What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 320 added, 339 removed, 1060 unchanged (38% of the section changed)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Lantheus Holdings, Inc.

To the Stockholders and the Board of Directors of Lantheus Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lantheus Holdings, Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Contingent Value Rights— Refer to Notes 1 and 4 to the financial statements

Accounting for Convertible Notes— Refer to Notes 2 and 13 to the financial statements

Critical Audit Matter Description

As part of the acquisition of Progenics Pharmaceuticals, Inc.

(“Progenics”) on June 19, 2020, the Company issued contingent value rights (“CVRs”) to certain stockholders of Progenics entitling them to future cash payments of 40% of U.S.

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

The estimated fair value of the CVRs was determined using a Monte-Carlo simulation model that included estimates and assumptions pertaining to (1) the period of expected milestone achievement and net sales targets and (2) discount rates.

The fair value determination of these CVRs therefore required management to make estimates and assumptions related the periods in which net sales targets will be achieved and the selection of the discount rates.

We identified the valuation of the contingent consideration liabilities related to the CVRs as a critical audit matter because of the estimates and assumptions used by management to determine the fair value of these CVRs.

Auditing the estimates and assumptions related to the valuation of the CVRs required a high degree of auditor judgment and an increased extent of effort, including the involvement of our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates as to the period of expected milestone achievement and net sales targets and the selection of the discount rates.

On December 8, 2022, the Company issued $575 million in aggregate principal amount of 2.625% Convertible Senior Notes due 2027 (the “Notes”), which includes $75 million in aggregate principal amount of Notes sold pursuant to the full exercise of the initial purchasers’ option to purchase additional Notes.

The Notes include conversion and redemption features that the Company determined should not be bifurcated as derivative instruments.

We identified the accounting for the conversion feature and redemption features of the Notes to be a critical audit matter given the complexity in applying the accounting framework, including the determination of whether those features of the Notes should be bifurcated from the Notes and accounted for separately as a derivative instrument.

The complexities required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of professionals in our firm with specialized skills and knowledge in the accounting for financial instruments.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of the CVRs, including assessing the periods in which net sales targets will be achieved and the selection of discount rates included the following, among others:

• We agreed the calculation to determine the CVR amounts payable to the terms of the merger agreement.

• We tested the effectiveness of controls over the valuation of the CVRs, including management’s controls over the determination of amounts and timing of net sales targets, and the selection of discount rates.

• We evaluated the reasonableness of the periods of expected milestone achievement and net sales targets by comparing these assumptions to (1) internal communications to management and the Board of Directors, (2) information obtained from individuals outside of the finance department and (3) information included in the Company’s external communications.

• We evaluated management’s ability to accurately estimate the periods in which net sales targets will be achieved and the reasonableness of such estimates by comparing management’s historical net sales estimates to subsequent results of operations, and comparing the forecasts to internal and external data, while also taking into account any changes in market conditions.

• We evaluated whether the period of expected milestone achievement and net sales targets were consistent with evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we evaluated the acceptability of the (1) valuation methodology and calculation and (2) discount rate by:

◦ Evaluating the appropriateness of the valuation methodology and the calculation of the Monte-Carlo simulation model used by the Company.

◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

Our audit procedures related to management’s judgments of the accounting treatment of the conversion and redemption features of the Notes included the following among others:

• We tested the design and effectiveness of internal controls over the evaluation of the features of the Notes and the related accounting conclusions.

• With the assistance of professionals in our firm with specialized skills and knowledge in financial instruments we evaluated the appropriateness of the accounting conclusions, including the accounting for the conversion and redemption features.

• We tested the completeness and accuracy of the Notes terms and assumptions utilized in the accounting conclusions through comparison to the underlying agreements and supporting documentation.

/s/ Deloitte & Touche LLP

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Other current assets 13,092 12,818

Assets held for sale — 5,242

Total current assets 677,616 235,791

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Accounts payable 20,563 20,787

Short-term contingent liability 99,700 —

Accrued expenses and other liabilities 127,084 58,068

Liabilities held for sale — 1,793

Total current liabilities 247,701 90,497

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Common stock ($ 0.01 par value, 250,000 shares authorized;

67,739 and 66,875 shares issued and outstanding, respectively)

68,851 and 67,739 shares issued as of December 31, 2022 and 2021, respectively)

Additional paid-in capital 715,875 685,472

Treasury Stock at cost - 1,339 and no shares as of December 31, 2022 and 2021, respectively

Accumulated deficit ( 193,158 ) ( 221,225 )

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Gain on sales of assets — 15,263 —

Operating (loss) income ( 60,825 ) ( 4,198 ) 51,661

Operating income (loss) 36,195 ( 60,825 ) ( 4,198 )

Interest expense 7,185 7,752 9,479

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

Loss (gain) on extinguishment of debt 588 ( 889 ) —

Other loss (income) 1,703 7,350 ( 2,198 )

(Loss) income before income taxes ( 75,038 ) ( 11,479 ) 28,627

Income (loss) before income taxes 26,719 ( 75,038 ) ( 11,479 )

Income tax (benefit) expense ( 1,348 ) ( 3,759 ) 1,994

Net (loss) income $ ( 71,279 ) $ ( 13,473 ) $ 31,667

Net (loss) income per common share:

Net income (loss) $ 28,067 $ ( 71,279 ) $ ( 13,473 )

Net income (loss) per common share:

Basic $ 0.41 $ ( 1.06 ) $ ( 0.25 )

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Lantheus Holdings, Inc.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

2022 2021 2020

Net (loss) income $ ( 71,279 ) $ ( 13,473 ) $ 31,667

Other comprehensive income (loss):

Net income (loss) $ 28,067 $ ( 71,279 ) $ ( 13,473 )

Other comprehensive income:

Foreign currency translation ( 505 ) ( 124 ) 330

Realized loss on cash flow hedges, net of tax ( 269 ) — —

Unrealized gain (loss) on cash flow hedges, net of tax — 1,687 ( 1,418 )

Total other comprehensive income (loss) 1,563 ( 1,088 ) 148

Comprehensive (loss) income $ ( 69,716 ) $ ( 14,561 ) $ 31,815

Total other comprehensive (loss) income ( 774 ) 1,563 ( 1,088 )

Comprehensive income (loss) $ 27,293 $ ( 69,716 ) $ ( 14,561 )

The accompanying notes are an integral part of these consolidated financial statements.

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(in thousands)

Common Stock Additional

Common Stock Treasury Stock Additional

Capital Accumulated

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Stockholders’

Shares Amount

Shares Amount Shares Amount

Balance, January 1, 2020 39,251 $ 393 — $ — $ 251,641 $ ( 136,473 ) $ ( 960 ) $ 114,601

Net income — — — 31,667 — 31,667

Other comprehensive income — — — — 148 148

Stock option exercises and employee stock plan purchases 95 1 1,745 — — 1,746

Vesting of restricted stock awards 796 8 ( 8 ) — — —

Shares withheld to cover taxes ( 106 ) ( 1 ) ( 2,453 ) — — ( 2,454 )

Stock-based compensation — — 12,492 — — 12,492

Balance, December 31, 2019 39,251 393 251,641 ( 136,473 ) ( 960 ) 114,601

Net loss — — — — — ( 13,473 ) — ( 13,473 )

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Stock option exercises and employee stock plan purchases 360 3 — — 6,059 — — 6,062

Vesting of restricted stock awards 611 6 — — ( 6 ) — — —

Shares withheld to cover taxes ( 107 ) ( 1 ) — — ( 2,045 ) — — ( 2,046 )

Stock-based compensation — — — — 15,934 — — 15,934

Balance, December 31, 2021 67,739 677 — — 685,472 ( 221,225 ) ( 485 ) 464,439

Net income — — — — — 28,067 — 28,067

Other comprehensive loss — — — — — — ( 774 ) ( 774 )

Stock option exercises and employee stock plan purchases 411 4 — — 8,908 — — 8,912

Vesting of restricted stock awards and units 845 9 — — ( 9 ) — — —

Shares withheld to cover taxes ( 144 ) ( 1 ) — — ( 7,758 ) — — ( 7,759 )

Repurchase of common stock — — 1,339 ( 75,000 ) — — — ( 75,000 )

Stock-based compensation — — — — 29,262 — — 29,262

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Operating activities

Net (loss) income $ ( 71,279 ) $ ( 13,473 ) $ 31,667

Adjustments to reconcile net (loss) income to net cash flows from operating activities:

Net income (loss) $ 28,067 $ ( 71,279 ) $ ( 13,473 )

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

Depreciation, amortization and accretion 47,929 42,288 24,689

Impairment of long-lived assets — 9,729 9,935

ARO acceleration 5,259 — —

Asset retirement obligation acceleration 280 5,259 —

Gain on interest rate swap termination ( 5,494 ) — —

Amortization of debt related costs 1,249 676 119

Changes in fair value of contingent assets and liabilities 34,700 72,400 ( 2,000 )

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

Charges incurred in connection with acquired IPR&D 260,000 — —

Loss (gain) on extinguishment of debt 588 ( 889 ) —

Provision for excess and obsolete inventory 7,145 4,057 2,365

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Other current assets ( 2,440 ) ( 73 ) 1,941

Other long-term assets ( 533 ) — —

Accounts payable 301 5,425 ( 4,224 )

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Proceeds from sale of assets, net 1,800 15,823 —

Acquisition of assets ( 260,000 ) — —

Lending on bridge loan — — ( 10,000 )

Cash acquired in acquisition of business — — 17,562

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

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

Financing activities

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Equity issuance costs — — ( 3,777 )

Proceeds from issuance of long-term debt — — 199,461

Debt issuance costs ( 95 ) — —

Proceeds from issuance of long-term debt, net 557,750 — —

Payments on long-term debt and other borrowings ( 175,385 ) ( 43,348 ) ( 15,491 )

Deferred financing costs ( 2,315 ) — ( 1,224 )

Proceeds from interest rate swap termination 5,583 — —

Proceeds from stock option exercises 7,537 5,295 77

Payments for minimum statutory tax withholding related to net share settlement of equity awards ( 7,759 ) ( 2,046 ) ( 2,129 )

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

Repurchase of common stock ( 75,000 ) — —

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

Effect of foreign exchange rates on cash and cash equivalents ( 335 ) ( 310 ) 152

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Lantheus Holdings, Inc., a Delaware corporation, is the parent company of Lantheus Medical Imaging, Inc.

(“LMI”) and Progenics Pharmaceuticals, Inc., a Delaware corporation (“Progenics”).

(“LMI”) and LMI is the parent company of Progenics Pharmaceuticals, Inc., a Delaware corporation (“Progenics”).

See “Progenics Acquisition”.

The Company develops, manufactures and commercializes innovative diagnostic and therapeutic products that assist clinicians in the diagnosis and treatment of heart disease, cancer and other diseases.

The Company believes its diagnostic products result in improved diagnostic information that enables healthcare providers to better detect and characterize, or rule out, disease, potentially achieving improved patient outcomes, reducing patient risk and limiting overall costs for payors and throughout the healthcare system.

The Company’s 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.

The Company produces and markets its products throughout the U.S., selling primarily to clinics, group practices, hospitals, integrated delivery networks and radiopharmacies.

The Company develops, manufactures and commercializes innovative diagnostic and therapeutic products that assist clinicians in the diagnosis and treatment of cancer, heart disease and other diseases.

The Company’s 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.

The Company produces and markets its products throughout the U.S., selling primarily to hospitals, independent diagnostic testing facilities, government facilities, integrated delivery networks, radiopharmacies, clinics, and group practices.

The Company sells its 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.

Sales of the Company’s microbubble ultrasound enhancing agent, DEFINITY, are generated in the U.S.

and Canada through a DEFINITY direct sales team.

Sales of the Company’s prostate cancer diagnostic imaging agent, PYLARIFY (as defined below), are generated in the U.S.

through a PYLARIFY direct sales team and a sales team at some of our positron emission tomography (“PET”) manufacturing facilities (“PMF”) partners.

In the U.S., the Company’s other nuclear imaging products, including TechneLite, Xenon, NEUROLITE and Cardiolite, are primarily sold to commercial radiopharmacies, the majority of which are controlled by or associated with GE Healthcare, Cardinal, UPPI, Jubilant Radiopharma and PharmaLogic.

Sales of the Company’s ultrasound enhancing agent, DEFINITY, are generated in the U.S.

and Canada through a DEFINITY direct sales team.

In the U.S., the Company’s other nuclear imaging products, including TechneLite, Xenon, NEUROLITE and CARDIOLITE, are primarily sold to commercial radiopharmacies, the majority of which are controlled by or associated with Cardinal, RLS, UPPI, PharmaLogic and Jubilant Radiopharma.

A small portion of the Company’s nuclear imaging product sales in the U.S.

are generated through the Company’s direct sales force to hospitals and clinics that maintain their own in-house radiopharmaceutical preparation capabilities.

We have licensed RELISTOR to Bausch, and the Company collects quarterly royalties based on those sales.

AZEDRA sales are generated in the U.S.

through an AZEDRA direct sales team.

We have licensed RELISTOR to Bausch, and the Company collects quarterly royalties based on those sales.

The Company also maintains its own direct sales force in Canada for certain of its products.

In Europe, Australia, Asia-Pacific, Central America and South America, the Company generally relies on third party distributors to market, sell and distribute its nuclear imaging and ultrasound enhancing agent products, either on a country-by-country basis or on a multi-country regional basis.

The Company’s headquarters are located in North Billerica, MA, with additional offices in Somerset, NJ, Montreal, Canada and Lund, Sweden.

The Company’s executive offices are located in Bedford, MA, with additional offices in North Billerica, MA, Somerset, NJ, Montreal, Canada and Lund, Sweden.

Progenics Acquisition

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This agent was approved by the U.S.

Food and Drug Administration (“FDA”) on May 26, 2021 under the name PYLARIFY (piflufolastat F 18), and the commercial launch of this agent has begun.

Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40 % of U.S.

Food and Drug Administration (“FDA”) on May 26, 2021 under the name PYLARIFY (piflufolastat F 18), and the commercial launch of this agent began in June 2021.

Each CVR entitles its holder 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 the Company’s aggregate payments in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9 % of the total consideration the Company pays in the Progenics Acquisition (which the Company currently estimates could be approximately $ 100.0 million).

The Company will issue the aforementioned cash payments related to the CVRs during the first quarter of 2023 and the first quarter of 2024 respectively.

No fractional shares of Holdings common stock were issued in the Progenics Acquisition, and Progenics’ former stockholders have received cash in lieu of any fractional shares of Holdings common stock.

In addition, in accordance with the Merger Agreement, at the Effective Time, each Progenics stock option with a per share exercise price less than or equal to $ 4.42 (an “in-the-money Progenics stock option”) received in exchange for each such in-the money Progenics stock option:

(i) an option to purchase Holdings common stock (each, a

“Replacement Stock Option”) converted based on the Exchange Ratio, and (ii) a vested or unvested CVR depending on whether the underlying in-the-money Progenics stock option was vested at the Effective Time.

Each Progenics stock option with a per share exercise price greater than $ 4.42 (an “out-of-the-money Progenics stock option”) received in exchange for such out-of-the-money Progenics stock options a Replacement Stock Option converted at an exchange ratio determined based on the average of the volume weighted average price per share of common stock of Progenics and Lantheus Holdings prior to the Effective Time, which exchange ratio was 0.31 , the same as the Exchange Ratio.

As a result of the acquisition, Holdings issued 26,844,877 shares of Holdings common stock and 86,630,633 CVRs to former Progenics stockholders.

Please refer to Note 8, “Business Combinations”, for further details on the acquisition.

PYLARIFY Approval and Commercial Launch

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

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 is a product in the Company’s radiopharmaceutical oncology product category.

The Company commenced its commercial launch of PYLARIFY in the U.S.

in June 2021.

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.

The Company continues to expand its geographic coverage, customer contracting and market access coverage to serve its customers and the U.S.

prostate cancer community.

The commercial launch of PYLARIFY is complex and expensive.

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

To manufacture PYLARIFY, the Company 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 approved by the FDA.

Although PYLARIFY is now broadly available nationwide, the Company can give no assurance that the FDA will continue to approve PMFs in accordance with the Company’s planned roll-out schedule.

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

The Company’s commercial launch also required the Company to obtain adequate coding and coverage for PYLARIFY, including not only coverage from Medicare, Medicaid and other government payors, as well as private payors, but also appropriate payment levels, which 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, 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 this 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.

The Company 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.

COVID-19 Pandemic

The Company experienced operational and financial impacts from the COVID-19 pandemic beginning late in the first quarter of 2020 and through the date of this filing, including the impact of hospital staffing challenges, vaccination mandates, employee absences due to illness, and a decline in the volume of certain procedures and treatments using the Company’s products.

For example, we believe that during the fourth quarter of 2021 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.

There has also been a substantial reduction in pulmonary ventilation studies in which the Company’s product, Xenon, is used.

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

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

For most of the second quarter of 2020, the Company reduced the Company’s work week from five days to four days and reduced the pay for employees by varying amounts depending on level of seniority.

During the second quarter of 2020, Progenics also implemented certain cost reduction initiatives and paused new enrollment in the ARROW Phase 2 study of 1095, a PSMA-targeted therapeutic, in metastatic castrate-resistant prostate cancer (“mCRPC”) patients to minimize the risk to subjects and healthcare providers during the pandemic.

New enrollment in that study restarted in October 2020.

GE Healthcare Limited (“GE Healthcare”), the Company’s development and commercialization partner for flurpiridaz fluorine-18 F 18, also delayed enrollment in the second Phase 3 clinical trial of flurpiridaz F 18 because of the pandemic and resumed enrollment in the third quarter of 2020.

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 United States (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 the Company’s business during 2021 and the pandemic could still have a future negative impact on the Company's business, particularly if there are additional resurgences as a result of mutations or other variations to the virus that increase its communicability or its impact on certain populations, geographic regions and the healthcare system, including elective procedures and hospital access.

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

The Company expects to make that payment during the first half of 2023.

As a result of the acquisition, Holdings issued 26,844,877 shares of Holdings common stock and 86,630,633 CVRs to former Progenics stockholders and option holders.

Summary of Significant Accounting Policies

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GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

The more significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, certain judgments regarding revenue recognition, goodwill, tangible and intangible asset valuation, inventory valuation, asset retirement obligations, contingent assets and liabilities, income tax liabilities and related indemnification receivable, deferred tax assets and liabilities and accrued expenses.

The estimates reflected in the Company’s consolidated financial statements include, but are not limited to, certain judgments regarding revenue recognition, goodwill, tangible and intangible asset valuation, inventory valuation, asset retirement obligations, contingent assets and liabilities, income tax liabilities and related indemnification receivable, deferred tax assets and liabilities and accrued expenses.

Actual results could materially differ from those estimates or assumptions.

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The Company accounts for income taxes using an asset and liability approach.

Income tax expense (benefit) represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.

Income tax (benefit) expense represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.

Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities.

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Net Income (Loss) per Common Share

The Company computes earnings per share using the two-class method.

Basic earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, plus the potential dilutive effect of other securities as if those securities were converted or exercised.

The Company’s potentially dilutive shares, which could include shares issuable upon conversion of the 2.625 % Convertible Senior Notes due 2027 (the “Notes”), are considered to be common stock equivalents and are only included in the calculation of diluted net income per share when their effect is dilutive.

The Company has the option to settle the Notes through cash settlement or a combination of cash and share settlement provided that the principal is settled in cash and the conversion spread is settled in cash or shares as elected by the Company.

The Company applies the if-converted method for diluted earnings in order to reflect the conversion spread.

During periods in which the Company incurs net losses, both basic and diluted loss per common share is calculated by dividing the net loss by the weighted-average shares of common stock outstanding and potentially dilutive securities are excluded from the calculation because their effect would be antidilutive.

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The Company periodically reviews its accounts receivable for collectability and provides for an allowance for doubtful accounts to the extent that amounts are not expected to be collected.

The Company sells primarily to clinics, distributors, group practices, hospitals, integrated delivery networks and radiopharmacies.

The Company sells primarily to hospitals, independent diagnostic testing facilities, government facilities, integrated delivery networks, radiopharmacies, clinics, and group practices.

As of December 31, 2022 and 2021, no customer accounted for greater than 10% of accounts receivable, net.

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In addition, a disruption in the commercial supply of, or a significant increase in the cost of one of the Company’s materials from these sources could have a material adverse effect on the Company’s business, financial position and results of operations.

The Company has Mo-99 supply agreements with IRE of Belgium, running through December 31, 2022, with auto-renewal provisions and terminable upon notice of non-renewal, and with NTP and its subcontractor ANSTO, running through March 31, 2022, and for which the Company is currently negotiating an extension.

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

The Company currently relies on IRE as the sole supplier of bulk-unprocessed Xenon which the Company processes and finishes for its customers.

The Company currently relies on JHS as its significant manufacturer of DEFINITY and its sole source manufacturer of NEUROLITE, CARDIOLITE and evacuation vials for TechneLite.

The Company has Mo-99 supply agreements with IRE of Belgium, running through December 31, 2023, with auto-renewal provisions and terminable upon notice of non-renewal, and with NTP and its subcontractor ANSTO, running through December 31, 2024.

The following table sets forth revenues for each of the Company’s products representing 10% or more of revenues:

2022 2021 2020

56.4 % 10.2 % — %

DEFINITY 26.2 % 54.7 % 62.8 %

TechneLite 9.5 % 21.5 % 25.4 %

10.2 % — % — %

Inventory includes material, direct labor and related manufacturing overhead and is stated at the lower of cost and net realizable value on a first-in, first-out basis.

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If future commercial use of the product is not probable, then inventory costs associated with such product are expensed as incurred.

As of December 31, 2021 and 2020, the Company had $ 6.1 million and no capitalized inventories associated with product that did not have regulatory approval, respectively.

As of December 31, 2021, the Company had $ 6.1 million of such product costs included in inventories related to DEFINITY that had been manufactured through the Company’s in-house manufacturing capabilities.

The Company received regulatory approval for the manufacture of DEFINITY at its new in-house manufacturing facility during the first quarter of 2022 and had no inventory pending regulatory approval as of December 31, 2022.

Property, Plant and Equipment, net

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Certain costs to obtain or develop computer software are capitalized and amortized over the estimated useful life of the software.

Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of the related assets and recorded throughout costs of goods sold and operating expenses in the associated functional expense category which utilizes the associated asset.

Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets and recorded throughout costs of goods sold and operating expenses in the associated functional expense category which utilizes the associated asset.

The estimated useful lives of the major classes of depreciable assets are as follows:

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

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

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

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

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

The Company’s in-process research and development (“IPR&D”) represents intangible assets acquired in a business combination that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use.

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.

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

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

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

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

The Company classifies 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, the Company will determine the useful life and begin amortizing the assets to reflect their use over their remaining lives.

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

IPR&D assets are tested at least annually as of October 31 or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in the Company’s consolidated statements of operations.

IPR&D intangible assets are tested at least annually as of October 31 or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in the Company’s consolidated statements of operations.

See Note 11, “Intangibles, net and Goodwill” for further details on impairment.

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The Company does not recognize gain contingencies until realized.

Convertible Notes

Effective as of January 1, 2021, the Company early adopted the provisions of ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

Upon adoption, the Company determined there was no impact for the year ended December 31, 2021.

The provisions of ASU 2020-06 became applicable for the year ended December 31, 2022 in connection with the issuance of the Notes.

This ASU provides guidance to simplify the complexity associated with accounting for convertible instruments and derivatives.

For convertible instruments, the number of major separation models required were reduced.

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for

embedded conversion features.

The Company evaluates convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for.

The change in fair value of any separately recognized derivative is recorded in the consolidated statement of operations as other income or expense.

Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation.

Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments, including its cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate the carrying values of these instruments due to their short term nature.

The estimated fair value of the Company’s long term debt approximates its carrying values as the applicable interest rates are subject to change with market interest rates.

The estimated fair value of the Company’s royalty-backed long-term debt approximates its carrying value as the interest rate is in line with the market interest rates for this type of debt with the respective underlining collateral value.

See Note 4, “Fair Value of Financial Instruments”.

The Company’s long-term debt has triggering events that would impact the fair value of the instruments.

The Company determined that no triggering event has occurred during the year ended December 31, 2022.

Since no triggering events have occurred, the estimated fair value of the Company’s long term debt approximates its carrying values.

The fair value See Note 4, “Fair Value of Financial Instruments”.

Contingent Consideration Liabilities

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

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.

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Derivative Instruments

The Company uses interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt.

The Company has used interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt.

To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged.

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Remeasurement of the Company’s foreign currency denominated transactions are included in net income.

Transaction gains and losses are reported as a component of other (income) loss in the consolidated statements of operations.

Transaction gains and losses are reported as a component of other loss (income) in the consolidated statements of operations.

Stock-Based Compensation

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Interest income ( 2,613 ) ( 45 ) ( 238 )

Arbitration award — — ( 3,453 )

Interest rate swap termination ( 5,494 ) — —

Other — — ( 2 )

Total other loss (income) $ 1,703 $ 7,350 $ ( 2,198 )

Comprehensive (Loss) Income

Comprehensive (loss) income consists of net (loss) income and other gains and losses affecting stockholders’ equity that, under U.S.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under U.S.

GAAP, are excluded from net income.

For the Company, other comprehensive (loss) income consists of foreign currency translation gains and losses as well as unrealized gains and losses on cash flow hedges related to the Company’s interest rate swaps.

The accumulated other comprehensive loss balance consists entirely of foreign currency translation gains and losses and unrealized gains and losses on cash flow hedges related to the Company’s interest rate swaps.

For the Company, other comprehensive income (loss) consists of foreign currency translation gains and losses as well as realized and unrealized gains and losses on cash flow hedges related to the Company’s interest rate swaps.

The accumulated other comprehensive income (loss) balance consists entirely of foreign currency translation gains and losses and realized and unrealized gains and losses on outstanding cash flow hedges related to the Company’s interest rate swaps.

Asset Retirement Obligations

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Changes in these assumptions could impact the Company’s future reported results.

The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts site.

The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts campus.

The Company considers its legal obligation to remediate its facilities upon a decommissioning of its radioactive-related operations as an asset retirement obligation.

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Recent Accounting Pronouncements

Standard Description Effective Date

for Company Effect on the

Consolidated Financial

Accounting Standards Adopted During the Year Ended December 31, 2021

ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”

This ASU provides guidance to simplify the complexity associated with accounting for convertible instruments and derivatives.

For convertible instruments, the number of major separation models required were reduced.

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

This ASU further amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

The ASU simplifies the diluted net income per share calculation in certain areas as well.

January 1, 2021 The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The Company has not adopted any new accounting standards during the year ended December 31, 2022.

Revenue from Contracts with Customers

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License and royalty revenues (2)

48,023 24,852 11,715

Total revenues $ 935,061 $ 425,208 $ 339,410

______________________________

(1) The Company’s principal products include DEFINITY, TechneLite and PYLARIFY and are categorized within product revenue, net.

(1) The Company’s principal products include PYLARIFY, DEFINITY, and TechneLite and are categorized within product revenue, net.

The Company applies the same revenue recognition policies and judgments for all of its principal products.

(2) The Company recognized $ 24.0 million license revenue in the first quarter of 2022 related to an agreement with Novartis Pharma AG.

The Company classifies its revenues into three product categories:

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

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

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

Radiopharmaceutical Oncology consists primarily of PYLARIFY and AZEDRA.

Strategic partnerships and other revenue includes strategic partnerships and other arrangements related to other products of the Company, including RELISTOR.

Strategic Partnerships and Other Revenue includes strategic partnerships and other arrangements related to other products of the Company, such as royalty revenue from our license of RELISTOR.

On January 31, 2022, the Company entered into a global settlement agreement with Novartis Pharma AG (“Novartis”), Advanced Accelerator Applications USA, Inc.

(“AAA”), Endocyte, Inc.

(“Endocyte”) and their affiliates (the “Novartis Agreement”) to settle certain disputes between the parties.

Under the Novartis Agreement, Novartis agreed to make a lump sum payment to the Company, as well as to reimburse the Company for certain fees and expenses in connection with certain German litigation, and the Company agreed to license certain intellectual property to Novartis.

In addition, the Company agreed to supply PYLARIFY for clinical purposes at an arms-length value which will be recorded revenue in the future as product is provided.

In accordance with the Company's ASC 606, Revenue from Contracts with Customers , assessment, Novartis is considered to be a customer.

The Company determined that the $ 24.0 million constituted a single element which was satisfied on the date of the execution of the Novartis Agreement.

The Company determined that the license of intellectual property carried a fair value of $ 24.0 million.

As such, the Company assigned the value to the fair value of the license, which constitutes the entire transaction price and does not require further allocation.

The Company determined that the $ 24.0 million represented the point at which the licensee was able to use and benefit from the license and recognized revenue when the license was granted to Novartis upon execution of the Novartis Agreement.

The Company recognized the $ 24.0 million fee as revenue on its consolidated statement of operations for the quarter ended March 31, 2022.

The Company received the $ 24.0 million payment in April 2022.

Revenue by product category on a net basis is as follows:

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Total revenues $ 935,061 $ 425,208 $ 339,410

________________________________

(1) The Company 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.

Product Revenue, Net

The Company sells its products principally to clinics, distributors, group practices, hospitals, integrated delivery networks and radiopharmacies.

The Company sells its products principally to hospitals, independent diagnostic testing facilities, government facilities, integrated delivery networks, radiopharmacies, clinics, and group practices.

The Company considers customer purchase orders, which in some cases are governed by master sales or group purchasing organization agreements, to be the contracts with a customer.

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The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

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

Actual amounts of consideration ultimately received may differ from the

Company’s estimates.

If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect product revenue and earnings in the period such variances become known.

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Money market $ 342,646 $ 342,646 $ — $ —

Interest rate swaps 357 — 357 —

Contingent receivable 9,300 — — 9,300

Total assets $ 342,646 $ 342,646 $ — $ —

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Money market $ 40,140 $ 40,140 $ — $ —

Interest rate swaps 357 — 357 —

Contingent receivable 9,300 — — 9,300

Total assets $ 49,797 $ 40,140 $ 357 $ 9,300

Interest rate swaps $ 1,908 $ — $ 1,908 $ —

Contingent consideration liabilities 86,200 — — 86,200

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During the years ended December 31, 2022 and 2021, there were no transfers into or out of Level 3.

On December 2, 2022, the Company voluntarily terminated the interest rate swap contracts in connection with the refinancing of debt.

As part of the Progenics Acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics from CytoDyn Inc.

related to a prior sale of certain intellectual property.

(“CytoDyn”) related to a prior sale of certain intellectual property.

The Company has the right to receive $ 5.0 million upon regulatory approval and a 5 % royalty on net sales of approved products.

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The estimated fair value was determined based on probability adjusted discounted cash flows that included significant estimates and assumptions pertaining to regulatory events and sales targets.

During the fourth quarter of 2022, the Company reduced the probability to zero as CytoDyn withdrew their regulatory application.

The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.

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Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40 % of U.S.

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

net sales generated by PYLARIFY in 2022 and 2023 in excess of $ 100.0 million and $ 150.0 million, respectively, subject to a maximum cap.

Refer to Note 1, “Description of Business” for further details on the CVRs.

Additionally, the Company assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”).

The Company considers the contingent consideration liabilities relating to the CVRs a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy.

The estimated fair value of these had been determined based on Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets.

Based on the U.S.

net sales generated by PYLARIFY in 2022, the Company currently expects to pay out the full amount of the CVRs from available cash in the first half of 2023.

The Company also assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”).

These contingent consideration liabilities include potential payments of up to $ 70.0 million if the Company attains certain net sales targets primarily for AZEDRA and 1095 and a $ 5.0 million 1095 commercialization milestone.

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The Company’s total potential payments related to the 2013 Acquisition are approximately $ 85.0 million.

The Company considers the contingent consideration liabilities relating to the CVRs and the 2013 Acquisition, each a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy.

The Company considers the contingent consideration liabilities relating to the 2013 Acquisition each a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy.

The estimated fair value of these was determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets.

The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.

The most significant unobservable inputs with respect to 1095 and 1404 are the probabilities of achieving regulatory approval of those development projects and subsequent commercial success.

Significant changes in any of the probabilities of success, the probabilities as to the periods in which sales targets and milestones will be achieved, discount rates or underlying revenue forecasts would result in a significantly higher or lower fair value measurement.

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Contingent receivable:

Regulatory milestone $ 2,500 $ 3,200 Probability adjusted discounted cash flow model Period of expected milestone achievement 2022 2021

Regulatory milestone $ — $ 2,500 Probability adjusted discounted cash flow model Period of expected milestone achievement N/A 2022

Probability of success 0 % 70 %

Discount rate 17 % 24 %

Discount rate N/A 17 %

Royalties — 6,800 Probability adjusted discounted cash flow model

Probability of success 0 % 10 % - 60 %

Discount rate 17 % 24 %

Discount rate N/A 17 %

Total $ — $ 9,300

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Contingent consideration liability:

Net sales targets - PYLARIFY (CVRs) $ 73,200 $ 4,200 Monte Carlo simulation Period of expected milestone achievement and sales targets 2022 - 2023 2022 - 2023

Discount rate 17 % 24 %

Net sales targets - PYLARIFY (CVRs) $ 99,700 $ 73,200 Probability adjusted discounted cash flow model (as of 12/31/2022)

Monte Carlo simulation

(as of 12/31/2021)

Period of expected milestone achievement and sales targets 2022 - 2023 2022 - 2023

Probability of success 100 % N/A

Discount rate N/A 17 %

1095 commercialization milestone 1,700 1,900 Probability adjusted discounted cash flow model

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Fair value, beginning of period $ 9,300 $ 11,300 $ 86,200 $ 15,800

Progenics acquisition — 10,100 — 16,600

Changes in fair value included in net loss ( 2,000 ) 1,200 70,400 ( 800 )

Changes in fair value included in net income (loss) ( 9,300 ) ( 2,000 ) 25,400 70,400

Fair value, end of period $ — $ 9,300 $ 111,600 $ 86,200

The change in fair value of the contingent financial asset and contingent financial liabilities, including the CVRs, resulted in an expense of $ 72.4 million for the year ended December 31, 2021 and was primarily due to changes in revenue forecasts, changes in market conditions, a decrease in discount rates and the passage of time.

The components of income before income taxes is summarized as follows:

The change in fair value of the contingent financial asset and contingent financial liabilities, including the CVRs, resulted in a general and administrative expense of $ 34.7 million for the year ended December 31, 2022 and was primarily due to changes in revenue forecasts, changes in market conditions, an increase in discount rates (excluding the CVRs) and the passage of time.

The Company expects to make all applicable cash payments related to the CVRs in the first half of 2023.

As of December 31, 2022, the Company had $ 99.7 million in current liabilities to account for the expected payments related to the CVRs.

The components of income (loss) before provision (benefit) for income taxes consists of the following:

(in thousands) 2022 2021 2020

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International ( 2,293 ) 1,351 ( 5,984 )

(Loss) income before income taxes $ ( 75,038 ) $ ( 11,479 ) $ 28,627

The income tax (benefit) expense is summarized as follows:

Income (loss) before income taxes $ 26,719 $ ( 75,038 ) $ ( 11,479 )

The Company’s provision (benefit) for income taxes consists of the following:

(in thousands) 2022 2021 2020

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The reconciliation of income taxes at the U.S.

federal statutory rate to the actual income taxes is as follows:

federal statutory rate to the income tax (benefit) expense is as follows:

(in thousands) 2022 2021 2020

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Intangible assets ( 80,770 ) ( 87,351 )

Amortization of intangibles other than goodwill ( 385 ) —

Depreciation ( 1,469 ) —

Deferred tax liability ( 87,978 ) ( 90,377 )

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Noncurrent deferred tax assets, net $ 110,647 $ 62,764

On June 19, 2020, the Company completed the Progenics Acquisition in a transaction that is expected to qualify as a tax-deferred reorganization under Section 368 of the Internal Revenue Code.

The transaction resulted in an ownership change of Progenics under Section 382 of the Internal Revenue Code, and a limitation on the utilization of Progenics’ precombination tax attributes.

All of Progenics’ precombination research credits and Orphan drug credits have been removed from the balance sheet, and the gross carrying value of the tax loss carryforwards reduced to their realizable value on the opening balance sheet, in accordance with the Section 382 limitation.

Deferred tax liabilities of $ 92.3 million on acquired identified intangibles were recorded at acquisition resulting in a small net overall deferred tax liability for Progenics after the application of acquisition accounting.

The Company also acquired estimated utilizable U.S.

federal loss carryforwards of $ 338.7 million, tax-effected state loss carryforwards of $ 12.5 million and state tax credits of $ 2.5 million as a result of the Progenics acquisition.

The utilization of these losses and credits is subject to annual limitations based on Sections 382 and 383 of the Internal Revenue Code.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

Under the Act, research and experimental expenditures incurred for tax years beginning after December 31, 2021, must be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted.

If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.The increase in worldwide net deferred tax asset is primarily due to the tax capitalization of the Company’s current year research and development expenses that are not currently deductible in 2022, offset by utilization of a portion of its net operating losses.

The Company regularly assesses its ability to realize its deferred tax assets.

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

In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence, and weighed the objective evidence and expected impact.

The Company continues to record valuation allowances of $ 1.2 million against the net deferred tax assets of its U.K.

subsidiary, $ 1.9 million against the net deferred tax assets of its Sweden subsidiary, and $ 0.8 million against certain domestic state tax credits and state loss carryforwards.

The Company will continue to assess the level of the valuation allowance required.

If the weight of negative evidence exists in future periods to again support the recording of a partial or full valuation allowance against the Company’s deferred tax assets, there would likely be a material negative impact on the Company’s results of operations in that future period.

A summary of the changes in the Company’s valuation allowance is summarized below:

(in thousands) Amount

Balance, January 1, 2020 $ 1,238

Charged to income tax (benefit) expense 311

Foreign currency 31

Increase due to Progenics acquisition 2,479

Release valuation allowance ( 603 )

Balance, December 31, 2020 3,456

Charged to income tax (benefit) expense ( 189 )

Adjustment related to Progenics acquired deferred assets 867

Foreign currency ( 211 )

Balance, December 31, 2021 $ 3,923

In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence.

As of December 31, 2022 and 2021, the Company maintains a valuation allowance of $ 3.5 million and $ 3.9 million, respectively, related to net deferred tax assets of certain of its foreign subsidiaries and U.S.

acquired tax credits.

Utilization of net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions.

These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively.

In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.

At December 31, 2022, the Company had U.S.

federal net operating loss carryforwards of approximately $ 338.4 million, $ 200.4 million of which will expire between 2024 and 2037, and $ 138.0 million of which can be carried forward indefinitely.

The Company’s state net operating losses are $ 11.6 million on a tax-effected basis, which will expire between 2024 and 2040.

The Company has state research credit carryforwards of $ 2.9 million, which will expire between 2024 and 2037.

The Company has state investment tax credit carryforwards of $ 1.4 million net of federal impact which have no expiration date.

The Company’s U.S.

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The state and foreign income tax returns are subject to examination for periods varying from three to four years after filing, depending on the specific jurisdictions’ statutes of limitation, and in the case of Sweden, up to six years after the end of the financial year.

At December 31, 2021, the Company has U.S.

federal net operating loss carryovers of approximately $ 476.2 million, $ 338.1 million of which will expire between 2022 and 2037, and $ 138.0 million of which can be carried forward indefinitely.

The Company’s state net operating losses are $ 17.4 million on a tax-effected basis, which will expire between 2022 and 2040.

The Company also has U.S.

federal research credits carryforwards of $ 3.4 million which will begin to expire in 2037.

The Company has state research credit carryforwards of $ 3.1 million, which will expire between 2024 and 2036.

The Company has state investment tax credit carryforwards of $ 1.7 million net of federal impact, $ 0.7 million of which have no expiration date, and $ 1.0 million of which will expire between 2022 and 2024.

A reconciliation of the Company’s changes in uncertain tax positions for 2022 and 2021 is as follows:

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Balance of uncertain tax positions as of December 31, 2022 $ 1,480

In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into a tax indemnification agreement with BMS under which BMS agreed to indemnify the Company for any payments made to settle those uncertain tax positions with the taxing authorities.

In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into an agreement to indemnify with BMS for any payments made to settle those uncertain tax positions with the taxing authorities.

A long-term receivable is recorded within other long-term assets to account for the expected value to the Company of future indemnification payments, net of actual tax benefits received, to be paid on behalf of the Company by BMS.

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

As of December 31, 2021 and 2020, total liabilities for uncertain tax positions including interest and penalties were $ 20.9 million and $ 29.9 million, respectively, consisting of uncertain tax positions of $ 3.7 million and $ 5.3 million, respectively, interest accruals of

$ 16.5 million and $ 23.5 million, respectively, and penalty accruals of $ 0.8 million and $ 1.0 million, respectively.

As of December 31, 2022 and 2021, total liabilities for uncertain tax positions including interest and penalties were $ 8.3 million and $ 20.9 million, respectively, consisting of uncertain tax positions of $ 1.5 million and $ 3.7 million, respectively, interest accruals of $ 6.4 million and $ 16.5 million, respectively, and penalty accruals of $ 0.4 million and $ 0.8 million, respectively.

As of December 31, 2022 and 2021, these liabilities were included in other long-term liabilities.

Included in the 2021, 2020 and 2019 tax provisions are a benefit of $ 9.0 million, an expense of $ 2.8 million and a benefit of $ 13.2 million, respectively, relating to accrual of interest, net of benefits for reversals of uncertain tax positions recognized upon settlements, effective settlements, or lapses of relevant statutes of limitation.

Included in the 2022, 2021 and 2020 tax provisions are a benefit of $ 12.6 million, a benefit of $ 9.0 million and an expense of $ 2.8 million, respectively, relating to accrual of interest, net of benefits for reversals of uncertain tax positions recognized upon settlements, effective settlements, or lapses of relevant statutes of limitation.

The total long-term asset related to the indemnification was $ 3.9 million and $ 13.5 million at December 31, 2022 and 2021, respectively.

Included in other (income) loss for the years ended December 31, 2022, 2021 and 2020, is tax indemnification expense (income), net of $ 9.6 million, $ 7.1 million and $( 2.2 ) million, respectively.

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was passed by the Congress and signed into law on March 27, 2020.

The Company has reviewed the relevant measures of the Act.

No material impacts of the Cares Act have been identified nor are any anticipated.

On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was signed into law, modifying certain aspects of the CARES Act.

The Company has analyzed the CARES Act and determined that the Act to date has had no material impact on the Company’s income taxes.

On August 16, 2022, the “Inflation Reduction Act” (H.R.

5376) was signed into law in the United States.

We do not currently expect the Inflation Reduction Act to have a material impact on our financial results.

Inventory consisted of the following:

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If future commercial use of the product is not probable, then inventory costs associated with such product are expensed during the period the costs are incurred.

As of December 31, 2021, the Company had $ 6.1 million of such product costs included in inventories related to DEFINITY that have been manufactured through the Company’s in-house manufacturing capabilities, which is awaiting regulatory approval.

As of December 31, 2021, the Company had $ 6.1 million of such product costs included in inventories related to DEFINITY that had been

manufactured through the Company’s in-house manufacturing capabilities.

The Company received regulatory approval to manufacture DEFINITY at its new in-house manufacturing facility during the first quarter of 2022 and has no inventory pending regulatory approval as of December 31, 2022.

Property, Plant and Equipment, Net

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Please refer to Note 17, “Leases” for further details.

During the three months ended March 31, 2020, as a result of a decline in expected future cash flows and the effect of the COVID-19 pandemic related to certain other nuclear legacy manufacturing assets, the Company determined certain impairment triggers had occurred.

Accordingly, the Company performed an undiscounted cash flow analysis as of March 31, 2020.

Based on the undiscounted cash flow analysis, the Company determined that the manufacturing assets had net carrying values that exceeded their estimated undiscounted future cash flows.

The Company then estimated the fair values of the asset group based on their discounted cash flows.

The carrying value exceeded the fair value and as a result, the Company recorded a non-cash impairment of $ 7.3 million for the year ended December 31, 2020 in cost of goods sold in the consolidated statement of operations.

In connection with a contract termination in the fourth quarter of 2020, the Company transferred ownership of certain manufacturing assets and recorded a non-cash loss on disposal of assets of $ 1.8 million as well as paid $ 0.5 million, all of which is recorded in cost of goods sold in the consolidated statement of operations.

Business Combinations

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The following unaudited pro forma financial information presents the Company’s results as if the Progenics Acquisition had occurred on January 1, 2019:

December 31, 2020 Year Ended

December 31, 2020

(in thousands) Amount Amount

(in thousands) Amount

Pro forma revenue $ 350,315

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Subject to certain limitations, the buyer will be indemnified for damages resulting from breaches or inaccuracies of the Company’s representations, warranties and covenants in the SPA.

As part of the transaction, the Company and the buyer also entered into a customary transition services agreement and a long-term supply contract under which the Company will supply the buyer with certain of the Company’s products on commercial terms and under which the buyer has agreed to certain product minimum purchase commitments.

The Company does not believe this sale of certain net assets, reported as held for sale as of December 31, 2020, constituted a strategic shift that would have a major effect on its operations or financial results.

As a result, this transaction is not classified as discontinued operations in the Company’s accompanying consolidated financial statements.

The following table summarizes the major classes of assets and liabilities sold as of January 29, 2021 (date of sale) and held for sale as of December 31, 2020:

(in thousands) January 29, 2021 December 31, 2020

The Company determined that this sale of certain net assets did not constitute a strategic shift that had a major effect on the Company’s operations or financial results.

As a result, this transaction was not classified as discontinued operations in the Company’s accompanying consolidated financial statements.

The following table summarizes the major classes of assets and liabilities sold as of January 29, 2021, the date of sale:

(in thousands) January 29, 2021

Current Assets:

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Total liabilities held for sale $ 1,448

The sale resulted in a pre-tax book gain of $ 15.3 million, which was recorded within operating (loss) income in the consolidated statements of operations for the year ended December 31, 2021.

The sale resulted in a pre-tax book gain of $ 15.3 million, which was recorded within operating income (loss) in the consolidated statements of operations for the year ended December 31, 2021.

Asset Retirement Obligations

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As a result of the accelerated timeline, the Company determined the asset group’s present value exceeded the current value recorded as of December 31, 2021.

Accordingly, the Company recorded a non-cash adjustment of $ 5.3 million to anticipate a revision in the end of useful life by the end of 2022.

The Company recorded a non-cash adjustment of $ 5.3 million in 2021 to anticipate a revision in the end of useful life by the end of 2022.

The Company is required to provide the Massachusetts Department of Public Health and New Jersey Department of Environmental Protection financial assurance demonstrating the Company’s ability to fund the decommissioning of its North Billerica, Massachusetts and Somerset, New Jersey production facilities upon closure, although the Company has no current plans to close the facilities.

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Accordingly, the Company reclassified the associated asset of $ 132.8 million from IPR&D to currently marketed products and commenced amortization of the asset.

The Company performed its annual impairment test of its IPR&D assets as of October 31, 2020.

As a result of a timing delay in the development of an AZEDRA IPR&D asset due to the impact of COVID-19, the Company determined that the carrying value of $ 18.3 million exceeded the fair value of the asset.

The Company performed its annual impairment test of its IPR&D intangible assets as of October 31, 2020.

As a result of a timing delay in the development of an AZEDRA IPR&D intangible asset due to the impact of COVID-19, the Company determined that the carrying value of $ 18.3 million exceeded the fair value of the asset.

Accordingly, the Company recorded a non-cash impairment charge of $ 2.7 million for the year ended December 31, 2020 in research and development expenses in the consolidated statements of operations.

The estimated fair value of the AZEDRA IPR&D asset was determined based on the present values of the expected cash flows.

The estimated fair value of the AZEDRA IPR&D intangible asset was determined based on the present values of the expected cash flows.

The Company used a discount rate of 23.0 % and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions.

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(in thousands) Amount

2022 $ 11,250

Total principal outstanding 575,000

Unamortized debt discount ( 498 )

Unamortized debt issuance costs ( 17,519 )

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Total long-term debt, net, and other borrowings $ 557,712

In June 2019, the Company refinanced its previous $ 275.0 million five-year term loan agreement (the “2017 Term Facility”) with a new five-year $ 200.0 million term loan facility (the “2019 Term Facility” and the loans thereunder, the “2019 Term Loans”).

In addition, the Company replaced its previous $ 75.0 million five-year revolving credit facility (the “2017 Revolving Facility”) with a new $ 200.0 million five-year revolving credit facility (the “2019 Revolving Facility” and, together with the 2019 Term Facility, the “2019 Facility”).

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

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

The net proceeds of the 2019 Term Facility, together with approximately $ 73.0 million of cash on hand, were used to refinance in full the aggregate remaining principal amount of the loans outstanding under the 2017 Term Facility and pay related interest, transaction fees and expenses.

No amounts were outstanding under the 2017 Revolving Facility at that time.

The Company accounted for the refinancing of the 2017 Term Facility as a debt extinguishment and the 2017 Revolving Facility as a debt modification by evaluating the refinancing on a creditor by creditor basis.

The Company recorded a loss on extinguishment of debt of $ 3.2 million related to the write-off of unamortized debt issuance costs and debt discounts.

In addition, the Company incurred and capitalized $ 2.8 million of new debt issuance costs and debt discounts related to the refinancing.

In December 2022, the Company refinanced its 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”).

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.

The Company paid off the 2019 Term Facility using available cash and did not utilize another term loan to fund the payoff.

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

The Company 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, the Company incurred and capitalized $ 2.7 million of new deferred financing costs related to the refinancing.

2022 Term Facility

The 2019 Term Loans under the 2019 Term Facility bear interest, with pricing based from time to time at the Company’s election at (i) LIBOR plus a spread ranging from 1.25 % to 2.25 % as determined by the Company’s total net leverage ratio (as defined in the 2019 Credit Agreement) or (ii) the Base Rate (as defined in the 2019 Credit Agreement) plus a spread ranging from 0.25 % to 1.25 % as determined by the Company’s total net leverage ratio.

The use of LIBOR, as it relates to the Company’s 2019 Term Facility, is expected to be phased out by the end of June 2023.

The 2019 Credit Agreement allows for a mutually agreed replacement interest rate in the event the LIBOR is phased out.

The Company is permitted to voluntarily repay the 2019 Term Loans, in whole or in part, without premium or penalty.

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

The 2019 Term Loans mature in June 2024.

At December 31, 2021, the Company’s interest rate under the 2019 Term Facility was 2.1 %.

The Company expected to draw from the 2022 Term Facility only if a proposed offering of notes by the Company was not consummated.

The commitment of the lenders to provide the 2022 Term Facility was terminated upon the completion of such note offering in December 2022.

The 2022 Term Facility included a commitment fee equal to 0.20 % per annum on the average daily unused amount of the 2022 Term Facility, which would have been payable commencing on January 16, 2023 and would have ended on the earliest of (i) the day the Term Loans under the 2022 Term Facility were funded, (ii) the last day of the delayed draw availability period and (iii) the day the commitments under the 2022 Term Facility were reduced to zero.

The Company did not draw from the 2022 Term Facility and, as such, no interest is due under this instrument.

2022 Revolving Facility

Under the terms of the 2019 Revolving Facility, the lenders thereunder agreed to extend credit to the Company from time to time until June 27, 2024 consisting of revolving loans (the “Revolving Loans” and, together with the 2019 Term Loans, the “Loans”) in an aggregate principal amount not to exceed $ 200.0 million (the “Revolving Commitment”) at any time outstanding.

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

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

The Letters of Credit, Swingline Loans and the borrowings under the 2019 Revolving Facility are expected to be used for working capital and other general corporate purposes.

The Revolving Loans under the 2019 Revolving Facility bear interest, with pricing based from time to time at the Company’s election at (i) LIBOR plus a spread ranging from 1.25 % to 2.25 % as determined by the Company’s total net leverage ratio or (ii) the Base Rate plus a spread ranging from 0.25 % to 1.25 % as determined by the Company’s total net leverage ratio.

The 2019 Revolving Facility also includes a commitment fee, which ranges from 0.15 % to 0.30 % as determined by the Company’s total net leverage ratio.

Under the terms of the 2022 Revolving Facility, the lenders are committed to extending credit to the Company from time to time until December 2, 2027 consisting of revolving loans (the “Revolving Loans”) in an aggregate principal amount not to exceed $ 350.0 million (the “Revolving Commitment”) at any time, including a $ 20.0 million sub-facility for the issuance of letters of credit (the “Letters of Credit”) and a $ 10.0 million sub-facility for swingline loans (the “Swingline Loans”).

The Letters of Credit, Swingline Loans and the Revolving Loans, if used, are expected to be used for working capital and for other general corporate purposes.

The Revolving Loans bear interest, with pricing based from time to time at the Company’s election, at (i) the secured overnight financing rate as published by the Federal Reserve Bank of New York on its website plus an applicable margin that ranges from 1.50 % to 2.50 % based on the Company’s total net leverage ratio or (ii) the alternative base rate plus an applicable margin that ranges from 0.50 % to 1.50 % based on the Company’s total net leverage ratio.

The 2022 Revolving Facility also includes an unused commitment fee at a rate ranging from 0.15 % to 0.35 % per annum based on the Company’s total net leverage ratio.

The Company is permitted to voluntarily prepay the Revolving Loans, in whole or in part, or reduce or terminate the Revolving Commitment, in each case, without premium or penalty.

On any business day on which the total amount of outstanding Revolving Loans and Letters of Credit exceeds the total Revolving Commitment, the Company must prepay the Revolving Loans in an amount equal to such excess.

On any business day on which the total amount of outstanding Revolving Loans, Letters of Credit and Swingline Loans exceeds the total Revolving Commitment, the Company must prepay the Revolving

Loans in an amount equal to such excess.

The Company is not required to make mandatory prepayments under the 2022 Revolving Facility.

As of December 31, 2022, there were no outstanding borrowings under the 2022 Revolving Facility.

The Company has the right to request an increase to the Revolving Commitment in an aggregate principal amount of up to the sum of $ 335.0 million or consolidated EBITDA for the four consecutive fiscal quarters most recently ended, plus additional amounts in certain circumstances (collectively, the “Incremental Cap”), minus certain incremental term loans made pursuant to specified incremental term loan commitments (“Incremental Term Loans”).

The Company has the right to request Incremental Term Loans in an aggregate principal amount of up to the Incremental Cap less any incremental increases to the Revolving Commitment.

Proceeds of Incremental Term Loans may be used for working capital and for other general corporate purposes and will bear interest at rates agreed between the Company and the lenders providing the Incremental Term Loans.

2022 Facility Covenants

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

The 2019 Facility requires the Company to be in quarterly compliance, measured on a trailing four quarter basis, with two financial covenants.

The minimum interest coverage ratio, commencing with the fiscal quarter ended September 30, 2019, must be at least 3.00 to 1.00.

The Company may elect to increase the maximum total net leverage ratio by 0.50 to 1.00 (subject to a maximum of 4.25 to 1.00) up to two separate times during the term of the 2019 Facility in connection with any Material Acquisition (as defined in the Credit Agreement).

The 2022 Facility contains a number of affirmative, negative and reporting covenants, as well as financial maintenance covenants pursuant to which the Company is required to be in quarterly compliance, measured on a trailing four quarter basis, with two financial covenants.

The minimum interest coverage ratio, commencing with the fiscal quarter ended December 31, 2022, must be at least 3.00 to 1.00.

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

2022 Credit Agreement

Period Total Net Leverage Ratio

Q1 2023 to Q4 2023 4.00 to 1.00

Q1 2024 and thereafter 3.50 to 1.00

The 2022 Facility contains usual and customary restrictions on the ability of the Company and its subsidiaries to:

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and (viii) enter into certain transactions with its affiliates.

Upon an event of default, the administrative agent under the Credit Agreement will have the right to declare the Loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced.

The 2019 Facility is guaranteed by Holdings, Progenics and Lantheus MI Real Estate, LLC, and obligations under the 2019 Facility are generally secured by first priority liens over substantially all of the assets of each of LMI, Holdings, Progenics and Lantheus MI Real Estate, LLC (subject to customary exclusions set forth in the transaction documents) owned as of June 27, 2019 or thereafter acquired.

2020 Amendment

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

The Company accounted for the Amendment as a debt modification and capitalized $ 1.2 million of associated costs.

The Amendment provides for, among other things, modifications to LMI’s financial maintenance covenants.

The covenant related to Total Net Leverage Ratio (as defined in the Amended Credit Agreement) 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

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 LMI’s Total Net Leverage Ratio.

Upon an event of default, the Administrative Agent will have the right to declare the loans and other obligations outstanding under the 2022 Facility immediately due and payable and all commitments immediately terminated.

The 2022 Facility is guaranteed by Holdings, and certain subsidiaries of LMI, including Progenics and Lantheus MI Real Estate, LLC, and obligations under the 2022 Facility are generally secured by first priority liens over substantially all of the assets of each of LMI, Holdings, and certain subsidiaries of LMI, including Progenics and Lantheus MI Real Estate, LLC (subject to customary exclusions set forth in the transaction documents) owned as of December 2, 2022 or thereafter acquired.

Convertible Notes

On December 8, 2022, the Company 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 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 (the “Guarantor”), a wholly owned subsidiary of the Company, as Guarantor, and U.S.

Bank Trust Company, National Association, 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 the Company.

The Notes are senior unsecured obligations of the Company.

The Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Guarantor.

The Notes bear interest at a rate of 2.625 % per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023, and will mature on December 15, 2027 unless earlier redeemed, repurchased or converted in accordance with their terms.

The initial conversion rate for the Notes is 12.5291 shares of the Company’s common stock per $1,000 in principal amount of Notes (which is equivalent to an initial conversion price of approximately $ 79.81 per share of the Company’s common stock, representing an initial conversion premium of approximately 42.5 % above the closing price of $ 56.01 per share of the Company’s common stock on December 5, 2022).

In no event shall the conversation rate per $1,000 in principal amount of notes exceed 17.8539 shares of the Company’s common stock.

Prior to the close of business on the business day immediately preceding September 15, 2027, the Notes may be converted at the option of the holders only upon occurrence of specified events and during certain periods, and thereafter until the close of business on the business day immediately preceding the maturity date, the Notes may be converted at any time.

The Company will satisfy any conversion by paying cash up to the aggregate principal amount of the Notes to be converted and by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Notes being converted.

The Company may redeem for cash all or any

portion of the Notes, at its option, on or after December 22, 2025 if the closing sale price per share of the Company’s common stock exceeds 130 % of the conversion price of the Notes for a specified period of time.

The redemption price will be equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The Company evaluated the Notes upon completion of the sale and concluded on the following features:

• Conversion Feature:

The Company determined that the conversion feature qualifies for the classification of equity.

As a result, the conversion feature should not be bifurcated as a derivative instrument and the Notes were accounted for as a single liability.

• Redemption Features:

The redemption features were reviewed within the Notes and the Company determined that the redemption features are closely related to the Notes and as such should not be separately accounted for as a bifurcated derivative instrument.

• Additional Interest Features:

The Notes may result in additional interest if the Company fails to timely file any document or report that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

The Company will pay additional interest on the notes at a rate equal to 0.25 % to 0.50 % per annum based on the principal amount of notes outstanding for each day the Company failure to file has occurred or the notes are not otherwise freely tradable.

Further, if the notes are assigned a restricted CUSIP number or the notes are not otherwise freely tradable pursuant to Rule 144 under the Securities Act by holders other than our affiliates or holders that were our affiliates at any time during the three months immediately preceding as of the 385th day after the last date of original issuance of the notes offered hereby, the Company will pay additional interest on the notes at a rate equal to (i) 0.25 % to 0.50 % per annum based on the principal amount of notes outstanding for each day until the restrictive legend has been removed from the notes, the notes are assigned an unrestricted CUSIP and the notes are freely tradable.

The Company concluded that the interest feature is unrelated to the credit risk and should be bifurcated from the Notes, however, the Company assessed the probabilities of triggering events occurring under these features and does not expect to trigger the aforementioned events.

These events will continue to be monitored to determine whether the interest feature will be bifurcated if it has value.

As of December 31, 2022, the carrying value of the Notes was $ 575.0 million, had an unamortized discount of zero , and the fair value of the liability was $ 575.0 million.

The Company recorded interest expense of approximately $ 1.3 million related to the Notes for the year ended December 31, 2022.

Royalty-Backed Loan

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The Royalty-Backed Loan bore interest at a per annum 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, the Company 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 governing the Royalty-Backed Loan.

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Derivative Instruments

The Company uses interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt.

The Company has used interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt.

In March 2020, the Company entered into interest rate swap contracts to fix the LIBOR rate on a notional amount of $ 100.0 million through May 31, 2024.

The average fixed LIBOR rate on the interest rate swaps is approximately 0.82 %.

This agreement involves the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

The average fixed LIBOR rate on the interest rate swaps was approximately 0.82 %.

This agreement involved the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

The interest rate swaps were designated as cash flow hedges.

In accordance with hedge accounting, the interest rate swaps are recorded on the Company’s consolidated balance sheets at fair value, and changes in the fair value of the swap agreements are recorded to other comprehensive loss and reclassified to interest expense in the period during which the hedged transaction affected earnings or it will become probable that the forecasted transaction would not occur.

At December 31, 2021, accumulated other comprehensive loss included $ 0.3 million of pre-tax deferred losses that are expected to be reclassified to earnings during the next 12 months.

In accordance with hedge accounting, the interest rate swaps are recorded on the Company’s consolidated balance sheets at fair value, and changes in the fair value of the swap agreements were recorded to other comprehensive loss and reclassified to interest expense in the period during which the hedged transaction affected earnings or it will become probable that the forecasted transaction would not occur.

On December 2, 2022, the Company voluntarily terminated the interest rate swap contracts in connection with the refinancing of debt.

Upon termination, the Company received approximately $ 5.6 million in cash and the remaining balance of approximately $ 5.5 million in accumulated other comprehensive income (loss) related to the interest rate swap contracts were reclassified into earnings.

The following table presents the location and fair value amounts of derivative instruments reported in the consolidated balance sheet:

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Interest rate swap Other long-term assets $ — $ 357

Interest rate swap Accrued expenses and other liabilities $ — $ 1,908

Accumulated Other Comprehensive Loss

The components of Accumulated Other Comprehensive Loss, net of tax of $ 0.1 million and $ 0.5 million for the year ended December 31, 2021 and 2020, respectively, consisted of the following:

The components of Accumulated Other Comprehensive Loss, net of tax of zero and $ 0.1 million for the year ended December 31, 2022 and 2021, respectively, consisted of the following:

(in thousands) Foreign currency translation Unrealized loss on cash flow hedges Accumulated other comprehensive loss

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The Company assumed Progenics equity plans due to the acquisition as discussed in Note 1, “Description of Business”.

The Company no longer grants new equity awards under the Progenics equity plans.

Stock-based compensation expense recognized in the consolidated statements of operations is summarized below:

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Outstanding at December 31, 2022 874,749 $ 30.37 5.8 19,058,224

Vested and expected to vest at December 31, 2022 874,749 $ 30.37 5.8 19,058,224

Exercisable at December 31, 2022 517,424 $ 17.83 3.6 17,141,202

No stock options were granted during the fiscal year ended December 31, 2021.

The table below summarizes the key weighted-average assumptions used in valuing stock options granted:

Year Ended December 31,

2022 2021 2020

Expected volatility 62.1 % — % 71.1 %

Risk-free interest rate 2.0 % — % 0.3 %

Expected life (in years) 6.0 — 3.5

Expected dividend yield — — —

During the years ended December 31, 2022, 2021 and 2020, 397,822 , 318,662 and 8,868 options were exercised having aggregate intrinsic values of $ 13.1 million, $ 1.6 million and $ 0.1 million, respectively.

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Vesting of the TSR Awards is based on the Company’s level of attainment of specified TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year period and is also subject to the continued employment of the grantees.

The number of shares that are earned over the performance period ranges from 0 % to 200 % of the initial award.

The number of shares

that are earned over the performance period ranges from 0 % to 200 % of the initial award.

The fair value of these awards are based on a Monte Carlo simulation valuation model with the following assumptions:

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The weighted average grant-date fair value for TSR Awards granted during the fiscal years ended December 31, 2022, 2021 and 2020 was $ 95.31 , $ 31.25 and $ 23.43 per share, respectively.

The total fair value of TSR Awards vested in fiscal years 2022, 2021 and 2020 was $ 8.8 million, $ 2.0 million and zero , respectively.

Common Stock Repurchases

In December 2022, the Company’s Board of Directors authorized the repurchase of up to $ 150.0 million in aggregate amount of the Company’s common stock under certain circumstances.

The Company used approximately $ 75.0 million of the net proceeds from the Notes to repurchase shares of their common stock from purchasers of the Notes in privately negotiated transactions effected with or through one of the initial purchasers or its affiliate.

The purchase price per share of the common stock repurchased in such transactions was equal to the closing sale price per share of the Company’s common stock on the date of the offering memorandum used for the Notes, which was $ 56.01 per share.

Following this initial repurchase, The Company may from time to time repurchase additional shares of their common stock.

In the year ended December 31, 2022, the Company purchased approximately 1.3 million shares of their outstanding common stock for $ 75.0 million as part of the program.

The Company did no t purchase any shares of their outstanding common stock in the years ended December 31, 2021 and 2020, respectively.

The Company determines if an arrangement is a lease at inception.

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The Company entered into an operating lease related to office space in Somerset, New Jersey, under a lease agreement expiring in August 2026, which was recorded in October 2021 for $ 0.7 million.

The Company excluded the Puerto Rico operating lease amounts classified as held for sale as of December 31, 2020.

The Company entered into an operating

lease agreement in February 2022 to lease office space in Bedford, Massachusetts, under a lease agreement expiring in June 2031, which commenced and was recorded in December 2022 for $ 11.0 million.

Leases with an initial term of 12 months or less are not recorded on the balance sheet as the Company has elected to apply the short-term lease exemption.

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Total other long-term assets $ 34,355 $ 38,758

Net (Loss) Income Per Common Share

A summary of net (loss) income per common share is presented below:

Net Income (Loss) Per Common Share

A summary of net income (loss) per common share is presented below:

(in thousands, except per share amounts) 2022 2021 2020

Net (loss) income $ ( 71,279 ) $ ( 13,473 ) $ 31,667

Net income (loss) $ 28,067 $ ( 71,279 ) $ ( 13,473 )

Basic weighted-average common shares outstanding 68,487 67,486 54,134

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Diluted weighted-average common shares outstanding 70,671 67,486 54,134

Basic (loss) income per common share $ ( 1.06 ) $ ( 0.25 ) $ 0.81

Diluted (loss) income per common share $ ( 1.06 ) $ ( 0.25 ) $ 0.79

Antidilutive securities excluded from diluted net (loss) income per common share 2,893 3,175 50

Basic income (loss) per common share $ 0.41 $ ( 1.06 ) $ ( 0.25 )

Diluted income (loss) per common share $ 0.40 $ ( 1.06 ) $ ( 0.25 )

Antidilutive securities excluded from diluted net income (loss) per common share 358 2,893 3,175

Impact of the Notes

The Company considered whether the notes are participating securities through the two-class method.

The Company determined that if a cash dividend is paid that is greater than the then stock price, the holder of notes will receive cash on an if-converted basis.

While this feature is considered to be a participating right;

basic earnings per share is only impacted if the Company’s earning exceeds the current share price, regardless of whether such dividend is declared.

During the year ended December 31, 2022, no such dividend was declared.

In addition, the Company is required to settle the principal amount of the Notes in cash upon conversion, and therefore, the Company uses the if-converted method for calculating any potential dilutive effect of the conversion option on diluted net income per share, if applicable, unless the application of the two-class method is dilutive.

The conversion option will have a dilutive impact on net income per share of Common Stock when the average market price per share of the Company's Common Stock for a given period exceeds the conversion price of the Notes of $ 79.81 per share.

During the year ended December 31, 2022, the weighted average price per share of the Company's Common Stock was below the conversion price of the Notes.

Commitments and Contingencies

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(in thousands) Amount

2027 and thereafter 2,716

Total $ 16,580

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The Company may be required to pay additional amounts up to approximately $ 200.0 million in contingent payments under the Company’s license agreements.

These contingent payments include potential milestone or contractual payment obligations contingent upon the achievement or occurrence of future milestones or events and the amounts and timing of such potential obligations are unknown or uncertain.

These contingent payments include potential milestone or contractual payment obligations contingent upon the

achievement or occurrence of future milestones or events and the amounts and timing of such potential obligations are unknown or uncertain.

Legal Proceedings

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If such loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

As of December 31, 2021, the Company had the following material ongoing litigation in which the Company was a party:

On January 31, 2022, the Company entered into a global settlement agreement with Pharma AG (“Novartis”), Advanced Accelerator Applications USA, Inc.

(“AAA”), Endocyte, Inc.

(“Endocyte”) and certain of their affiliates (the “Novartis Agreement”) to settle certain disputes between the parties, as further described below:

German PSMA-617 Litigation

On November 8, 2018, Molecular Insight Pharmaceuticals, Inc., a subsidiary of Progenics (“MIP”), filed a complaint against the University of Heidelberg (the “University”) in the District Court in Mannheim, Germany (the “German District Court” and, such litigation, the “German Litigation”).

In this Complaint, MIP claimed that the discovery and development of PSMA-617 was related to work performed under a research collaboration sponsored by MIP.

MIP alleged that the University breached certain contracts with MIP and that MIP is the co-owner of inventions embodied in certain worldwide patent filings related to PSMA-617 that were filed by the University.

On February 27, 2019, Endocyte, a wholly owned subsidiary of Novartis, filed a motion to intervene in the German Litigation.

Endocyte is the exclusive licensee of the patent rights that are the subject of the German proceedings.

In connection with this dispute, MIP filed a Confirmation of Ownership with the United States Patent and Trademark Office (“USPTO”) for certain U.S.

patent applications filed by the University to support MIPs claim that it is the co-owner of these pending U.S.

patent applications (the “Ownership Claim”).

On February 27, 2019, the German District Court set € 0.4 million as the amount MIP must deposit with the German District Court as security in the event of an unfavorable final decision on the merits of the dispute.

On August 24, 2020, the German District Court issued its decision dismissing MIP’s claims, stating that MIP failed to discharge its burden of proof in the matter.

MIP filed a Notice of Appeal of the German District Court’s decision on September 24, 2020 and filed its appeal brief on November 26, 2020.

The University and Endocyte each filed oppositions to MIP’s Notice of Appeal on March 12, 2021 and an oral hearing for the appeal was scheduled for September 28, 2022, at the Higher Regional Court Karlsruhe.

Pursuant to the terms of the Novartis Agreement, the German Litigation was dismissed and the Ownership Claim withdrawn.

Post-Grant Review Proceeding

On February 4, 2021, AAA, a wholly-owned subsidiary of Novartis and parent of Endocyte, filed a petition for post-grant review of U.S.

10,640,461 (the “’461 patent”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO.

The ’461 patent is owned by MIP.

In the petition, AAA challenged the patentability of certain claims of the ’461 patent.

The PTAB instituted Post-Grant Review proceedings (the “PGR Proceeding”) on July 29, 2021.

Pursuant to the terms of the Novartis Agreement, the PGR Proceeding will be terminated.

Global Settlement Agreement

In addition to the dismissal of the German Litigation, the withdrawal of the Ownership Claim and the termination of the PGR Proceeding, under the Novartis Agreement, the parties will, among other things, cross-license certain patent rights to one another, and Novartis will make a $ 24.0 million lump sum payment to the Company and also reimburse the Company for certain fees and expenses the Company is required to pay to the University in connection with the German Litigation.

RELISTOR European Opposition Proceedings

In October 2015, Progenics received notices of opposition to three European patents relating to methylnaltrexone:

EP1615646, EP2368553 and EP2368554.

Notices of opposition were filed separately at the European Patent Office (the “EPO”) by each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH.

Between May 11, 2017 and July 4, 2017, the Opposition Division of the EPO (the “Opposition Division”) provided notice that the three European patents would be revoked.

Each of these matters was appealed to the Appeal Board of the EPO.

On November 13, 2020, Progenics withdrew the appeal for EP2368553 and EP2368554.

Notices of termination of the proceedings with revocation of the patent were issued on November 23, 2020 for both patents.

Progenics continued its appeal on the revocation of the third patent, EP1615646.

Oral proceedings for EP1615646 were held at the Appeal Board of the EPO on September 22, 2020.

The revocation decision under appeal was set aside and the case was remitted to the Opposition Division for further prosecution.

An oral hearing was held before the Opposition Division on September 27, 2021.

The Opposition Division issued its final written opinion on November 11, 2021, indicating that the patent will be maintained in amended form.

The final written decision of the Opposition Division was appealable to the Appeal Board of the EPO by either party.

Progenics appealed this decision on January 20, 2022 to hold open its option to file Grounds for Appeal.

Given that neither opponent filed an Notice of Appeal, Progenics intends to withdraw its notice to allow the patent to issue in amended form.

As of December 31, 2022, the Company did not have any material ongoing litigation to which the Company was a party.

The Company maintains a qualified 401(k) plan (the “401(k) Plan”) for its U.S.

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Expense recognized by the Company for matching contributions made to the 401(k) Plan was $ 3.1 million, $ 2.6 million and $ 0.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Acquisition of Assets

In December 2022, the Company made upfront payments of $ 260.0 million to POINT as a part of an asset acquisition with the potential for additional milestone payments of approximately $ 1.8 billion between the two licensed assets based on U.S.

Food and Drug Administration (“FDA”) approval and net sales and commercial milestones.

Under the terms of the PNT2002 License Agreement, Lantheus Two, LLC 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.

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.

Additionally, the Company will pay POINT royalties on net sales, beyond certain financial thresholds and subject to conditions, of 20 % for PNT2002 and 15 % for PNT2003.

Costs of IPR&D projects acquired as part of an asset acquisition that have no alternative future use are expensed when incurred, and therefore, a charge of $ 260.0 million was recognized in research and development expenses during the year ended December 31, 2022.

Segment Information

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The Company now operates as one business segment:

the development, manufacture and sale of innovative diagnostic and therapeutic products that assist clinicians in the diagnosis and treatment of heart disease, cancer and other diseases.

the development, manufacture and sale of innovative imaging diagnostics, radiotherapeutics, and artificial intelligence solutions designed to enable clinicians to Find, Fight and Follow disease to deliver better patient outcomes.

This conclusion reflects the Company’s focus on the performance of the business on a consolidated worldwide basis.

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The Company’s chief operating decision maker does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the Company’s consolidated operating results.

Subsequent Events

On January 31, 2022, the Company entered into a global settlement agreement with Novartis, AAA, Endocyte and their affiliates to settle certain disputes between the parties.

Under the Novartis Agreement, Novartis will make a lump sum payment and reimburse the Company for certain fees and expenses in connection with the German Litigation.

See Note 20, “Commitments and Contingencies”, for further details.

Subsequent Event

On February 6, 2023, the Company 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, Lantheus paid an upfront payment of $ 35 million and potentially will pay additional development and commercial milestone payments.

Additionally, Lantheus 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.

Structured as a stock purchase, the agreement specifies, among other things, that the seller will also provide transition and clinical development services for a prescribed time following the closing of the transaction.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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 8. Financial Statements and Supplementary Data