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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 234 added, 236 removed, 233 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with Item 6, “Selected Financial Data” and the consolidated financial statements and the related notes included in Item 8 of this Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and the related notes included in Item 8 of this Annual Report on Form 10-K.

This discussion contains forward-looking statements related to future events and our future financial performance that are based on current expectations and subject to risks and uncertainties.

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

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

We classify our products in three revenue categories:

This section discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.

Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 have been excluded from this Form 10-K and can be found in “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.

With more than 65 years of experience in delivering life-changing science, we are 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:

Precision Diagnostics, Radiopharmaceutical Oncology, and Strategic Partnerships and Other Revenue.

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

Our leading Precision Diagnostic products assist healthcare professionals (“HCPs”) Find and Follow diseases, with a focus in cardiology.

Our Radiopharmaceutical Oncology diagnostics and therapeutics help HCPs Find, Fight and Follow cancer.

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

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

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

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

Our Strategic Partnerships focus on enabling precision medicine through the use of biomarkers, digital solutions and pharma services platforms, and also includes our license of RELISTOR to Bausch Health Companies, Inc.

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

We produce and market our products throughout the United States (the “U.S.”), selling primarily to hospitals, independent diagnostic testing facilities, government facilities, integrated delivery networks, radiopharmacies, clinics, and group practices.

We sell our products outside the U.S.

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

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

Montreal, Canada and Lund, Sweden.

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

Our executive offices are located in Bedford, Massachusetts, with additional offices in North Billerica, Massachusetts, Somerset, New Jersey, Montreal, Canada and Lund, Sweden.

Recent Developments

Exclusive License for PNT2002 and PNT2003

On December 20, 2022, we announced the closing of a set of strategic collaborations with POINT Biopharma Global Inc.

(“POINT”), in which we were granted a license to exclusive worldwide rights (excluding Japan, South Korea, China (including Hong Kong, Macau and Taiwan), Singapore and Indonesia) to co-develop and commercialize POINT’s PNT2002 and PNT2003 product candidates.

With respect to PNT2002, POINT is generally responsible for funding and development activities required for FDA approval of PNT2002, including generating all clinical and nonclinical data, analysis and other information, and we are responsible for preparing for and seeking regulatory approval for PNT2002, as well as performing and funding all future development and commercialization of PNT2002 following such approval.

POINT will be responsible for all manufacturing of PNT2002, subject to certain exceptions described in the PNT2002 License Agreement.

With respect to PNT2003, POINT is responsible for curating all data, analysis and other information necessary for regulatory approval, and supporting us in the preparation of regulatory filings for PNT2003, and we are responsible for preparing for and seeking regulatory approval of all such applications, as well as performing and funding all future development and commercialization of PNT2003 following such approval.

POINT will be responsible for all manufacturing of PNT2003, subject to certain exceptions described in the PNT2003 License Agreement.

For more information, see Note 22, “Acquisition of Assets” in our consolidated financial statements included herein.

Acquisition of Cerveau Technologies, Inc.

On February 6, 2023, we announced that we acquired Cerveau Technologies, Inc.

Cerveau’s asset is MK-6240, a second-generation F 18-labeled PET imaging agent that targets Tau tangles in Alzheimer’s disease that will expand our Pharma Services business.

Under the terms of the agreement, we paid an upfront payment of $35 million and potentially will pay additional development and commercial milestone payments.

Additionally, we will pay double-digit royalty payments for research revenue and commercial sales.

Research revenue is derived from existing partnerships with pharmaceutical companies that use the imaging agent in clinical trials and includes milestone and dose-related payments.

Pursuant to the terms of the stock purchase agreement, the seller will also provide transition and clinical development services for a prescribed time following the closing of the transaction.

Refinancing of 2019 Facility

In December 2022, we refinanced our existing credit facility, consisting of (i) a $200.0 million five-year term loan facility (the “2019 Term Facility”) and (ii) a $200.0 million five-year revolving credit facility (the “2019 Revolving Facility” and, together with the 2019 Term Facility, the “2019 Facility”), with a new $100.0 million delayed draw term loan facility (the “2022 Term Facility” and, the loans thereunder, the “Term Loans”) and a new $350.0 million five-year revolving credit facility (the “2022 Revolving Facility” and, together with the 2022 Term Facility, the “2022 Facility”).

We used approximately $7.8 million of cash on hand to primarily repay the principal amount of the loans outstanding related to the 2019 Facility through the nine months ended September 30, 2022.

In addition, we used approximately $167.6 million of cash on hand to repay in full the aggregate remaining principal amount of the loans outstanding under the 2019 Facility and to pay related interest, transaction fees and expenses.

While the 2022 Term Facility allowed for a delayed draw term loan, the loan was not drawn upon.

We recorded a loss on extinguishment of debt of $0.6 million related to the write-off of unamortized debt issuance costs and debt discounts associated with the 2019 Term Facility.

In addition, we incurred and capitalized $2.7 million of new deferred financing costs related to the refinancing.

Issuance of Convertible Notes

On December 8, 2022, we issued $575.0 million in aggregate principal amount of 2.625% Convertible Senior Notes due 2027 (the “Notes”), which includes $75.0 million in aggregate principal amount of the Notes sold pursuant to the full exercise of the initial purchasers’ option to purchase additional Notes.

The Notes were issued under an indenture, dated as of December 8, 2022 (the “Indenture”), among the Company, LMI, as Guarantor, and U.S.

Bank, as Trustee.

The net proceeds from the issuance of the Notes were approximately $557.8 million, after deducting the initial purchasers’ discounts and offering expenses payable by us.

Key Factors Affecting Our Results

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

Our 2022 and 2021 financial performances reflect full year results of the Progenics business, whereas the year ended December 31, 2020 only incorporates results since the June 19, 2020 closing date of the Progenics Acquisition.

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

PYLARIFY Approval and Commercial Launch

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

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

Continued Growth of PYLARIFY

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”).

PYLARIFY is a product in our Radiopharmaceutical Oncology product category.

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in June 2021.

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

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

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

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

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

suspected recurrence of prostate cancer.

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

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

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

CONDOR studied men with biochemical recurrent prostate cancer.

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

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

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

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

prostate cancer community.

The commercial launch of PYLARIFY is complex and expensive.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and internationally.

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

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

As of December 31, 2022, we had activated 37 PMF manufacturing sites in our PMF network, up from 21 activated sites as of December 31, 2021.

These additional sites provide geographic breadth, out-the-door time flexibility and added optionality within our existing PMF network.

Overall, we have achieved broad national distribution of PYLARIFY with customers in 46 of 50 states, including the District of Columbia.

In March 2022, we announced a strategic collaboration with Novartis AG (“Novartis”) to include PYLARIFY in prostate cancer trials with PLUVICTO, Novartis’ approved PSMA-targeted therapeutic.

In addition, in 2022, we entered into an agreement with Curium to add PYLARIFY to its PSMA-targeted therapeutic clinical trial referred to by Curium as ECLIPSE.

Both of these collaborations, as well as other collaborations using PYLARIFY are described further under Part I, Item 1.

“Business - Strategic Partnerships and Other Revenue – Oncology.”

Also, during 2022, the National Comprehensive Cancer Center updated its guidelines and the Society for Nuclear Medicine and Molecular Imaging updated its appropriate use criteria, both noting that PSMA PET imaging agents, including PYLARIFY, can be used for patient selection for PSMA-targeted radioligand therapy.

Throughout 2021 and 2022, we hired additional employees to assist us with the commercialization of PYLARIFY, including in sales, marketing, reimbursement, quality and medical affairs.

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

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

For this initiative, we enter into a fee-for-service arrangement under which the academic medical center manufactures F 18 on its cyclotron and completes the manufacturing process for PYLARIFY.

PYLARIFY can then be used by the academic medical center itself, and in some cases distributed to other customers under separate purchase agreements.

We received notification that our Healthcare Procedure Coding System (“HCPCS”) code, which enables streamlined billing, went into effect as of January 1, 2022.

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 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 bundled into the facility payment a hospital receives for a PET/CT imaging procedure, and the facility payment may not always adequately cover the total cost of the procedure.

The successful growth of PYLARIFY is also dependent on 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.

PYLARIFY’s competition is primarily two commercially available Ga-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.

In connection with the Progenics Acquisition in June 2020, we issued to the Progenics stockholders at the time the transaction was consummated contingent value rights (“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 2022 PYLARIFY net sales, we determined that the aggregate payment obligation under the CVRs was $99.7 million.

We expect to make that payment during the first half of 2023.

PYLARIFY AI Clearance and Use

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

and received CE marking in Europe for aPROMISE.

and received European Conformity Marking (“CE marking”) in Europe for aPROMISE.

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

in November 2021.

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

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 that is designed to assist with the reading and quantification of PYLARIFY scans.

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

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

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

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

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

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

This image segmentation enables automated localization, detection and quantification of potential PSMA-avid lesions in a PSMA PET/CT image, which data is then incorporated into the reporting system used by physicians.

Continued Growth of DEFINITY

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 as of December 31, 2022, DEFINITY continued to hold over 80% of the market.

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

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and internationally.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 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.

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

DEFINITY and DEFINITY RT.

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

• DEFINITY RT - The formulation of DEFINITY that we have branded as DEFINITY RT became commercially available in the fourth quarter of 2021.

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

• VIALMIX RFID – DEFINITY is activated through the use of medical devices branded as VIALMIX and VIALMIX RFID.

The activation rate and time are controlled by VIALMIX RFID through the use of RFID to ensure reproducible activation of DEFINITY.

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

Global Mo-99 Supply

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

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

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.

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.

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

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

Under the terms of the supply agreement, entered into in November 2014, SHINE will provide Mo-99 produced using its proprietary LEU-solution technology for use in our TechneLite generators once SHINE’s facility becomes operational and receives all necessary regulatory approvals, which SHINE now estimates will occur in 2024.

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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.

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

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

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

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

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

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

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.

The initial term of the MSA runs through December 31, 2027 and can be further extended by mutual agreement of the parties.

The MSA requires LMI to purchase from JHS specified percentages of its total requirements for DEFINITY, as well as specified quantities of NEUROLITE, CARDIOLITE and evacuation vial products, each year during the contract term.

Either party can terminate the MSA upon the occurrence of certain events, including the material breach or bankruptcy of the other party.

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 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.

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

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

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

Xenon is both inhaled and exhaled by the patient.

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

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

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.

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

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

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

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

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

to enroll approximately 100 patients with known or suspected neuroblastoma.

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

• 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 PNT2002 and PNT2003, we were granted a license to exclusive worldwide rights (excluding certain countries) for $260.0 million in upfront payments during the fourth quarter of 2022 and will potentially make additional payments as described below.

• For 1095, we enrolled the last patient in our ARROW Phase 2 study during the second quarter of 2022.

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.

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

Under the terms of the PNT2002 License Agreement, Lantheus Two, LLC (“Lantheus Two”) paid POINT an upfront cash payment of $250.0 million, and could pay up to an additional $281.0 million in milestone payments upon the achievement of specified U.S.

regulatory milestones related to PNT2002.

POINT is also eligible to receive up to $1.3 billion in sales milestone payments upon the achievement of specified annual sales thresholds of PNT2002.

In addition, after Lantheus Two achieves $500.0 million in cumulative gross profit, POINT is eligible to receive royalty payments of twenty percent of net sales of PNT2002.

Prior to achieving that financial recoupment threshold, POINT is eligible to receive royalty payments of twenty percent on that portion of annual net sales of PNT2002 that generate annual gross profit in excess of specified levels.

Under the terms of the PNT2003 License Agreement, Lantheus Three, LLC paid POINT an upfront cash payment of $10.0 million, and could pay up to an additional $34.5 million in milestone payments upon the achievement of specified U.S.

regulatory milestones related to PNT2003.

POINT is also eligible to receive up to $275.0 million in sales milestone payments upon the achievement of specified annual sales thresholds of PNT2003.

In addition, POINT is eligible to receive royalty payments of fifteen percent of net sales of PNT2003.

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

Strategic Partnerships and Other Revenue

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

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

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

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

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

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

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

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

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

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

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

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 in oncology are designed to enable precision medicine using biomarkers and digital solutions that augment diagnostic productivity.

For example, with respect to prostate cancer, we collaborate with pharmaceutical companies by supplying them with piflufolastat F 18 for use in their therapeutic drug development programs.

For immuno-oncology, we intend to offer NM-01, a novel technetium-99m SPECT imaging agent that we are developing to assess PD-L1 expression in cancer cells, for potential use as an efficacy and safety biomarker in immuno-oncology therapies.

With respect to pan-oncology, we are further exploring the use of NTI-1309 as an innovative imaging biomarker that targets fibroblast activation protein.

Microbubble Franchise

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

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

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

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

In addition, we continue to expand our microbubble franchise.

In December 2022, we announced a strategic collaboration with SonoThera, Inc.

(“SonoThera”), which will use our microbubbles in combination with SonoThera’s ultrasound-guided, non-viral, gene therapy platform and treatments.

Prior to 2022, we entered into microbubble collaborations with the following parties:

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

and (iii) Insightec Ltd.

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

(iii) Insightec Ltd.

(“Insightec”), which will

use our microbubbles in connection with the development of Insightec’s transcranial guided focused ultrasound device for the treatment of glioblastoma as well as other neurodegenerative conditions;

and (iv) Allegheny Health Network (“AHN”), which will use our microbubbles in combination with AHN’s ultrasound-assisted non-viral gene transfer technology for the development of a proposed treatment of xerostomia.

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, 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 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, 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 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, 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, will be successful or accretive to earnings.

Results of Operations

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

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

Operating income (loss) 36,195 (60,825) (4,198) 97,020 (159.5) % (56,627) 1,348.9 %

Interest expense 7,185 7,752 9,479 (567) (7.3) % (1,727) (18.2) %

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

Loss (gain) on extinguishment of debt 588 (889) — 1,477 (166.1) % (889) N/A

Other loss (income) 1,703 7,350 (2,198) (5,647) (76.8) % 9,548 (434.4) %

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

Income (loss) before income taxes 26,719 (75,038) (11,479) 101,757 (135.6) % (63,559) 553.7 %

Income tax (benefit) expense (1,348) (3,759) 1,994 2,411 (64.1) % (5,753) (288.5) %

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

Net income (loss) $ 28,067 $ (71,279) $ (13,473) $ 99,346 (139.4) % $ (57,806) 429.1 %

Comparison of the Periods Ended December 31, 2022 and 2021

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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.

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

Strategic Partnerships and Other Revenue includes out-licensing arrangements, which includes $24.0 million of revenue recognized pursuant to the Novartis Agreement, partnerships that focus on facilitating precision medicine through the use of biomarkers, digital solutions and radiotherapeutic platforms, and on our other products, such as RELISTOR.

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

Year Ended December 31, 2022 vs.

(in thousands) 2021 2020 (1)

Change $ Change %

(in thousands) 2022 2021 2020 Change $ Change %

DEFINITY $ 244,993 $ 232,759 $ 195,865 $ 12,234 5.3 %

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Total revenues $ 935,061 $ 425,208 $ 339,410 $ 509,853 119.9 %

________________________________

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

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

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

The increase in revenues for the year ended December 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.

The increase is offset, in part, by lower sales volumes from TechneLite driven by the strategic decision to exit a customer contract and opportunistic sales in the prior year, lower volumes of other precision diagnostics driven by cease of vial line production, lower volume of other radiopharmaceutical oncology products and lower strategic partnerships and other revenue due primarily to a sale of the heart myocardial perfusion analysis software, cREPO, in the prior year period.

Rebates and Allowances

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These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and growth, Medicaid rebate programs for our products, administrative fees of group purchasing organizations and certain distributor related commissions.

The calculation of the accrual for these rebates and allowances is based on an estimate of the third party’s buying patterns and the resulting applicable contractual rebate to be earned over a contractual period.

The calculation of the accrual for these rebates and allowances is based on an estimate of the third-party’s expected purchases and the resulting applicable contractual rebate to be earned over a contractual period.

An analysis of the amount of, and change in, reserves is summarized as follows:

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Balance, December 31, 2022 $ 13,399

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

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

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

Sales and Marketing

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

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

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 $31.8 million for the year ended December 31, 2022, as compared to the prior year period.

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

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 and 2022 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 period 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 $81.1 million for the year ended December 31, 2021 compared to the prior year period.

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

General and administrative expenses decreased $16.8 million for the year ended December 31, 2022 compared to the prior year period.

This was primarily driven by a $37.7 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) and a $9.5 million sublease impairment charge in the prior year period.

These reductions were offset by increased employee-related costs and professional fees.

Research and Development

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Research and development expenses increased $266.7 million for the year ended December 31, 2022 as compared to the prior year period.

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

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

Gain on Sale of Assets

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

This was primarily driven by the $260.0 million upfront payment between the two agreements with POINT, the phasing of activity of the ARROW Phase 2 study of 1095, investment in medical affairs related to PYLARIFY and higher overall headcount related costs.

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

on March 31, 2021.

Gain on Extinguishment of Debt

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

Other (Income) Loss

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

Interest expense for the year ended December 31, 2022 decreased $0.6 million as compared to the prior year period because in 2021, we repaid the outstanding principal on our $50.0 million loan agreement (the “Royalty-Backed Loan”) between Progenics, through a wholly-owned subsidiary MNTX Royalties Sub LLC, and a fund managed by HealthCare Royalty Partners III, L.P.

Loss on Extinguishment of Debt

During the year ended December 31, 2022, we realized a $0.6 million loss on extinguishment of debt related to the refinancing of our existed indebtedness.

Other Loss (Income)

Other loss (income) decreased by $5.6 million for the year ended December 31, 2022 as compared to the prior year period, due to the termination of the interest rate swaps on December 2, 2022 and an increase in interest income offset by the reduction of indemnified receivables related to the release of our uncertain tax positions.

Income Tax (Benefit) Expense

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

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

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

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

Effective tax rate (5.0)% 5.0%

Our effective tax rate in fiscal 2022 differs from the U.S.

statutory rate of 21% primarily due to the income tax benefit for the release of a portion of our uncertain tax positions and the tax benefit associated with stock compensation deductions offset by tax expense from the change in fair value of contingent consideration and expense generated on the revaluation of the Company’s deferred state tax rate.

The income tax benefit of $1.3 million for the year ended December 31, 2022 primarily represents the statutory tax rate offset by the release of tax indemnification liabilities with BMS.

The majority of our uncertain tax positions are indemnified liabilities, in accordance with the Stock and Asset Purchase Agreement entered into with BMS in 2008.

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

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

During 2022, the Company released a significant portion of its indemnified liability due to the settlement of these positions in various states at a cost significantly less than our accrual resulting in $9.6 million (net of federal or state benefit) income tax benefit.

Refer to Note 5, Income Taxes.

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

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

Assessing the realizability of deferred tax assets requires management judgment.

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

We 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:

Effective tax rate 5.0% (17.4)%

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

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

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

Comparison of the Periods Ended December 31, 2020 and 2019

For a comparison of our results of operations for the fiscal years ended December 31, 2020 and December 31, 2019, see “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 25, 2021.

Liquidity and Capital Resources

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Net cash provided by operating activities $ 281,781 $ 53,916 $ 16,396

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

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

Net cash (used in) provided by investing activities $ (276,547) $ 3,683 $ (4,912)

Net cash provided by (used in) financing activities $ 311,691 $ (39,332) $ (21,861)

For a discussion of our liquidity and capital resources related to our cash flow activities for the fiscal year ended December 31, 2020, see “Part II, Item 7.

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Net Cash Provided by Operating Activities

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

Net cash provided by operating activities of $281.8 million during the year ended December 31, 2022 was primarily comprised of net income adjusted for charges incurred in connection with acquired in-process research and development (“IPR&D”) and 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 $34.7 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 accruals associated with PYLARIFY sales.

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 $53.9 million during the year ended December 31, 2021 was primarily comprised of net loss adjusted for the net effect of non-cash items such as the change in fair value of contingent assets and liabilities of $72.4 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

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

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

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

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

Net Cash Provided by (Used in) Investing Activities

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities during the year ended December 31, 2022 was primarily due to the $260.0 million upfront payment to POINT and the $18.3 million of capital expenditures partially offset by $1.8 million received from the sale of our Puerto Rico subsidiary.

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

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

Net Cash Used in Financing Activities

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities during the year ended December 31, 2022 is primarily attributable to the proceeds of $557.8 million received from the issuance of the Notes, proceeds of $7.5 million from stock option exercises and proceeds of $5.6 million from the voluntarily terminated interest rate swap contracts in connection with the refinancing of debt.

These amounts were offset by payments on long-term debt and other borrowings of $175.0 million, repurchase of common stock of $75.0 million and payments for minimum statutory tax withholding related to net share settlement of equity awards of $7.8 million.

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

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

External Sources of Liquidity

In June 2019, we refinanced our 2017 $275.0 million five-year term loan facility with the 2019 Term Facility.

In December 2022, we voluntarily repaid our 2019 $200.0 million five-year term loan facility.

In addition, we replaced our $200.0 million revolving facility with the 2022 Revolving Facility.

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

We have the right to request an increase to the 2019 Term Facility or request the establishment of one or more new incremental term loan facilities, in an aggregate principal amount of up to $100.0 million, plus additional amounts, in certain circumstances.

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

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

The 2019 Term Facility amortizes at 5.0% per year through September 30, 2022 and 7.5% thereafter, until its June 27, 2024 maturity date.

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

The terms of the 2022 Revolving Facility are set forth in the Credit Agreement, dated as of December 2, 2022, by and among us, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent and collateral agent (the “2022 Credit Agreement”).

We have the right to request an increase to the 2022 Revolver Facility or request the establishment of one or more new incremental term loan facilities, in an aggregate principal amount of up to $335 million or consolidated EBITDA for the four consecutive fiscal quarters most recently ended, plus additional amounts, in certain circumstances.

The Company used approximately $7.8 million of cash on hand to primarily repay the principal amount of the loans outstanding related to the 2019 Facility through the nine months ended September 30, 2022.

In addition, in December 2022, the Company used approximately $167.6 million of cash on hand to repay in full the aggregate remaining principal amount of the loans outstanding under the 2019 Facility and to pay related interest, transaction fees and expenses.

Under the terms of the 2022 Revolving Facility, the lenders thereunder agreed to extend credit to us from time to time until December 2, 2027 consisting of revolving loans in an aggregate principal amount not to exceed $350.0 million at any time.

The 2022 Revolving Facility includes a $20.0 million sub-facility for the issuance of letters of credit (the “Letters of Credit”).

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Please refer to Note 13, “Long-Term Debt, Net, and Other Borrowings” for further details on the 2022 Facility.

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

The Amendment provides for, among other things, modifications to our financial maintenance covenants.

The covenant related to Total Net Leverage Ratio (as defined in the 2019 Credit Agreement) was waived from the date of the Amendment through December 31, 2020.

The maximum total net leverage ratio and interest coverage ratio permitted by the financial covenant is displayed in the table below:

2019 Credit Agreement

Period Total Net Leverage Ratio

Q3 2021 and thereafter 3.50 to 1.00

Period Interest Coverage Ratio

Q2 2021 and thereafter 3.00 to 1.00

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

Under the 2019 Credit Agreement, loans bear interest at LIBOR plus a spread that ranges from 1.50% to 3.00% or the Base Rate plus a spread that ranges from 0.50% to 2.00%, and the commitment fee ranges from 0.15% to 0.40%, in each case based on our Total Net Leverage Ratio.

On June 19, 2020, as a result of the Progenics Acquisition, we assumed Progenics outstanding debt as of such date in the amount of $40.2 million.

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

The Royalty-Backed Loan bore interest at an annual rate of 9.5% and was scheduled to mature on June 30, 2025.

On June 22, 2020, HCRP waived the automatic acceleration of the Royalty-Backed Loan that otherwise would have been triggered by the consummation of the Progenics Acquisition and MNTX Royalties agreed not to prepay the loan until after December 31, 2020.

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

On December 8, 2022, we issued $575.0 million in aggregate principal amount of the Notes, which includes $75.0 million in aggregate principal amount of Notes sold pursuant to the full exercise of the initial purchasers’ option to purchase additional Notes.

The Notes were issued under an indenture, dated as of December 8, 2022 (the “Indenture”), among the Company, LMI, as Guarantor, and U.S.

Bank, as Trustee.

The net proceeds from the issuance of the Notes were approximately $557.8 million, after deducting the initial purchasers’ discounts and offering expenses payable by us.

On March 31, 2021, we voluntarily repaid in full the entire outstanding principal on outstanding debt of Progenics that we assumed as a result of the Progenics Acquisition.

The total amount we paid was $30.9 million, which included a prepayment amount of $0.5 million.

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

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

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

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

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

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

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

• 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, including any potential related milestone or royalty payments, 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 PNT2002, PNT2003, 1095 and NM-01;

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

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

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

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

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We had $415.7 million of cash and cash equivalents at December 31, 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.

Incremental borrowings under the 2019 Revolving Facility, as amended, may affect our ability to comply with the covenants in the 2019 Facility, as amended, including the financial covenants restricting consolidated net leverage and interest coverage.

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.

Our 2022 Revolving Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds.

Incremental borrowings under the 2022 Revolving Facility may affect our ability to comply with the covenants including the financial covenants restricting consolidated net leverage and interest coverage.

Accordingly, we may be limited in utilizing the full amount of our 2022 Revolving Facility 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 (but 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, including our prudent expense management in response to the COVID-19 pandemic, we believe our balance of cash and cash equivalents, which totaled $98.5 million as of December 31, 2021, along with cash generated by ongoing operations and continued access to our 2019 Revolving Facility, will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

Based on PYLARIFY net sales for 2022, we determined that the aggregate payment obligation under the CVRs was $99.7 million.

We expect to make that payment during the first half of 2023.

Based on our current operating plans, we believe our balance of cash and cash equivalents, which totaled $415.7 million as of December 31, 2022, along with cash generated by ongoing operations and continued access to our 2022 Revolving Facility, will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

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

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

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

We completed a sale of $575.0 million in aggregate principal amount of the Notes due in 2027.

As of December 31, 2022, we had no amounts of principal due within the next twelve months.

Future interest payments associated with the Notes total $76.2 million, with $16.3 million payable within twelve months.

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

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We may be required to pay additional amounts up to approximately $200.0 million in contingent payments under our license agreements.

Asset Acquisition

During 2022, we entered into the POINT License Agreements, in which we made upfront payments of $260.0 million, and under which we may make additional milestone payments.

The additional milestone payments are based on FDA approval and net sales and commercial milestones.

Under the terms of the PNT2002 License Agreement, we have the potential to pay up to an additional $281 million in milestone payments and up to $1.3 billion in sales milestone payments upon the achievement of specified annual sales thresholds.

Under the terms of the PNT2003 License Agreement, we have the potential to pay an additional $34.5 million in milestone payments and up to $275.0 million in sales milestone payments upon the achievement of specified annual sales thresholds.

In total, we may be required to pay up to approximately $1.8 billion related to the asset acquisition.

As of December 31, 2022, these contingent payments were not expected to be payable due to the uncertainty around the timing of the future cash flows.

Other Long-Term Liabilities

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

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

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

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

As of December 31, 2022, these contingent payments were not expected to be payable within twelve months due to the uncertainty around the timing of the future cash flows.

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However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.

While we generally believe that we will be able to offset the effect of price-level changes by adjusting our product prices and implementing operating efficiencies, any material unfavorable changes in price levels could have a material adverse effect on our financial condition, results of operations and cash flows.

While we generally believe that we will be able to offset some of the effect of price-level changes by adjusting our product prices and implementing operating efficiencies, any material unfavorable changes in price levels could have a material adverse effect on our financial condition, results of operations and cash flows.

Recent Accounting Standards

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

Critical Accounting Estimates

Critical Accounting Policies

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

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

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

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

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

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The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount rates.

Acquired in-process research and development (“IPR&D”) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use.

Acquired IPR&D is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use.

Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill.

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Intangible assets, consisting of trademarks, customer relationships, currently marketed products, licenses and developed technology are amortized in a method equivalent to the estimated utilization of the economic benefit of the asset.

Our IPR&D represents intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use.

Costs of IPR&D intangible assets acquired as part of an asset acquisition that have no alternative future use are expensed when incurred.

Milestone payments made after regulatory approval are capitalized as an intangible asset and amortized over an estimated useful life of the product.

Cash payments related to acquired IPR&D intangible assets are reflected as an investing cash flow in the Company's consolidated statement of cash flows.

Our IPR&D intangible assets include intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use.

The primary basis for determining the technological feasibility or completion of these projects is whether we have obtained regulatory approval to market the underlying products in an applicable geographic region.

Because obtaining regulatory approval can include significant risks and uncertainties, the eventual realized value of the acquired IPR&D projects may vary from their fair value at the date of acquisition.

We classify IPR&D acquired in a business combination as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts.

We classify IPR&D intangible assets acquired in a business combination as an indefinite-lived intangible asset

until the completion or abandonment of the associated research and development efforts.

Upon completion of the associated research and development efforts, we will determine the useful life and begin amortizing the assets to reflect their use over their remaining lives.

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

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

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

Contingent Consideration Liabilities

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

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

CVRs are based on net sales generated by PYLARIFY in both 2022 and 2023, subject to a cap.

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

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

The contingent

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

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

The estimated fair value is determined based on probability adjusted discounted cash flows or Monte Carlo simulation models that include significant estimates and assumptions pertaining to the period of expected milestone achievement, probability of success, discount rates and sales targets.

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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-K

Item 7. Management’s Discussion and Analysis