are also exploring additional lifecycle management opportunities for some of our current products, including AZEDRA.

Our investments in these additional clinical activities and lifecycle management opportunities will increase our operating expenses and impact our results of operations and cash flow, and we can give no assurances as to whether any of these clinical development candidates or lifecycle management opportunities will be successful.

Strategic Partnerships and Other Revenue

We continue to seek ways to further expand our portfolio of products and product candidates and how best to optimize the value of our current assets, evaluating a number of different opportunities to collaborate with others or to acquire or in-license additional products, product candidates, businesses and technologies to drive our future growth.

As we continue to pursue expanding our strategic partnerships, our Pharma Services activities and strategic partnerships in oncology include:

• Prostate Cancer - We collaborate with pharmaceutical companies developing therapies and diagnostics in prostate cancer.

In January 2022, we announced a collaboration with the Prostate Cancer Clinical Trial Consortium (“PCCTC”), a premier multicenter clinical research organization that specializes in prostate cancer research.

The intent of the strategic collaboration is to integrate our AI platform into PCCTC studies to advance the development and validation of novel AI-enabled biomarkers.

In September 2021, we entered into a development and commercialization collaboration with RefleXion Medical, Inc.

to evaluate the use of piflufolastat F 18 to enable real-time therapeutic guidance of biology-guided radiotherapy in prostate cancer using the RefleXion X1 TM platform.

Prior to 2021, we had also entered into several other agreements, including ones with Bayer, POINT Biopharma and Regeneron, under which we supply piflufolastat F 18 in connection with their clinical studies, and Curium, under which we licensed exclusive rights to Curium to develop and commercialize piflufolastat F 18 in Europe.

• Immuno-Oncology - In May 2019, we entered into a strategic collaboration and license agreement with NanoMab, a privately-held biopharmaceutical company focused on the development of next generation radiopharmaceuticals for cancer precision medicine.

• Pan-Oncology - In March 2021, we acquired from Ratio Therapeutics LLC (previously Noria Therapeutics, Inc.) exclusive, worldwide rights to NTI-1309, an innovative imaging biomarker that targets fibroblast activation protein, an emerging target with broad potential imaging applicability and use in oncology.

Upon further clinical development, we will assess options to bring NTI-1309 to market as a diagnostic or potentially a therapeutic product.

Microbubble Franchise

In addition, as described above, we continue to expand our microbubble franchise.

In October 2020, we announced a strategic collaboration with Insightec which will use our microbubbles in connection with Insightec’s transcranial guided focused ultrasound device for the treatment of glioblastoma as well as other neurodegenerative conditions.

Glioblastoma is a lethal and devastating form of brain cancer with median survival of 15 months after diagnosis.

Previously, we announced a strategic commercial supply agreement with CarThera for the use of our microbubbles in combination with SonoCloud, a proprietary implantable device in development for the treatment of recurrent glioblastoma.

We also previously announced a strategic development and commercial collaboration with Cerevast in which our microbubbles will be used in connection with Cerevast’s ocular ultrasound device to improve blood flow in occluded retinal veins in the eye.

Retinal vein occlusion is one of the most common causes of vision loss worldwide.

In April 2021, we announced a strategic collaboration with Allegheny Health Network (“AHN”), which will use our microbubbles in combination with AHN’s ultrasound-

assisted non-viral gene transfer technology for the development of a proposed treatment of xerostomia.

Xerostomia is a lack of saliva production leading to dry mouth and has a variety of causes, including radiotherapy and chemotherapy, the chronic use of drugs and rheumatic and dysmetabolic diseases.

Prior to 2021, we entered into microbubble collaborations with the following parties:

(i) Cerevast Medical, Inc.

(“Cerevast”), in which our microbubbles will be used in connection with Cerevast’s ocular ultrasound device to improve blood flow in occluded retinal veins in the eye;

(ii) CarThera SAS, for the use of our microbubbles in combination with SonoCloud, a proprietary implantable device in development for the treatment of recurrent glioblastoma;

and (iii) Insightec Ltd.

(“Insightec”), which will use our microbubbles in connection with the development of Insightec’s transcranial guided focused ultrasound device for the treatment of glioblastoma as well as other neurodegenerative conditions.

Generally, our costs in connection with the strategic partnerships relate to the supply of drug and other ancillary expenses and the benefits can include possible supply, milestone and royalty payments, additional intellectual property rights and strategic relationships.

We can give no assurance as to if or when or if any of these collaborations and other new initiatives will be successful or accretive to earnings.

Results of Operations

The following is a summary of our consolidated results of operations:

(in thousands) 2020 2019 2018

2020 2020 vs.

(in thousands) 2021 2020 2019 Change

Revenues $ 425,208 $ 339,410 $ 347,337 $ 85,798 25.3 % $ (7,927) (2.3) %

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Total operating expenses 263,783 142,959 123,150 120,824 84.5 % 19,809 16.1 %

Gain on sales of assets 15,263 — — 15,263 N/A — N/A

Operating (loss) income (60,825) (4,198) 51,661 (56,627) 1,348.9 % (55,859) (108.1) %

Interest expense 7,752 9,479 13,617 (1,727) (18.2) % (4,138) (30.4) %

Loss on extinguishment of debt — 3,196 —

Other (income) loss (2,198) 6,221 (2,465)

(Gain) loss on extinguishment of debt (889) — 3,196 (889) N/A (3,196) N/A

Other loss (income) 7,350 (2,198) 6,221 9,548 (434.4) % (8,419) (135.3) %

(Loss) income before income taxes (75,038) (11,479) 28,627 (63,559) 553.7 % (40,106) (140.1) %

Income tax expense (benefit) 1,994 (3,040) 9,030

Income tax (benefit) expense (3,759) 1,994 (3,040) (5,753) (288.5) % 5,034 (165.6) %

Net (loss) income $ (71,279) $ (13,473) $ 31,667 $ (57,806) 429.1 % $ (45,140) (142.5) %

Comparison of the Periods Ended December 31, 2021 and 2020

Segment revenues are summarized by product as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

DEFINITY $ 207,270 $ 211,777 $ 178,440 $ (4,507) (2.1) % $ 33,337 18.7 %

TechneLite 69,729 72,534 74,042 (2,805) (3.9) % (1,508) (2.0) %

Other nuclear 36,864 36,231 48,935 633 1.7 % (12,704) (26.0) %

Rebates and allowances (19,067) (16,553) (12,837) (2,514) 15.2 % (3,716) 28.9 %

Revenues 294,796 303,989 288,580 (9,193) (3.0) % 15,409 5.3 %

International

DEFINITY 6,046 5,731 4,633 315 5.5 % 1,098 23.7 %

TechneLite 16,512 14,058 24,816 2,454 17.5 % (10,758) (43.4) %

Other nuclear 22,060 23,574 25,349 (1,514) (6.4) % (1,775) (7.0) %

Rebates and allowances (4) (15) (4) 11 (73.3) % (11) 275.0 %

Total International Revenues 44,614 43,348 54,794 1,266 2.9 % (11,446) (20.9) %

We classify our revenues into three product categories:

precision diagnostics, radiopharmaceutical oncology, and strategic partnerships and other revenue.

Precision diagnostics includes DEFINITY, TechneLite and other imaging diagnostic products.

Radiopharmaceutical oncology consists primarily of PYLARIFY and AZEDRA.

Strategic partnerships and other revenue includes partnerships that focus on facilitating precision medicine through the use of biomarkers, digital solutions and radiotherapeutic platforms, and on our other products, such as RELISTOR.

Revenues are summarized by product category on a net basis as follows:

Year Ended December 31, 2021 vs.

(in thousands) 2021 2020 (1)

Change $ Change %

DEFINITY $ 232,759 $ 195,865 $ 202,398 $ 36,894 18.8 %

TechneLite 91,293 84,945 85,465 6,348 7.5 %

Other nuclear 58,924 59,805 74,284 (881) (1.5) % (14,479) (19.5) %

Rebates and allowances (19,071) (16,568) (12,841) (2,503) 15.1 % (3,727) 29.0 %

Other precision diagnostics 26,973 36,824 49,243 (9,851) (26.8) %

Total precision diagnostics 351,025 317,634 337,106 33,391 10.5 %

PYLARIFY 43,414 — — 43,414 100.0 %

Other radiopharmaceutical oncology 5,473 10,022 8,655 (4,549) (45.4) %

Total radiopharmaceutical oncology 48,887 10,022 8,655 38,865 387.8 %

Strategic Partnerships and other revenue 25,296 11,754 1,576 13,542 115.2 %

Total revenues $ 425,208 $ 339,410 $ 347,337 $ 85,798 25.3 %

The decrease in U.S.

segment revenues during the year ended December 31, 2020, as compared to the prior year is primarily due to COVID-19 related business losses which include a $4.5 million decrease in DEFINITY revenue and a $2.8 million decrease in TechneLite revenue.

Additionally, rebates and allowances increased $2.5 million.

Other nuclear revenue increased $0.6 million driven by the addition of Progenics revenue portfolio, which was nearly offset by a reduction in Xenon volume.

The increase in International segment revenues during the year ended December 31, 2020, as compared to the prior year is primarily due to a $2.5 million higher TechneLite revenue as a result of resolution of supplier disruptions and opportunistic incremental demand, partially offset by a decrease in revenue in other nuclear products driven by COVID-19 demand losses.

________________________________

(1) We reclassified aggregate rebates and allowances of $19.1 million and $16.6 million for the years ended December 31, 2020 and 2019, respectively, which included $17.5 million and $15.1 million for DEFINITY, $1.3 million and $1.1 million for TechneLite and $0.3 million for other precision diagnostics.

The increase in revenues for the year ended December 31, 2021, as compared to the prior year period, is primarily driven by the commercial launch of PYLARIFY, as well as increases in DEFINITY and TechneLite volume period over period as a result of the COVID-19 pandemic in the prior year, as well as the addition of the Progenics product portfolio, including RELISTOR.

These increases are partially offset by continued COVID-19 related reduced volumes in our sales of Xenon throughout 2021 and the divestiture of our Puerto Rico business during the first quarter of 2021.

Rebates and Allowances

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Balance, December 31, 2021 $ 10,977

Gross profit is summarized by segment as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

$ 127,778 $ 164,051 $ 161,760 $ (36,273) (22.1) % $ 2,291 1.4 %

International 10,983 10,760 13,125 223 2.1 % (2,365) (18.0) %

Total Gross profit $ 138,761 $ 174,811 $ 174,885 $ (36,050) (20.6) % $ (74) — %

The decrease in the U.S.

segment gross profit for the year ended December 31, 2020, as compared to the prior year is primarily due to lower DEFINITY, TechneLite, and Xenon unit volumes due to COVID-19, amortization expense of assets acquired in the Progenics acquisition, a contract termination including a loss on disposal of assets and an asset impairment loss of $7.3 million on other nuclear products.

The increase in gross profit for the year ended December 31, 2021, as compared to the prior year period, is primarily due to an increase in volume of DEFINITY sales and the commercial launch of PYLARIFY in 2021, as well as an asset impairment loss of $7.3 million on other nuclear products that occurred in the prior year.

These increases were offset, in part, by lower sales of our Xenon and increased radioisotope transportation costs, both due to COVID-19, as well as amortization expense of $2.7 million related to assets acquired in the Progenics Acquisition and accelerated recognition of asset retirement obligations of $5.4 million due to a change in useful life estimate.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and other related costs for personnel in field sales, marketing and customer service functions.

Other costs in sales and marketing expenses include the development and printing of advertising and promotional material, professional services, market research and sales meetings.

Sales and marketing expense is summarized by segment as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

$ 38,992 $ 39,672 $ 40,579 $ (680) (1.7) % $ (907) (2.2) %

International 1,909 2,216 2,580 (307) (13.9) % (364) (14.1) %

Total Sales and marketing $ 40,901 $ 41,888 $ 43,159 $ (987) (2.4) % $ (1,271) (2.9) %

The decrease in the U.S.

segment sales and marketing expenses for the year ended December 31, 2020, as compared to the prior year period is primarily due to reduced marketing promotional programs, reduced travel due to COVID-19 impact and reduced hiring and lower employee related costs offset by market research and the addition of the Progenics business.

The Progenics business contributed approximately $6.4 million of expense to the U.S.

segment for the year ended December 31, 2020.

The decrease in the International segment sales and marketing expenses for the for the year ended December 31, 2020, as compared to the prior year period is primarily due to lower marketing promotional activities.

Other costs in sales and marketing expenses include the development and preparation of advertising and promotional material, professional services, market research and sales meetings.

Sales and marketing expenses increased $27.5 million for the year ended December 31, 2021, as compared to the prior year period.

This was primarily driven by preparation activities for the launch of PYLARIFY (including the hiring of additional employees) in 2021 and a full year of sales and marketing expenses related to AZEDRA, as well as the reduced level of marketing and promotional programs during the prior year period as a result of the COVID-19 pandemic.

General and Administrative

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Other costs included in general and administrative expenses are professional fees for information technology services, external legal fees, consulting and accounting services as well as bad debt expense, certain facility and insurance costs, including director and officer liability insurance.

General and administrative expense is summarized by segment as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

$ 68,283 $ 60,752 $ 49,149 $ 7,531 12.4 % $ 11,603 23.6 %

International 987 492 1,018 495 100.6 % (526) (51.7) %

Total General and administrative $ 69,270 $ 61,244 $ 50,167 $ 8,026 13.1 % $ 11,077 22.1 %

The increase in U.S.

segment general and administrative expenses for the year ended December 31, 2020, as compared to the prior year is driven primarily by an increase in acquisition-related costs associated with the Progenics Acquisition and the addition of the Progenics business offset by lower medical insurance costs, travel with COVID-19 limitations and a gain on changes in fair value of contingent assets and liabilities.

The Progenics business contributed approximately $5.5 million of expense to the U.S.

segment for the year ended December 31, 2020.

The International segment general and administrative expenses increased for the year ended December 31, 2020, as compared to the prior year, driven primarily by the addition of the Progenics business and an insurance benefit received in 2019 which was partially offset by lower employee related costs in 2020.

The Progenics business contributed approximately $0.4 million of expense to the International segment for the year ended December 31, 2020.

General and administrative expenses increased $81.1 million for the year ended December 31, 2021 compared to the prior year period.

This was primarily driven by the $72.4 million fair value adjustment to the contingent asset and liabilities, including the CVRs (an increase of $74.4 million from the prior year period), $9.5 million impairment charge related to the sublease of office space in the World Trade Center, and higher headcount related costs following the Progenics Acquisition, offset by acquisition-related costs associated with the Progenics Acquisition in the prior year and synergy capture in the current year.

Research and Development

Research and development expenses relate primarily to the development of new products to add to our portfolio and costs related to our medical affairs, medical information and regulatory functions.

We do not allocate research and development expenses incurred in the U.S.

to our International segment.

Research and development expense is summarized by segment as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

$ 30,866 $ 19,352 $ 15,705 $ 11,514 59.5 % $ 3,647 23.2 %

International 1,922 666 1,366 1,256 188.6 % (700) (51.2) %

Total Research and development $ 32,788 $ 20,018 $ 17,071 $ 12,770 63.8 % $ 2,947 17.3 %

The increase in U.S.

segment research and development expenses for the year ended December 31, 2020, as compared to the prior year is primarily driven by the addition of the Progenics business, including the PyL NDA filing fee, an in-process research and development (“IPR&D”) asset impairment loss of $2.7 million partially offset by clinical research expenses related to DEFINITY studies completing and lower employee related expenses.

The Progenics business contributed approximately $17.2 million of expense to the U.S.

segment for the year ended December 31, 2020.

The increase in the International segment research and development expenses for the year ended December 31, 2020, as compared to the prior year period is primarily driven by the addition of the Progenics business partially offset by regulatory costs related to Brexit matters.

The Progenics business contributed approximately $1.3 million of expense to the International segment for the year ended December 31, 2020.

Research and development expenses increased $12.2 million for the year ended December 31, 2021 as compared to the prior year period.

This was primarily driven by additional research and development expenses related to 1095 and preparation activities for the launch of PYLARIFY, as well as higher employee-related costs in 2021 (including the hiring of additional employees) as compared to the prior year.

The increase in research and development expenses during 2021 was offset by the filing fee paid in the prior year period related to the PYLARIFY New Drug Application.

Gain on Sale of Assets

We sold 100% of the stock of our Puerto Rico radiopharmacy subsidiary, resulting in a pre-tax book gain of $15.3 million for the year ended December 31, 2021.

Interest Expense

Interest expense for the year ended December 31, 2020 decreased $4.1 million as compared to the prior year period due to the refinancing of our existing indebtedness in the second quarter of 2019 which reduced our underlying principal amount and decreased interest rates on our long-term debt offset by debt we assumed as part of the Progenics acquisition.

Loss on Extinguishment of Debt

During the year ended December 31, 2019, we incurred a $3.2 million loss on extinguishment of debt in connection with the refinancing of our existing indebtedness.

Interest expense for the year ended December 31, 2021 decreased $1.7 million as compared to the prior year period due to lower interest rates on our long-term debt together with reduced debt as a result of the voluntary repayment of the outstanding principal on our $50.0 million loan agreement (the “Royalty-Backed Loan”) between Progenics, through a wholly-owned subsidiary MNTX Royalties Sub LLC (“MNTX Royalties”), and a fund managed by HealthCare Royalty Partners III, L.P.

on March 31, 2021.

Gain on Extinguishment of Debt

During the year ended December 31, 2021, we realized a $0.9 million gain on extinguishment of debt related to the voluntary repayment of the outstanding principal on the Royalty-Backed Loan on March 31, 2021.

Other (Income) Loss

Other (income) loss changed by $8.4 million for the year ended December 31, 2020 as compared to the prior year, due to an increase in tax indemnification income primarily due to the reduction of indemnified receivables related to the release of our uncertain tax positions in the prior year offset by an arbitration award that occurred in the prior year.

Income Tax Expense (Benefit)

Income tax expense (benefit) is summarized as follows:

December 31, 2020 vs.

2019 2019 vs.

(in thousands) 2020 2019 2018 Change

Income tax expense (benefit) $ 1,994 $ (3,040) $ 9,030 $ 5,034 (165.6) % $ (12,070) (133.7) %

The income tax expense for the year ended December 31, 2020 was primarily due to the accrual of interest associated with uncertain tax positions and the impact of non-deductible acquisition costs, offset by the tax benefits on losses generated in the period, the recognition of the deferred tax asset on held for sale assets, and tax credits.

In accordance with the Company’s accounting policy, the change in the tax liability, penalties and interest associated with these uncertain tax positions (net of any offsetting federal or state benefit) is recognized within income tax (benefit) expense.

Contemporaneously, changes in the tax indemnification receivable are recognized within other loss (income) in the consolidated statement of operations.

Accordingly, as these reserves change, adjustments are included in income tax (benefit) expense with an offsetting adjustment included in other loss (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.

Other (income) loss changed by $9.5 million for the year ended December 31, 2021 as compared to the prior year, due to the reduction of indemnified receivables related to the release of uncertain tax positions.

Income Tax (Benefit) Expense

The income tax benefit of $3.8 million for the year ended December 31, 2021 was primarily due to incurred losses before tax, the release of a portion of our uncertain tax positions, stock compensation deductions, and tax credits, offset by non-deductible expenses related to the changes in fair value of contingent assets and liabilities, the accrual of interest associated with uncertain tax positions, and the impact of an increased effective state tax rate on our ending net deferred tax assets.

In accordance with our accounting policy, the change in the tax liabilities, penalties and interest associated with our uncertain tax positions (net of any offsetting federal or state benefit) is recognized within income tax benefit.

The majority of our uncertain tax positions are indemnified liabilities, in accordance with the Stock and Asset Purchase Agreement entered into with Bristol-Myers (‘BMS’) in 2008.

Changes in the liability result in offsetting changes in the indemnification receivable.

Changes in the indemnification receivable are recognized within other loss (income) in the consolidated statement of operations.

Assuming that the receivable from BMS continues to be considered recoverable by us, there will be no effect on net income and no net cash outflows related to these liabilities.

Refer to Note 5, Income Taxes.

The income tax benefit for the year ended December 31, 2019 was primarily due to the release of tax contingency reserves as well as the release of the valuation allowance against our Canada deferred tax assets and tax benefits arising from stock compensation deductions, offset by tax expense on income generated in the period and the accrual of interest associated with uncertain tax positions.

The income tax expense of $2.0 million for the year ended December 31, 2020 was primarily due to the accrual of interest associated with uncertain tax positions and the impact of non-deductible acquisition costs, offset by the tax benefits on losses generated in the period, the recognition of the deferred tax asset on held for sale assets, and tax credits.

We regularly assess our ability to realize our deferred tax assets.

Assessing the realizability of deferred tax assets requires significant management judgment.

Assessing the realizability of deferred tax assets requires management judgment.

In determining whether our deferred tax assets are more-likely-than-not realizable, we evaluate all available positive and negative evidence, and weigh the objective evidence and expected impact.

We released the full valuation allowance recorded against our Canada deferred tax assets during the year ended December 31, 2018.

We continue to record a valuation allowance against certain of our foreign net deferred tax assets and a small component of our domestic deferred tax assets.

Our effective tax rate for each reporting period is presented as follows:

2020 2019 2018

Effective tax rate 5.0% (17.4)%

Our effective tax rate in fiscal 2021 differs from the U.S.

statutory rate of 21% principally due to non-deductible acquisition costs and the accrual of interest on uncertain tax positions, offset by the benefit created by the recognition of the deferred tax asset on held for sale assets and tax credits.

The decrease in the effective income tax rate for the year ended December 31, 2020 as compared to the prior year period is primarily due to the large non-recurring benefit recorded in 2019 associated with the release of tax contingency reserves, non-deductible acquisition costs offset by the benefit created by the recognition of the deferred tax asset on held for sale assets.

The 2020 effective tax rate is a tax expense recorded against a pre-tax loss, whereas the 2019 effective tax rate is a tax benefit recorded against pre-tax income.

statutory rate of 21% principally due to the impact of non-deductible expenses related to changes in fair value of contingent assets and liabilities, releases of uncertain tax position liabilities, and state effective tax rate changes that impacted our ending net deferred tax assets.

The change in the effective income tax rate for the year ended December 31, 2021 as compared to the prior year period is primarily due to the reduction in tax benefit resulting from the accrual of non-deductible expenses related to changes in fair value of contingent assets and liabilities.

Comparison of the Periods Ended December 31, 2020 and 2019

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Net cash provided by operating activities $ 53,916 $ 16,396 $ 80,384

Net cash used in investing activities $ (4,912) $ (22,061) $ (19,132)

Net cash provided by (used in) investing activities $ 3,683 $ (4,912) $ (22,061)

Net cash used in financing activities $ (39,332) $ (21,861) $ (78,881)

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Net Cash Provided by Operating Activities

Net cash provided by operating activities of $53.9 million was primarily comprised of net loss adjusted for the net effect of non-cash items such as the change in fair value of contingent assets and liabilities of $72.4 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

The primary working capital sources of cash were the timing of payments to large vendors as well as an increase in billings associated with PYLARIFY sales.

The primary working capital use of cash were an increase in trade receivables from timing of sale orders and an increase in collection period as well as the timing of inventory purchases.

Net cash provided by operating activities of $16.4 million in the year ended December 31, 2020 was driven primarily by a net loss of $13.5 million, a net decrease of $22.4 million related to movements in our working capital accounts during the period and a net decrease of $2.0 million in the fair value of contingent assets and liabilities offset by $24.7 million of depreciation, amortization and accretion expense, stock-based compensation expense of $14.1 million, impairment of long-lived assets of $9.9 million and a loss on disposal of assets of $2.3 million.

The overall decreases in cash from our working capital accounts were primarily driven by the increase in accounts receivable due to the Progenics Acquisition and increase in collection period as well as change in inventory related to the COVID-19 impact on products and the timing of payments and payments of accruals related to G&A expenses in connection with the Progenics Acquisition.

Net cash provided by operating activities of $80.4 million in the year ended December 31, 2019 was driven primarily by net income of $31.7 million plus $13.4 million of depreciation, amortization and accretion expense, changes in long-term income tax payable and other long-term liabilities of $13.2 million, stock-based compensation expense of $12.5 million, changes in long-term income tax receivable of $10.6 million, changes in deferred taxes of $9.7 million and debt extinguishment expense of $3.2 million.

These net sources of cash were further increased by a net increase of $9.0 million related to movements in our working capital accounts during the period.

The overall increases in cash from our working capital accounts were primarily driven by accrued expenses and the timing of purchases.

Net Cash Used in Investing Activities

The overall decreases in cash from our working capital accounts were primarily driven by the increase in accounts receivable due to the Progenics Acquisition and increase in collection period as well as change in inventory related to the COVID-19 impact on products and the timing of payments and payments of accruals related to general and administrative expenses in connection with the Progenics Acquisition.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities during the year ended December 31, 2021 was primarily due to cash proceeds of $15.8 million received from the sale of our Puerto Rico subsidiary, which was offset by $12.1 million of capital expenditures.

Net cash used in investing activities during the year ended December 31, 2020 reflected $10.0 million in lending on a note receivable to Progenics prior to the acquisition and $12.5 million in capital expenditures offset by $17.6 million of acquired cash related to the Progenics Acquisition.

Net cash used in investing activities during the year ended December 31, 2019 reflected $22.1 million in capital expenditures.

Net Cash Used in Financing Activities

Net cash used in financing activities during the year ended December 31, 2021 is primarily attributable to the payments on long-term debt and other borrowings of $43.3 million related to the 2019 Term Facility and Royalty-Backed Loan, including a voluntary repayment of the outstanding principal on the Royalty-Backed Loan and payments for minimum statutory tax withholding related to net share settlement of equity awards of $2.0 million offset by proceeds of $5.3 million from stock option exercises.

Net cash used in financing activities during the year ended December 31, 2020 is primarily attributable to the payments on long-term debt and other borrowings of $15.5 million related to the 2019 Term Facility and Royalty-Backed Loan (defined below), equity issuance costs related to the Progenics Acquisition of $3.8 million, and payments for minimum statutory tax withholding related to net share settlement of equity awards of $2.1 million.

Net cash used in financing activities during the year ended December 31, 2019 is primarily attributable to the net cash outflow of approximately $73.0 million in connection with the refinancing of our previous 2017 Facility, payments on long-term debt of $5.0 million related to the 2019 Term Facility and payments for minimum statutory tax withholding related to net share settlement of equity awards of $2.5 million.

Starting in 2019, we require certain senior executives to cover tax liabilities resulting from the vesting of their equity awards pursuant to sell-to-cover transactions under 10b5-1 plans.

External Sources of Liquidity

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In addition, we replaced our $75.0 million revolving facility with the 2019 Revolving Facility.

The terms of the 2019 Facility are set forth in the Credit Agreement, dated as of June 27, 2019, by and among us, the lenders from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent and collateral agent.

The terms of the 2019 Term Facility are set forth in the Credit Agreement, dated as of June 27, 2019, by and among us, the lenders from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent and collateral agent (as amended, the “2019 Credit Agreement”).

We have 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.

We are permitted to voluntarily prepay the 2019 Term Loans, in whole or in part, without premium or penalty.

We are permitted to voluntarily repay the 2019 Term Loans, in whole or in part, without premium or penalty.

The 2019 Term Facility requires us to make mandatory prepayments of the outstanding 2019 Term Loans in certain circumstances.

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Under the terms of the 2019 Revolving Facility, the lenders thereunder agreed to extend credit to us from time to time until June 27, 2024 consisting of revolving loans in an aggregate principal amount not to exceed $200.0 million at any time outstanding.

The 2019 Revolving Facility includes a $20.0 million sub-facility for the issuance of Letters of Credit.

The 2019 Revolving Facility includes a $10.0 million sub-facility for Swingline Loans.

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.

Please refer to Note 13, “Long-Term Debt, Net, and Other Borrowings” for further details on the 2019 Facility.

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

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

The Amendment provides for, among other things, modifications to our 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 covenant related to Total Net Leverage Ratio (as defined in the 2019 Credit Agreement) was 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

2019 Credit Agreement

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

Q3 2021 and 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 we deliver a compliance certificate for the fiscal quarter ending March 31, 2021.

As of December 31, 2020, we were in compliance with all financial and other covenants under the Amendment.

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 our 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 our Total Net Leverage Ratio.

Q2 2021 and thereafter 3.00 to 1.00

As of December 31, 2021, we were in compliance with all financial and other covenants under the 2019 Credit Agreement.

Under the 2019 Credit Agreement, 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%, and the commitment fee ranges from 0.15% to 0.40%, in each case based on our Total Net Leverage Ratio.

On June 19, 2020, as a result of the Progenics Acquisition, we 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.

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 us.

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.

On November 4, 2016, Progenics, through MNTX Royalties, entered into the Royalty-Backed Loan.

The Royalty-Backed Loan bore interest at an annual rate of 9.5% and was scheduled to mature 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.

On March 31, 2021, we voluntarily repaid in full the entire outstanding principal on the Royalty-Backed Loan in the amount of $30.9 million, which included a prepayment amount of $0.5 million, and terminated the agreement.

Our ability to fund our future capital needs will be affected by our ability to continue to generate cash from operations and may be affected by our ability to access the capital markets, money markets or other sources of funding, as well as the capacity and terms of our financing arrangements.

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Our future capital requirements will depend on many factors, including:

• The level of product sales and the pricing environment of our currently marketed products, particularly DEFINITY and any additional products that we may market in the future, including decreased product sales resulting from the COVID-19 pandemic;

• The level of product sales and the pricing environment of our currently marketed products, particularly DEFINITY, PYLARIFY, as well as any additional products that we may market in the future, including decreased product sales resulting from the COVID-19 pandemic;

• Revenue mix shifts and associated volume and selling price changes that could result from contractual status changes with key customers and additional competition;

• The continued costs of the PYLARIFY commercial launch and our ability to successfully commercialize PYLARIFY;

• The costs of acquiring or in-licensing, developing, obtaining regulatory approval for, and commercializing, new products, businesses or technologies, together with the costs of pursuing opportunities that are not eventually consummated;

• Our investment in the further clinical development and commercialization of products and development candidates, including the newly acquired Progenics assets AZEDRA, PyL, 1095, aBSI and PSMA AI;

• Our investment in the further clinical development and commercialization of products and development candidates, including AZEDRA, 1095, and LMI 1195;

• The costs of investing in our facilities, equipment and technology infrastructure;

• The costs and timing of establishing manufacturing and supply arrangements for commercial supplies of our products and raw materials and components;

• Our ability to have product manufactured and released from JHS and other manufacturing sites in a timely manner in the future;

• The costs and timing of establishing or amending manufacturing and supply arrangements for commercial supplies of our products and raw materials and components;

• Our ability to have product manufactured and released from JHS and other manufacturing sites in a timely manner in the future, or to begin and ramp up our manufacturing of DEFINITY at our in-house manufacturing facility in an amount sufficient to meet our supply needs;

• The costs of further commercialization of our existing products, particularly in international markets, including product marketing, sales and distribution and whether we obtain local partners to help share such commercialization costs;

• The extent to which we choose to establish collaboration, co-promotion, distribution or other similar arrangements for our marketed products;

• The legal costs relating to maintaining, expanding and enforcing our intellectual property portfolio, pursuing insurance or other claims and defending against product liability, regulatory compliance or other claims;

• The cost of interest on any additional borrowings which we may incur under our financing arrangements;

Until we successfully become dual sourced for our principal products, we are vulnerable to future supply shortages.

Disruption in our financial performance could also occur if we experience significant adverse changes in product or customer mix, broad economic downturns, adverse industry or company conditions or catastrophic external events, including pandemics such as COVID-19, natural disasters and political or military conflict.

• The impact of sustained inflation on our costs of goods sold and operating expenses.

We are vulnerable to future supply shortages, especially for our single sourced products.

Disruption in our financial performance could also occur if we experience significant adverse changes in product or customer mix, broad economic downturns, sustained inflation, adverse industry or company conditions or catastrophic external events, including pandemics such as COVID-19, natural disasters and political or military conflict.

If we experience one or more of these events in the future, we may be required to further implement expense reductions, such as a delay or elimination of discretionary spending in all functional areas, as well as scaling back select operating and strategic initiatives.

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Accordingly, we may be limited in utilizing the full amount of our 2019 Revolving Facility, as amended, as a source of liquidity.

In addition, in connection with the Progenics Acquisition, which we closed in June 2020, we incurred legal, accounting, financial advisory, consulting and printing fees, and transition, integration and other costs which we funded from our available cash and the available cash of Progenics.

The CVRs we issued in the Progenics Acquisition entitle holders thereof to future cash payments of 40% of PyL net sales over (i) $100.0 million in 2022 and (ii) $150.0 million in 2023, which, if payable, we currently intend to fund from our then-available cash.

In no event will our aggregate payments under the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9% (which we estimate could be approximately $100.0 million) of the total consideration we pay in the Progenics Acquisition.

The CVRs we issued in the Progenics Acquisition entitle holders thereof to future cash payments of 40% of PYLARIFY net sales over (i) $100.0 million in 2022 and (ii) $150.0 million in 2023, which, if payable, we currently intend to fund from our then-available cash.

In no event will our aggregate payments under the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9% (which we currently estimate could be approximately $100.0 million) of the total consideration we pay in the Progenics Acquisition.

Refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities.

Based on our current operating plans, including our prudent expense management in response to the COVID-19 pandemic, we believe that our existing cash and cash equivalents, results of operations and availability under our 2019 Revolving Facility, as amended, will be sufficient to continue to fund our liquidity requirements for the foreseeable future.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent contractual liabilities for which we cannot reasonably predict future payment, including contingencies related to potential future development, financing, certain suppliers, contingent royalty payments and/or scientific, regulatory, or commercial milestone payments under development agreements.

The following table summarizes our contractual obligations as of December 31, 2020:

Payments Due by Period

(in thousands) Total Less than

1 Year 1 - 3 Years 3 -5 Years More than

Debt obligations (principal) $ 217,553 $ 20,452 $ 48,351 $ 148,750 $ —

Interest on debt obligations (a)

26,537 9,697 14,454 2,386 —

Operating lease obligations (b)

23,239 1,964 4,468 4,637 12,170

Purchase obligations (c)

6,198 4,132 2,066 — —

Finance lease obligations 525 231 294 — —

Fixed payments under license agreements (d)

733 164 328 203 38

Other long-term liabilities (e)(f)

Asset retirement obligations (g)

Total contractual obligations $ 274,785 $ 36,640 $ 69,961 $ 155,976 $ 12,208

________________________________

(a) Amounts relate to the estimated interest under our 2019 Term Facility and interest rate swaps based on interest rates in effect as of December 31, 2020 as well as future principal and interest, based upon estimated sales projections, under our Royalty-Backed Loan.

(b) Operating leases include minimum payments under leases for our facilities.

Amounts exclude lease payments of $0.9 million associated with the Puerto Rico subsidiary that is classified as held for sale.

(d) Does not include potential milestone or contractual payment obligations contingent upon the achievement or occurrence of future milestones or events under our license agreements, because they are contingent and the amounts and timing of such potential obligations are unknown or uncertain.

Based on our current operating plans, including our prudent expense management in response to the COVID-19 pandemic, we believe our balance of cash and cash equivalents, which totaled $98.5 million as of December 31, 2021, along with cash generated by ongoing operations and continued access to our 2019 Revolving Facility, will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

Our material cash requirements include the following contractual and other obligations.

As of December 31, 2021, we had maturities of principal obligations related to our 2019 Term Facility for an aggregate principal amount of $175.0 million, with $11.3 million payable within twelve months.

Future interest payments associated with the 2019 Term Facility total $8.3 million, with $3.6 million payable within twelve months.

We have operating lease arrangements for certain facilities, including corporate and manufacturing space.

As of December 31, 2021, we had fixed operating lease payment obligations of $22.0 million, with $2.4 million payable within twelve months.

We have lease arrangements for certain equipment.

As of December 31, 2021, we had fixed finance lease payment obligations of $0.8 million, with $0.4 million payable within twelve months.

Purchase Obligations

We have purchase obligations that primarily consist of noncancelable obligations related to minimum quantities of goods or services that have been committed to be purchased on an annual basis.

As of December 31, 2021, we had minimum purchase obligations of $6.5 million, with $3.5 million due within twelve months.

License Agreements

We have entered into license agreements in which fixed payments have been committed to be paid on an annual basis.

As of December 31, 2021, we had fixed license payments of $0.3 million, with $0.1 million due within twelve months.

These amounts do not include potential milestone or contractual payment obligations contingent upon the achievement or occurrence of future milestones or events under our license agreements, because they are contingent and the amounts and timing of such potential obligations are unknown or uncertain.

We may be required to pay additional amounts up to approximately $170.5 million in contingent payments under our license agreements.

(e) Our other long-term liabilities in the consolidated balance sheet include unrecognized tax benefits and related interest and penalties.

Other Long-Term Liabilities

Our other long-term liabilities in the consolidated balance sheet include the fair values of contingent consideration liabilities including CVRs and contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013.

We may be required to pay up to approximately $100.0 million related to the CVRs and approximately $85.0 million related to the contingent consideration.

As of December 31, 2021, these contingent payments were not expected to be payable within twelve months due to the uncertainty around the timing of the future cash flows.

Our other long-term liabilities in the consolidated balance sheet include unrecognized tax benefits and related interest and penalties.

As of December 31, 2021, we had unrecognized tax benefits of $20.9 million, which included interest and penalties, classified as noncurrent liabilities.

At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities.

therefore, such amounts are not included in the above contractual obligation table.

(f) Our other long-term liabilities in the consolidated balance sheet also include the fair values of contingent consideration liabilities including CVRs and contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013.

We may be required to pay up to approximately $100.0 million related to the CVRs and approximately $85.0 million related to the contingent consideration.

These contingent payments have been excluded from the above table due to uncertainty around the timing of the future cash outflows.

(g) We have excluded asset retirement obligations from the table above due to the uncertainty of the timing of the future cash outflows related to the decommissioning of our radioactive operations.

As of December 31, 2020, the liability, which was approximately $14.3 million, including amounts recorded in liabilities held for sale was measured at the present value of the obligation expected to be incurred of approximately $26.9 million.

Asset Retirement Obligation

We are required to provide the Massachusetts Department of Public Health and the New Jersey Department of Environmental Protection financial assurance demonstrating our ability to fund the decommissioning of our North Billerica, Massachusetts and Somerset, New Jersey production facilities upon closure, although we have no current plans to close the facilities.

We have provided this financial assurance in the form of a $28.2 million surety bond (the “Surety Bond”).

As of December 31, 2021, the liability, which was approximately $20.8 million, was measured at the present value of the obligation expected to be incurred of approximately $26.4 million.

These contingent payments are not expected to be payable within twelve months due to the uncertainty around the timing of the future cash flows related to the decommissioning of our radioactive operations.

Off-Balance Sheet Arrangements

We are required to provide the U.S.

Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurance demonstrating our ability to fund the decommissioning of our North Billerica, Massachusetts production facility upon closure, though we do not intend to close the facility.

We have provided this financial assurance in the form of a $28.2 million surety bond.

As noted above, we have provided the Surety Bond to the Massachusetts Department of Public Health and New Jersey Department of Environmental Protection.

Since inception, we have not engaged in any other off-balance sheet arrangements, including structured finance, special purpose entities or variable interest entities.

Effects of Inflation

We do not believe that inflation has had a significant impact on our revenues or results of operations since inception.

We do not believe that inflation has had a significant impact on our revenues or results of operations.

We expect our cost of product sales and other operating expenses will change in the future in line with periodic inflationary changes in price levels.

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Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying consolidated financial statements located under Item 8 of this Annual Report on Form 10-K for information regarding recently issued accounting standards that may have a significant impact on our business.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S.

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In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

We believe the following represent our critical accounting policies and estimates used in the preparation of our financial statements.

We believe the following represent our critical accounting estimates used in the preparation of our financial statements.

Revenue from Contracts with Customers

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We derive our revenues through arrangements with customers for product sales as well as licensing and royalty arrangements.

We sell our products principally to hospitals and clinics, radiopharmacies, and distributors and we consider customer purchase orders, which in some cases are governed by master sales or group purchasing organization agreements, to be contracts with our customers.

We sell our products primarily to clinics, distributors, group practices, hospitals, integrated delivery networks, and radiopharmacies, and we consider customer purchase orders, which in some cases are governed by master sales or group purchasing organization agreements, to be contracts with our customers.

In addition to these arrangements, we also enter into licensing agreements under which we license certain rights to third parties.

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Our product revenues are recorded at the net sales price (transaction price), which represents our sales price less estimates related to reserves which are established for items such as discounts, returns, rebates and allowances that may be provided for in certain contracts with our customers.

Judgment is used in determining and updating our reserves on an on-going basis, and where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our 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.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

Judgment is used in determining and updating our reserves on an ongoing basis, and where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our 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 our best estimates of the amount of consideration to which it is entitled based on the terms of the contract.

Actual amounts of consideration ultimately received may differ from our estimates.

For our licensing and royalty arrangements, we use 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.

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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.

Acquired in-process research and development (“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.

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We test our IPR&D assets at least annually or when a triggering event occurs that could indicate a potential impairment and we recognize any impairment loss in our consolidated statements of operations.

Contingent Consideration Liabilities

The Progenics Acquisition included certain contingent consideration liabilities, including CVRs, as well as other contingent future payments.

CVRs are based on net sales generated by PYLARIFY in both 2022 and 2023.

Other contingent future payments are based on net sales targets for 1095 and AZEDRA and include a commercialization milestone for 1095.

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 or Monte Carlo simulation models that include significant estimates and assumptions pertaining to the period of expected milestone achievement, probability of success, discount rates 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.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis