What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-04-29 · 109 added, 86 removed, 302 unchanged (39% of the section changed)

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These forward-looking statements, including, in particular, statements about our plans, strategies, prospects and industry estimates are subject to risks and uncertainties.

These statements identify prospective information and can generally be identified by words such as “anticipates,” “believes,” “can,” “could,” “estimates,” “expects,” “hopes,” “intends,” “launch,” “may,” “pipeline,” “plans,” “predicts,” “seeks,” “should,” “target,” “will,” “would” and similar expressions, or by express or implied discussions regarding potential marketing approvals or new indications for the collaborations, products candidates or approved products described in this Quarterly Report on Form 10-Q, or regarding potential future revenues from such collaborations, product candidates and products.

These statements identify prospective information and can generally be identified by words such as “anticipates,” “believes,” “can,” “could,” “designed,” “estimates,” “expects,” “hopes,” “intends,” “launch,” “may,” “pipeline,” “plans,” “predicts,” “seeks,” “should,” “target,” “will,” “would” and similar expressions, or by express or implied discussions regarding potential marketing approvals or new indications for the collaborations, products candidates or approved products described in this Quarterly Report on Form 10-Q, or regarding potential future revenues from such collaborations, product candidates and products.

Examples of forward-looking statements include statements we make relating to our outlook and expectations including, without limitation, in connection with:

(i) continued market expansion and penetration for our established commercial products, particularly DEFINITY, in the face of segment competition and potential generic competition, including as a result of patent and regulatory exclusivity expirations and challenges;

(ii) our ability to continue to grow PYLARIFY as a commercial product, including (A) our ability to obtain FDA approval for additional positron emission tomography (“PET”) manufacturing facilities (“PMFs”) to manufacture PYLARIFY, (B) the ability of PMFs to manufacture PYLARIFY to meet product demand, (C) our ability to sell PYLARIFY to customers, (D) our ability to obtain and maintain adequate coding, coverage and payment for PYLARIFY, and (E) our ability to establish PYLARIFY as a leading PSMA PET imaging agent in a competitive environment in which other PSMA PET imaging agents have been approved and additional ones are in development;

(i) our ability to continue to grow PYLARIFY as a commercial product, including (A) our ability to obtain FDA approval for additional positron emission tomography (“PET”) manufacturing facilities (“PMFs”) to manufacture PYLARIFY, (B) the ability of PMFs to manufacture PYLARIFY to meet product demand, (C) our ability to sell PYLARIFY to customers, (D) our ability to obtain and maintain adequate coding, coverage and payment for PYLARIFY, and (E) our ability to establish PYLARIFY as a leading PSMA PET imaging agent in a competitive environment in which other PSMA PET imaging agents have been approved and additional ones are in development;

(ii) continued market expansion and penetration for our established commercial products, particularly DEFINITY, in the face of segment competition and potential generic competition, including as a result of patent and regulatory exclusivity expirations and challenges;

(iii) the global Molybdenum-99 (“Mo-99”) supply;

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(v) our ability to successfully launch PYLARIFY AI as a commercial product;

(vi) the continuing impact of the global COVID-19 pandemic on our business, financial condition and prospects;

(vii) the efforts and timing for clinical development of our product candidates and new clinical applications for our products, in each case, that we may develop, including 1095 and LMI 1195, or that our strategic partners may develop, including flurpiridaz fluorine-18 (“F 18”);

(vi) the continuing impact of the global COVID-19 pandemic on our business, supply chain, financial condition and prospects;

(vii) the efforts and timing for clinical development and regulatory approval of our product candidates and new clinical applications and territories for our products, in each case, that we may develop, including 1095 and NM-01, or that our strategic partners may develop, including piflufolastat F 18 in Europe and flurpiridaz fluorine-18 (“F 18”);

(viii) our ability to identify and acquire or in-license additional diagnostic and therapeutic product opportunities in oncology and other strategic areas;

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We caution you, therefore, against relying on any of these forward-looking statements.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A.

“Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2022, and in Part II, Item 1A.

“Risk Factors” in this Quarterly Report on Form 10-Q.

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The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q as well as the other factors described in Part I, Item 1A.

“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A.

“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, in Part II, Item 1A.

“Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2022, and in Part II, Item 1A.

“Risk Factors” in this Quarterly Report on Form 10-Q.

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 are an established leader and fully integrated provider committed to improving patient outcomes through diagnostics, radiotherapeutics and artificial intelligence solutions that enable clinicians to Find, Fight and Follow disease.

We classify our products in three categories:

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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 royalty revenue from our license of RELISTOR.

Our strategic partnerships and other revenue category focuses on facilitating precision medicine through the use of biomarkers, artificial intelligence solutions and radiotherapeutic platforms, and also includes royalty revenue from our license of RELISTOR.

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

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

PYLARIFY Approval, Commercial Launch and Revenue Growth

PYLARIFY, Commercial Launch and Revenue Growth

On May 27, 2021, we announced that the FDA had approved PYLARIFY, an F 18-labeled PET imaging agent targeting prostate-specific membrane antigen (“PSMA”).

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As part of the agreement with Novartis, we will supply PYLARIFY for the selection of patients with prostate cancer, and Novartis will provide all PYLARIFY-related clinical imaging data to us.

In addition, the Society for Nuclear Medicine and Molecular Imaging, or SNMMI, recently updated their appropriate use criteria, noting that PSMA PET imaging agents, including PYLARIFY, can be used for patient selection for PSMA-targeted radioligand therapy.

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).

In addition, the National Comprehensive Cancer Center updated its guidelines and the Society for Nuclear Medicine and Molecular Imaging updated its appropriate use criteria earlier this year, both noting that PSMA PET imaging agents, including PYLARIFY, can be used for patient selection for PSMA-targeted radioligand therapy.

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.

Over the course of the remainder of 2021 and into 2022, PYLARIFY availability has 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.

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

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

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

We 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.

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and internationally.

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

for PYLARIFY, we have four Orange Book-listed patents, including composition of matter patents, the last of which expires in 2037.

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

In connection with the Progenics Acquisition in June 2020, we issued to the Progenics stockholders at the time the transaction was consummated CVRs, entitling them to receive a pro rata share of aggregate cash payments equal to 40% of U.S.

net sales generated by PYLARIFY in 2022 and 2023 in excess of $100.0 million and $150.0 million, respectively.

In no event will our aggregate payment obligations in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9% of the total consideration we paid in the Progenics Acquisition.

Based on our current projections of 2022 PYLARIFY net sales, we believe that all of our aggregate payment obligations under the CVRs (which we currently estimate will be approximately $99.7 million) will become payable in the first half of 2023, although we can give no assurances to that effect.

PYLARIFY AI Clearance and Use

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in November 2021.

During the second quarter of 2022, we received a new 510(k) clearance for an updated version of our PYLARIFY AI platform.

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

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

We believe the market opportunity for our ultrasound microbubble enhancing agent, DEFINITY, continues to be significant.

Historically, DEFINITY has been our fastest growing and highest margin commercial product.

We anticipate DEFINITY sales will continue to grow in the future.

We believe the market opportunity for our microbubble ultrasound enhancing agent, DEFINITY, continues to be significant and that DEFINITY sales will continue to grow in the future.

As we continue to educate the physician and healthcare provider community about the benefits and risks of DEFINITY, we believe we will be able to continue to grow the appropriate use of DEFINITY in suboptimal echocardiograms.

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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 May 2022 and the full 30-month stay were obtained, then the Applicant would be precluded from commercialization until at least November 2024.

Solely by way of example and not based on any knowledge we currently have, if we received a Notice from an Applicant in August 2022 and the full 30-month stay were obtained, then the Applicant would be precluded from commercialization until at least February 2025.

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.

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Global Mo-99 Supply

We currently have Mo-99 supply agreements with Institute for Radioelements (“IRE”), running through December 31, 2022, with auto-renewal provisions that are 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 June 30, 2022, and for which we are currently negotiating an extension.

We currently have Mo-99 supply agreements with Institute for Radioelements (“IRE”), running through December 31, 2022, with auto-renewal provisions that are 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 August 31, 2022, and for which we are currently negotiating an extension.

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.

The NTP processing facility had periodic outages in 2017, 2018 and 2019.

When NTP was not producing, we relied on Mo-99 supply from both IRE and ANSTO to limit the impact of the NTP outages.

In 2019 and 2020, ANSTO experienced multiple facility issues that resulted in ANSTO outages and volume limitations, during which time we relied on IRE and NTP to limit the impact of those outages and limitations.

Because of the COVID-19 pandemic, we experienced challenges receiving regularly scheduled orders of Mo-99 from our global suppliers, particularly in the second quarter of 2020.

We continue to manage these various supply chain challenges, but depending on reactor and processor schedules and operations, at times we have not been able to fill some or all of the demand for our TechneLite generators on certain manufacturing days.

When one supplier experiences outages, we generally rely on Mo-99 supply from the other suppliers to limit the impact of the outages.

We believe we effectively manage these various supply chain challenges, but depending on reactor and processor schedules and operations, at times we have not been able to fill some or all of the demand for our TechneLite generators on certain manufacturing days.

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.

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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 many 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 first quarter of 2022.

For example, we believe sales of DEFINITY were impacted by elevated case counts and hospitalizations but improved over the course of the quarter, even amidst ongoing hospital nursing and sonographer shortages.

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.

example, we believe sales of DEFINITY during the second quarter of 2022 were impacted by ongoing staffing challenges for nurses at U.S.

healthcare institutions, as well as there being fewer in-person U.S.

cardiology visits during the quarter as compared to the second quarter of 2021.

The pandemic could still have a future negative impact on our business, particularly if there are additional resurgences as a result of new variants of 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 and will continue to make substantial investments in new product development and lifecycle management for existing products.

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, including:

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

• For PYLARIFY AI, our development of PYLARIFY AI resulted in a 510(k) clearance granted by the FDA in July 2021.

• For 1095, we completed an interim analysis of the ARROW Phase 2 study in mCRPC patients in the fourth quarter of 2021 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 plan to initiate 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.

• For PYLARIFY AI, our development of PYLARIFY AI resulted in a 510(k) clearance granted by the FDA in the third quarter of 2021 and an additional 510(k) clearance granted during the second quarter of 2022.

• For 1095, we completed an interim analysis of the ARROW Phase 2 study in mCRPC patients in the fourth quarter of 2021 and continued that study without modifications.

During the second quarter of 2022, we enrolled the last patient in this study.

In total, 120 patients have been randomized -- 80 in the 1095 plus enzalutamide combination group and 40 in the enzalutamide alone group.

This study is a multicenter, randomized, open-label, controlled Phase 2 clinical study evaluating the efficacy and safety of 1095, our PSMA-targeted I-131 therapeutic, in combination with enzalutamide compared to enzalutamide alone in patients with metastatic castration resistant prostate cancer who are PSMA-avid, chemotherapy naïve, and have progressed on abiraterone.

The primary endpoint in this study is prostate specific antigen, or (PSA), response rate.

Key secondary endpoints include time to radiographic free progression, progression free survival, and overall survival.

Patients in this study will be followed for one year after their first treatment for all efficacy endpoints and survival and safety data will be collected for an additional year.

• For LMI 1195, we have decided not to make any further investment at this time based on recent feedback from the FDA that we would not be granted a pediatric voucher upon successful approval of the product.

We are currently exploring alternative options for this asset.

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

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Strategic Initiatives

We continue to seek ways to further expand our portfolio of products and product candidates and 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.

In particular, we believe that diagnostic and therapeutic product opportunities in oncology and other strategic areas will be critical to our future success, and we are committed to further augmenting our commercial portfolio with revenue opportunities of a similar magnitude as DEFINITY and PYLARIFY, either through strategic transactions or internal development.

We continue to seek ways to further increase the overall value of our portfolio of products and product candidates.

We are evaluating a number of different opportunities to collaborate, in-license or acquire additional products, product candidates, businesses and technologies to drive our future growth.

In particular, we are focused on late-stage diagnostic and therapeutic product opportunities in oncology and other strategic areas that will complement our existing portfolio.

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

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◦ In March 2022, we announced a collaboration with Novartis to include PYLARIFY in prostate cancer trials with Pluvicto.

As part of the agreement with Novartis, the Company will provide PYLARIFY for the selection of patients with prostate cancer, and Novartis will provide all PYLARIFY related clinical imaging data to the Company.

As part of the agreement with Novartis, we will provide PYLARIFY for the selection of patients with prostate cancer, and Novartis will provide all PYLARIFY related clinical imaging data to us.

◦ 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.

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◦ Prior to 2021, we also entered into several other separate agreements, including with 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.

In June 2022, Curium announced that it had submitted its marketing authorization application to the European Medicines Agency seeking approval for piflufolastat F 18 in Europe.

In addition, we recently entered into an agreement with Curium to add PYLARIFY to its U.S.

Eclipse trial, a multi-center, open-label, randomized Phase 3 trial comparing the safety and efficacy of Curium’s PSMA-targeted therapeutic versus hormone therapy in patients with metastatic castration-resistant prostate cancer.

PYLARIFY will be used to determine PSMA-avidity as part of patient selection.

• 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.

In May 2022, we announced that the first patient had been dosed in a Phase 2 clinical trial of NM-01, a novel technetium-99m SPECT imaging agent that we are developing to assess PD-L1 expression in cancer cells.

The Phase 2 clinical trial is an open-label, single-arm trial in non-small cell lung cancer patients.

The primary endpoint is the assessment of PD-L1 expression in primary tumor and metastatic lesions by NM-01 compared to immunohistochemistry.

Other objectives are aimed at quantifying intra- and inter-tumoral heterogeneity of PD-L1 expression by NM-01, as well as establishing correlations with other diagnostic procedures.

The trial is being conducted by NanoMab at King’s College London and is expected to complete enrollment later in 2022.

• 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.

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Three Months Ended

(in thousands) 2022 2021 Change $ Change %

June 30, Six Months Ended

(in thousands) 2022 2021 Change $ Change % 2022 2021 Change $ Change %

Revenues $ 223,723 $ 101,064 $ 122,659 121.4 % $ 432,603 $ 193,573 $ 239,030 123.5 %

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Total operating expenses 74,825 72,869 1,956 2.7 % 144,970 113,540 31,430 27.7 %

Gain on sale of assets — 15,263 (15,263) N/A

Operating income 58,925 15,622 43,303 277.2 %

Gain on sale of assets — — — N/A — 15,263 (15,263) N/A

Operating income (loss) 63,204 (26,781) 89,985 (336.0) % 122,129 (11,159) 133,288 (1194.4) %

Interest expense 1,469 1,937 (468) (24.2) % 2,978 4,655 (1,677) (36.0) %

Gain on extinguishment of debt — (889) 889 N/A

Gain on extinguishment of debt — — — N/A — (889) 889 N/A

Other income (310) (182) (128) 70.3 % (795) (731) (64) 8.8 %

Income before income taxes 57,901 14,342 43,559 303.7 %

Income tax expense 14,939 5,334 9,605 180.1 %

Net income $ 42,962 $ 9,008 $ 33,954 376.9 %

Comparison of the Periods Ended March 31, 2022 and 2021

Income (loss) before income taxes 62,045 (28,536) 90,581 (317.4) % 119,946 (14,194) 134,140 (945.0) %

Income tax expense (benefit) 18,987 (1,879) 20,866 (1110.5) % 33,926 3,455 30,471 881.9 %

Net income (loss) $ 43,058 $ (26,657) $ 69,715 (261.5) % $ 86,020 $ (17,649) $ 103,669 (587.4) %

Comparison of the Periods Ended June 30, 2022 and 2021

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.

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

Radiopharmaceutical oncology consists primarily of PYLARIFY and AZEDRA.

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Three Months Ended

(in thousands) 2022 2021 Change $ Change %

June 30, Six Months Ended

(in thousands) 2022 2021 Change $ Change % 2022 2021 Change $ Change %

DEFINITY $ 62,306 $ 59,842 $ 2,464 4.1 % $ 120,634 $ 115,813 $ 4,821 4.2 %

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Total precision diagnostics 87,109 90,356 (3,247) (3.6) % 173,307 176,111 (2,804) (1.6) %

PYLARIFY 92,777 — 92,777 N/A

PYLARIFY 130,232 273 129,959 N/A 223,009 273 222,736 N/A

Other radiopharmaceutical oncology 928 2,539 (1,611) (63.5) % 2,255 4,039 (1,784) (44.2) %

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Total revenues $ 223,723 $ 101,064 $ 122,659 121.4 % $ 432,603 $ 193,573 $ 239,030 123.5 %

The increase in revenues for the three months ended March 31, 2022, as compared to the prior year period, is primarily driven by the commercial launch of PYLARIFY and $24.0 million of revenue recognized pursuant to the Novartis Agreement, and an increase in DEFINITY sales volume period over period due to improving conditions relative to the COVID-19 pandemic in the prior year.

The increase is offset, in part, by lower sales volumes from other precision diagnostic products.

The increase in revenues for the three months ended June 30, 2022, as compared to the prior year period, is primarily driven by the commercial launch of PYLARIFY and an increase in DEFINITY sales volume.

The increase is offset, in part, by lower sales volumes from TechneLite driven by the strategic decision to exit a customer contract in the prior year, lower strategic partnerships and other revenue due to a sale of cREPO in the prior period and lower volume of other precision diagnostic and radiopharmaceutical oncology products.

The increase in revenues for the six months ended June 30, 2022, as compared to the prior year period, is primarily driven by the commercial launch of PYLARIFY and $24.0 million of revenue recognized pursuant to the Novartis Agreement, and an increase in DEFINITY sales volume.

The increase is offset, in part, by lower sales volumes from TechneLite and other precision diagnostic products driven by the strategic decision to exit a customer contract in the prior year, and lower volume of other precision diagnostic and radiopharmaceutical oncology products.

Rebates and Allowances

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Payments or credits made during the period (12,733)

Balance, March 31, 2022 $ 10,793

The increase in gross profit for the three months ended March 31, 2022, as compared to the prior year period, is primarily due to PYLARIFY post commercial launch sales volume and the $24.0 million pursuant to the Novartis Agreement, which are partially offset by amortization expense of acquired intangible assets in the Progenics Acquisition.

Balance, June 30, 2022 $ 12,195

The increase in gross profit for the three months ended June 30, 2022, as compared to the prior year period, is primarily due to PYLARIFY post commercial launch sales volume, which is partially offset by amortization expense of acquired intangible assets in the Progenics Acquisition and lower revenue from strategic partnerships due to a one-time sale of a digital solution in 2021.

The increase in gross profit for the six months ended June 30, 2022, as compared to the prior year period, is primarily due to PYLARIFY post commercial launch sales volume and the $24.0 million pursuant to the Novartis Agreement, which are partially offset by amortization expense of acquired intangible assets in the Progenics Acquisition.

Sales and Marketing

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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 expenses increased $6.2 million for the three months ended March 31, 2022 as compared to the prior year period.

This was primarily driven by the commercialization activities for the launch of PYLARIFY and increased employee-related costs (including the hiring of new employees during 2021 in connection with the commercialization activities for PYLARIFY), as well as the reduced level of marketing promotional programs and travel during the prior year due to the impact of the COVID-19 pandemic.

Sales and marketing expenses increased $9.9 million and $16.0 million for the three and six months ended June 30, 2022 as compared to the prior year period.

This was primarily driven by the continued commercialization activities following the launch of PYLARIFY and increased employee-related costs (including the hiring of new employees during 2021 in connection with the commercialization activities for PYLARIFY), as well as an increase in the level of marketing promotional programs and travel during this period which was reduced during the prior year due to the impact 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 expenses increased $21.5 million for the three months ended March 31, 2022 compared to the prior period.

This was primarily driven by the $18.4 million net expense for the fair value adjustments to the contingent asset and liabilities in the first quarter of 2022 (an increase of $18.1 million from the prior year period) (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs) and increased employee-related costs, offset by acquisition-related costs associated with the Progenics Acquisition in the prior year.

General and administrative expenses decreased $10.6 million for the three months ended June 30, 2022 compared to the prior period.

This was primarily driven by the $8.5 million net expense for the fair value adjustments to the contingent asset and liabilities in the second quarter of 2022 (a decrease of $17.1 million from the prior year period) (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs) and increased employee-related costs and professional fees.

General and administrative expenses increased $10.9 million for the six months ended June 30, 2022 compared to the prior period.

This was primarily driven by the $26.9 million net expense for the fair value adjustments to the contingent asset and liabilities in the first half of 2022 (an increase of $1.0 million from the prior year period) (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs) and increased employee-related costs and professional fees.

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.

Research and development expenses increased $1.8 million for the three months ended March 31, 2022 as compared to the prior year period.

Research and development expenses increased $2.7 million for the three months ended June 30, 2022 as compared to the prior year period.

This was primarily driven by the level of activity of the ARROW Phase 2 study of 1095, investment in medical affairs related to PYLARIFY and higher overall headcount related costs, offset by the expenses related to the preparation activities for the launch of PYLARIFY during the prior year period.

Research and development expenses increased $4.5 million for the six months ended June 30, 2022 as compared to the prior year period.

This was primarily driven by the level of activity of the ARROW Phase 2 study of 1095, investment in medical affairs related to PYLARIFY and higher overall headcount related costs, offset by the expenses related to filing fees for the PYLARIFY New Drug Application and preparation activities for the launch of PYLARIFY during the prior year period.

Interest Expense

Interest expense decreased by approximately $1.2 million for the three months ended March 31, 2022 as compared to the prior year period due to lower interest rates on our long-term debt and the repayment of the Royalty-Backed Loan on March 31, 2021.

Interest expense decreased by approximately $1.7 million for the six months ended June 30, 2022 as compared to the prior year period due to lower interest rates on our long-term debt and the repayment of the Royalty-Backed Loan on March 31, 2021.

Income Tax Expense

The income tax expense recorded for the three months ended March 31, 2022 was primarily due to pre-tax profits reported during the quarter, partially offset by the benefit associated with stock compensation deductions.

The income tax expense recorded for the three and six months ended June 30, 2022 was primarily due to pre-tax profits reported during the period, partially offset by the benefit associated with stock compensation deductions.

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

Assessing the realizability of deferred tax assets requires significant 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.

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 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:

Three Months Ended

Six Months Ended

Effective tax rate 28.3% (24.3)%

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statutory rate of 21% principally due to the accrual of state taxes and the impact of non-deductible contingency reserve expense.

The decrease in the effective income tax rate for the three months ended March 31, 2022 is primarily due to the increased amount of stock compensation benefits recorded during that quarter.

The increase in the effective income tax rate for the six months ended June 30, 2022 is primarily due to the increased pre-tax profits in high population states that generally have higher tax rates.

Liquidity and Capital Resources

The following table provides information regarding our cash flows:

Three Months Ended

Six Months Ended

(in thousands) 2022 2021

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Net Cash Provided by Operating Activities

Net cash provided by operating activities of $10.3 million in the three months ended March 31, 2022 was primarily comprised of net income adjusted for the net effect of non-cash items such as the change in fair value of contingent assets and liabilities of $18.4 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

Net cash provided by operating activities of $82.9 million in the six months ended June 30, 2022 was primarily comprised of net income adjusted for the net effect of non-cash items such as the change in fair value of contingent assets and liabilities of $26.9 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.

The primary working capital uses 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 $9.8 million in the three months ended March 31, 2021 was driven primarily by net income of $9.0 million, depreciation, amortization and accretion expense of $8.1 million, stock-based compensation expense of $3.3 million, and deferred income taxes of $4.6 million.

These net sources of cash were offset by a gain on sale of assets of $15.3 million and a net decrease of $1.5 million related to movements in our working capital accounts during the period.

The overall decreases in cash from our working capital accounts were primarily driven by the payment of prior year annual bonuses as well as increased receivables from sales offset by a reduction in inventory due to obsolescence as well as the timing of inventory purchases.

The primary working capital uses of cash were an increase in trade receivables associated primarily with the increase in PYLARIFY revenues as well as the timing of inventory purchases.

Net cash provided by operating activities of $35.7 million in the six months ended June 30, 2021 was driven primarily by a change in fair value of contingent assets and liabilities of $25.9 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs), depreciation, amortization and accretion expense of $17.7 million, stock-based compensation expense of $7.9 million, deferred income taxes of $2.7 million and a net increase of $11.5 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 an increase in sales collections, the timing of payments to large vendors, a reduction in inventory due to obsolescence as well as the timing of inventory purchases.

These net sources of cash were offset by a net loss of $17.6 million and a gain on sale of assets of $15.3 million.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities during the three months ended March 31, 2022 was primarily due to $3.2 million of capital expenditures offset by cash proceeds of $1.8 million received from the sale of our Puerto Rico subsidiary.

Net cash provided by investing activities during the three months ended March 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 $2.5 million of capital expenditures.

Net cash used in investing activities during the six months ended June 30, 2022 was primarily due to $7.5 million of capital expenditures offset by cash proceeds of $1.8 million received from the sale of our Puerto Rico subsidiary.

Net cash provided by investing activities during the six months ended June 30, 2021 was primarily due to cash proceeds of $15.8 million received from the sale of our Puerto Rico subsidiary, which was offset by $5.2 million of capital expenditures.

Net Cash Used in Financing Activities

Net cash used in financing activities during the three months ended March 31, 2022 is primarily attributable to the payments on long-term debt and other borrowings of $2.6 million related to the 2019 Term Facility and payments for minimum statutory tax withholding related to net share settlement of equity awards of $5.5 million offset by proceeds of $5.4 million from stock option exercises.

Net cash used in financing activities during the three months ended March 31, 2021 is primarily attributable to the payments on long-term debt and other borrowings of $35.6 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 $1.6 million offset by proceeds of $2.0 million from stock option exercises.

Net cash used in financing activities during the six months ended June 30, 2022 is primarily attributable to the payments on long-term debt and other borrowings of $5.2 million related to the 2019 Term Facility and payments for minimum statutory tax withholding related to net share settlement of equity awards of $6.3 million offset by proceeds of $6.8 million from stock option exercises.

Net cash used in financing activities during the six months ended June 30, 2021 is primarily attributable to the payments on long-term debt and other borrowings of $38.1 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 $1.8 million offset by proceeds of $4.1 million from stock option exercises.

External Sources of Liquidity

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Q2 2021 and thereafter 3.00 to 1.00

As of March 31, 2022, we were in compliance with all financial and other covenants under the 2019 Credit Agreement.

As of June 30, 2022, we were in compliance with all financial and other covenants under the 2019 Credit Agreement.

Please refer to our Form 10-K for fiscal year ended December 31, 2021 for further details on the 2019 Facility and the 2019 Credit Agreement.

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

• The expected cash payment related to the CVRs

• The level of product sales and the pricing environment of our currently marketed products, particularly DEFINITY and 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 ongoing commercialization of PYLARIFY;

• The continued costs of the ongoing commercialization of PYLARIFY and PYLARIFY AI;

• 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 AZEDRA, 1095, and LMI 1195;

• Our investment in the further clinical development and commercialization of products and development candidates, including AZEDRA, 1095 and NM-01;

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

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However, we cannot be assured that such an amendment or waiver would be granted, or that additional capital will be available on acceptable terms, if at all.

At March 31, 2022, our only current committed external source of funds is our borrowing availability under our 2019 Revolving Facility.

We had $105.4 million of cash and cash equivalents at March 31, 2022.

At June 30, 2022, our only current committed external source of funds is our borrowing availability under our 2019 Revolving Facility.

We had $171.4 million of cash and cash equivalents at June 30, 2022.

Our 2019 Facility, as amended, contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds.

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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.

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.

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 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% 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, we believe our balance of cash and cash equivalents, which totaled $105.4 million as of March 31, 2022, 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.

Based on our current operating plans, we believe our balance of cash and cash equivalents, which totaled $171.4 million as of June 30, 2022, 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.

Critical Accounting Policies and Estimates

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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.

There have been no other significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the three months ended March 31, 2022.

There have been no other significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the six months ended June 30, 2022.

For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis