What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 113 added, 88 removed, 323 unchanged (38% of the section changed)

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

(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;

(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 an increasingly 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;

(iv) our ability to have third party manufacturers manufacture our products and our ability to use our in-house manufacturing capacity;

(iv) our ability to have third party manufacturers manufacture our products and our ability to manufacture DEFINITY in our in-house manufacturing facility;

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

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

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

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

PYLARIFY, Commercial Launch and Revenue Growth

PYLARIFY, Ongoing 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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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.

PYLARIFY works with PET/computed tomography (“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 3.0 million American men are living with prostate cancer today.

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and 30,000 scans for patients with metastatic castration-resistant prostate cancer (“mCRPC”) who may be under consideration for PSMA-targeted therapy for the treatment of adult patients with PSMA-positive mCRPC who have already been treated with other anticancer treatments (androgen receptor pathway inhibition and taxane-based chemotherapy).

However, because we are still early in the commercialization of PYLARIFY, we can give no assurance as to how clinical practice may evolve or what our ultimate market penetration may be.

However, because we are still early in the commercialization of PYLARIFY, we can give no assurance as to how clinical practice may evolve or our ultimate market penetration.

In March 2022, we announced a strategic collaboration with Novartis to include PYLARIFY in prostate cancer trials with Pluvicto, Novartis’ recently approved PSMA-targeted therapeutic.

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.

As part of the agreement with Novartis, we will supply PYLARIFY

for the selection of patients with prostate cancer for the trials, and Novartis will provide all PYLARIFY-related clinical imaging data to us.

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 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.

Over the course of the remainder of 2021 and into 2022, PYLARIFY availability expanded into additional regions and is now broadly available nationwide.

We continue to expand the U.S.

footprint for PYLARIFY with new PMFs, increased capacity at existing PMFs and added redundancy in key geographic areas, while broadening our customer base and market access coverage to serve our customers and the U.S.

prostate cancer community.

The commercial launch of PYLARIFY has been 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.

Throughout 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.

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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.

Although PYLARIFY is now broadly available nationwide and we continue to seek qualification for 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.

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In addition, effective January 1, 2022, the Centers for Medicare and Medicaid Services (“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.

TPT Status for PYLARIFY is expected to expire on 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 adequately cover the total cost of 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 a PYLARIFY PET/CT imaging procedure.

The successful growth of PYLARIFY is also dependent on our ability to establish PYLARIFY as a leading PSMA PET imaging agent in an increasingly competitive environment in which other PSMA PET imaging agents have been approved and additional ones are in development.

PYLARIFY’s competition is primarily two commercially available gallium-68-based PSMA imaging agents, as well as other non-PSMA-based imaging agents.

We also could face potential competition from an F 18 PSMA PET imaging agent currently under review by the FDA.

To the extent we lose market share to existing or future competitors, such loss of market share could have an adverse impact on our future business, results of operations, financial condition and cash flows.

Moreover, because we are still early in the commercialization of PYLARIFY, we can give no assurance as to how clinical practice may evolve or our ultimate market penetration or market share.

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

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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.

Outside of the U.S., we have and 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.

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.

Based on our 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.

PYLARIFY AI Clearance and Use

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

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.

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, subject to the challenges discussed in “COVID-19 Pandemic and Other Challenges” below.

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.

market with three echocardiography ultrasound enhancing agents approved by the FDA, we estimate that DEFINITY had over 80% of the market as of December 31, 2021.

market with three echocardiography ultrasound enhancing agents approved by the FDA, we estimate that DEFINITY continues to hold over 80% of the market.

As we continue to pursue expanding our microbubble franchise, our activities include:

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for DEFINITY RT, we have six 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.

Outside of the U.S., we have and 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;

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As of the date of filing of this Quarterly Report on Form 10-Q, 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 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 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 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 November 2022 and the full 30-month stay were obtained, then the

Applicant would be precluded from commercialization until at least May 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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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.

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 Microbubble Franchise below).

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 Microbubble Franchise below).

• 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.

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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 August 31, 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, 2023, 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 December 31, 2024.

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

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.

On February 23, 2022, our wholly-owned subsidiary, LMI, entered into a Manufacturing and Supply Agreement (the “MSA”) with JHS, effective as of February 23, 2022, pursuant to which JHS will manufacture, and LMI will purchase, our DEFINITY, NEUROLITE, Cardiolite and evacuation vial products.

Jubilant HollisterStier (“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.

On February 23, 2022, our wholly-owned subsidiary, LMI, entered into a Manufacturing and Supply Agreement (the “MSA”) with JHS, effective as of February 23, 2022, pursuant to which JHS will manufacture, and LMI will purchase, DEFINITY, NEUROLITE, Cardiolite and evacuation vial products.

The new MSA supersedes all of the prior agreements of the parties.

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

In 2021, we completed the construction of 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, and inventory that we had previously manufactured at this facility became commercially saleable.

In 2021, we completed the construction of a specialized in-house manufacturing facility at our North Billerica campus to produce DEFINITY and, potentially, other sterile vial products.

On February 22, 2022, we received FDA approval of our supplemental new drug application authorizing commercial manufacturing of DEFINITY at our new facility, and inventory that we had previously manufactured at this facility became commercially saleable.

We believe this facility 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 facilities in North Billerica, Massachusetts and Somerset, New Jersey.

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.

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

Radiopharmaceutical finished goods 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 facilities in North Billerica, Massachusetts and Somerset, New Jersey, as well as at our PMF partner manufacturing facilities across the U.S.

COVID-19 Pandemic and Other Challenges

The global COVID-19 pandemic has had, and 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.

In addition, our business has been impacted by hospital staffing challenges and a decline in the volume of certain procedures and treatments using our products.

For example, we believe sales of DEFINITY during the third 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.

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

Research and Development Expenses

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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.

The primary endpoint in this study is PSA response rate.

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

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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 our clinical development candidates or lifecycle management opportunities will be successful.

Strategic Initiatives

Strategic Partnerships, Collaborations, and other Initiatives

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

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

As part of the agreement with Novartis, we will provide PYLARIFY for the selection of patients with prostate cancer for the trials, 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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to evaluate the use of piflufolastat F 18 to enable real-time therapeutic guidance of biology-guided radiotherapy in prostate cancer using the RefleXion X1TM platform.

◦ 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.

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

(“POINT Biopharma”) and Regeneron Pharmaceuticals, Inc., 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.

In addition, in 2022, we 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.

• Immuno-Oncology - In May 2019, we entered into a strategic collaboration and license agreement with NanoMab Technology Limited (“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.

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(“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.

Flurpiridaz F 18

In September 2022, we announced with our strategic partner GE Healthcare Limited (“GE Healthcare”) that the recent Phase III clinical trial of our investigational radiotracer, flurpiridaz F 18, had met its co-primary endpoints of exceeding a 60% threshold for both sensitivity and specificity for detecting coronary artery disease (“CAD”).

The findings, shared at an American Society of Nuclear Cardiology conference, also demonstrated that cardiac PET imaging with flurpiridaz F 18 has higher diagnostic efficacy and image quality in patients with suspected CAD, compared with single photon emission computed tomography (“SPECT”) Myocardial Perfusion Imaging (“MPI”), the predominant procedure currently used in nuclear cardiology.

We believe SPECT MPI represents approximately 6 million procedures per year in the U.S.

Under a Collaboration and License Agreement we entered into with GE Healthcare in 2017, GE Healthcare has led the funding and development of flurpiridaz F 18, and, if the imaging agent is approved, will have the global commercialization rights for it.

We have collaborated on the development and will also collaborate on potential commercialization through a joint steering committee.

If flurpiridaz F 18 receives regulatory approval and is commercially successful, we will receive:

• up to $60 million in regulatory and sales milestone payments,

• tiered double-digit royalties on U.S.

• mid-single digit royalties on sales outside of the U.S.

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.

For flurpiridaz F 18, under the Collaboration and License Agreement, we retained ownership of all of the licensed intellectual property and bear the cost of patent prosecution and maintenance.

We can give no assurance as to if or when or if any of these collaborations and other new initiatives, including our collaboration for flurpiridaz F 18, will be successful or accretive to earnings.

Results of Operations

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

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Net income (loss) $ 61,232 $ (13,415) $ 74,647 (556.4) % $ 147,252 $ (31,064) $ 178,316 (574.0) %

Comparison of the Periods Ended June 30, 2022 and 2021

Comparison of the Periods Ended September 30, 2022 and 2021

We classify our revenues into three product categories:

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

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Total revenues $ 239,292 $ 102,073 $ 137,219 134.4 % $ 671,895 $ 295,646 $ 376,249 127.3 %

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.

The increase in revenues for the three months ended September 30, 2022, as compared to the prior year period, is primarily driven by the commercial launch of PYLARIFY, an increase in DEFINITY sales volume and higher strategic partnership revenue from the RELISTOR royalty stream.

The increase is offset, in part, by lower sales volumes from TechneLite driven by opportunistic sales in the prior year and lower volumes of other precision diagnostics.

The increase in revenues for the nine months ended September 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 driven by the strategic decisions to exit a customer contract and opportunistic sales in the prior year, lower volumes of other precision diagnostics, lower volume of other radiopharmaceutical oncology products and lower strategic partnerships and other revenue due primarily to a sale of cREPO in the prior period.

Rebates and Allowances

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Payments or credits made during the period (18,134)

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.

Balance, September 30, 2022 $ 13,247

The increase in gross profit for the three months ended September 30, 2022, as compared to the prior year period, is primarily due to PYLARIFY sales volume, as well as an increase in DEFINITY sales volume.

The increase in gross profit for the nine months ended September 30, 2022, as compared to the prior year period, is primarily due to PYLARIFY sales volume, the $24.0 million pursuant to the Novartis Agreement, and an increase in DEFINITY sales volume, which is 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 $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.

Sales and marketing expenses increased $8.2 million and $24.3 million for the three and nine months ended September 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 throughout 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 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.

General and administrative expenses decreased $4.8 million for the three months ended September 30, 2022 compared to the prior period.

This was primarily driven by a $9.5 million sublease impairment charge in the prior year.

In addition, there was a $1.5 million net reduction for the fair value adjustments to the contingent asset and liabilities in the third quarter of 2022 (a decrease of $4.1 million from the prior year period) (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

These decreases are partially offset by increased employee-related costs and professional fees.

General and administrative expenses increased $6.1 million for the nine months ended September 30, 2022 compared to the prior period.

This was primarily driven by increased employee-related costs and professional fees.

This amount was offset by a $3.1 million net reduction for the fair value adjustments to the contingent asset and liabilities.

(refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

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 $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.

Research and development expenses increased $1.3 million for the three months ended September 30, 2022 as compared to the prior year period.

This was primarily driven by higher overall headcount related costs and the investment in medical affairs related to PYLARIFY, offset, in part, by the expenses related to the preparation activities for the launch of PYLARIFY during the prior year period.

Research and development expenses increased $5.8 million for the nine months ended September 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 $1.7 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.

Interest expense decreased by approximately $1.6 million for the nine months ended September 30, 2022 as compared to the prior year period due to the repayment of the Royalty-Backed Loan on March 31, 2021.

Income Tax Expense

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.

The income tax expense recorded for the three and nine months ended September 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.

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

Six Months Ended

Nine Months Ended

September 30,

Effective tax rate 27.4% 8.7%

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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 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.

The increase in the effective income tax rate for the nine months ended September 30, 2022 is primarily due to our 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:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2022 2021

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Net Cash Provided by Operating Activities

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 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.

Net cash provided by operating activities of $176.4 million in the nine months ended September 30, 2022 was primarily comprised of net income adjusted for the net effect of non-cash items such as depreciation, amortization and accretion expense, the change in fair value of contingent assets and liabilities of $25.4 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs), and stock-based compensation expense.

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

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

Net cash provided by operating activities of $40.0 million in the nine months ended September 30, 2021 was driven primarily by depreciation, amortization and accretion expense of $30.1 million, a change in fair value of contingent assets and liabilities of $28.5 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs), stock-based compensation expense of $11.8 million, impairment of long-lived assets of $9.5 million and a net increase of $2.4 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, and an increase in fees related to PYLARIFY sales.

These net sources of cash were offset by a net loss of $31.1 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 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 investing activities during the nine months ended September 30, 2022 was primarily due to $13.6 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 nine months ended September 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 $7.6 million of capital expenditures.

Net Cash Used in Financing Activities

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.

Net cash used in financing activities during the nine months ended September 30, 2022 is primarily attributable to the payments on long-term debt and other borrowings of $7.9 million related to the 2019 Term Facility and payments for minimum statutory tax withholding related to net share settlement of equity awards of $7.2 million offset by proceeds of $7.5 million from stock option exercises.

Net cash used in financing activities during the nine months ended September 30, 2021 is primarily attributable to the payments on long-term debt and other borrowings of $40.8 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 $1.9 million offset by proceeds of $4.6 million from stock option exercises.

External Sources of Liquidity

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Q2 2021 and thereafter 3.00 to 1.00

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.

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

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

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.

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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;

• The amount and timing of the expected cash payment related to the CVRs;

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

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• 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 manufacturing sites in a timely manner in the future, or to manufacture products at our in-house manufacturing facilities in amounts 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;

• Our ability to have products manufactured and released from manufacturing sites in a timely manner in the future, or to manufacture products at our in-house manufacturing facilities in amounts sufficient to meet our supply needs;

• The costs of further commercialization of our existing products, 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;

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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.

If we experience one or more of these events in the future, we may be required to 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.

If our capital resources become insufficient to meet our future capital requirements, we would need to finance our cash needs through public or private equity offerings, debt financings, assets securitizations, sale-leasebacks or other financing or strategic alternatives, to the extent such transactions are permissible under the covenants of our 2019 Credit Agreement.

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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 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.

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

We had $257.3 million of cash and cash equivalents at September 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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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 $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.

Based on our current operating plans, we believe our balance of cash and cash equivalents, which totaled $257.3 million as of September 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 six months ended June 30, 2022.

There have been no significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the nine months ended September 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