What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 85 added, 86 removed, 265 unchanged (39% of the section changed)

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

(i) continued market expansion and penetration for our established commercial products, particularly PYLARIFY and DEFINITY, in the face of competition;

(i) continued market expansion and penetration for our established commercial products, particularly PYLARIFY and DEFINITY, in a competitive environment in which other imaging agents have been approved and are being commercialized, and our ability to clinically and commercially differentiate our products from other products;

(ii) our ability to have third parties manufacture our products and our ability to manufacture DEFINITY in our in-house manufacturing facility;

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

With more than 65 years of experience in delivering life-changing science, we are committed to deliver better patient outcomes and improve lives through diagnostics, radiotherapeutics and artificial intelligence solutions that enable clinicians to Find, Fight and Follow disease.

With more than 65 years of experience in delivering life-changing science, we are committed to delivering better patient outcomes and improving lives through diagnostics, radiotherapeutics and artificial intelligence solutions that enable clinicians to Find, Fight and Follow disease.

We classify our products in three categories:

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

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

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

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

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

In April 2023, we announced with POINT that the FDA had granted Fast Track designation for PNT2002.

Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and address unmet needs.

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

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

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

Under the terms of the agreement, we paid the Selling Stockholders an upfront payment of $35.0 million in February 2023 and paid an additional $10.0 million in May 2023 upon the successful completion of a technology transfer.

The Selling Stockholders are also eligible to receive additional development and commercial milestone payments.

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

Research revenue is derived from existing partnerships with pharmaceutical companies that use MK-6240 in clinical trials and includes milestone and dose-related payments.

Pursuant to the terms of the stock purchase agreement pursuant to which we purchased Cerveau, certain members of the Selling Stockholders will also provide transition and clinical development services for a prescribed time following the closing of the transaction.

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

For more information, see Note 19, “Acquisition of Assets” in our consolidated financial statements included herein.

Refinancing of 2019 Facility

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

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

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

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

Issuance of Convertible Notes

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

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

Bank 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 us.

Key Factors Affecting Our Results

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

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

During 2021, 2022 and the first half of 2023, we hired additional employees to assist us with the commercialization of PYLARIFY, including in Sales, Marketing, Reimbursement, Quality and Medical Affairs.

In addition to our network of PET manufacturing facilities (“PMFs”), we partnered with academic medical centers in the U.S.

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

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

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

TPT Status for PYLARIFY could expire on December 31, 2024.

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

PYLARIFY’s competition is primarily two commercially available gallium-68-based PSMA imaging agents and other non-PSMA-based imaging agents, commonly referred to as conventional imaging.

We also could face potential competition from an F 18 PSMA PET imaging agent.

The successful growth of PYLARIFY is dependent on our ability to sustain PYLARIFY as the leading PSMA PET imaging agent in an increasingly competitive marketplace.

PYLARIFY’s competition includes two commercially available gallium-68-based PSMA imaging agents, a recently approved fluorine-18-based PSMA imaging agent, and other non-PSMA-based imaging agents, commonly referred to as conventional imaging.

In connection with the acquisition of Progenics in June 2020, we issued CVRs tied to the financial performance of PYLARIFY.

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, but not to exceed, in the aggregate, 19.9% of the total consideration we paid in the acquisition of Progenics.

Based on our 2022 PYLARIFY net sales, we determined that the aggregate payment obligation under the CVRs was $99.7 million, which is the maximum amount payable under the CVRs.

We expect to make that payment during the second quarter of 2023 in full satisfaction of the CVRs.

Each CVR entitled 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, but not to exceed, in the aggregate, 19.9% of the total consideration we paid in the acquisition of Progenics.

Based on our 2022 PYLARIFY net sales, we determined that the aggregate payment obligation under the CVRs was $99.6 million, which was the maximum amount payable under the CVRs.

We paid $99.6 million to the CVR holders during May 2023 in full satisfaction of our obligations under the CVRs.

PYLARIFY AI Use

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Continued Growth of DEFINITY

As we continue to educate the physician and healthcare provider community about the benefits and risks of DEFINITY, we believe we will be able to continue to grow the appropriate use of DEFINITY through growth in the total addressable market as well as instances where there are suboptimal echocardiograms.

market with three echocardiography ultrasound enhancing agents approved by the FDA, we estimate that DEFINITY will continue to hold approximately 80% market share.

We believe we will be able to increase use of DEFINITY through continued education of physicians and healthcare providers about the benefits of ultrasound enhancing agents in suboptimal echocardiograms.

market currently has three echocardiography ultrasound enhancing agents approved by the FDA;

we estimate that DEFINITY will continue to hold at least an 80% market share.

As we continue to expand our microbubble franchise, our activities include:

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

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

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

Our Strategic Partnerships and Other Revenue category includes our Strategic Partnerships, Pharma Services and Digital Solutions businesses and is focused on enabling precision medicine with biomarkers and digital solutions.

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The strategic goal of our Pharma Services business is to gain early access to innovation, de-risk the development, data generation and co-funding of our pipeline through collaborations, embed our technologies in the clinical ecosystem and establish the clinical utility of product candidates and research tools in our pipeline.

Our Biomarkers are intended to support patient

selection and the monitoring of disease progression, primarily with respect to different oncological diseases.

Our Biomarkers are intended to support patient selection and the monitoring of disease progression, primarily with respect to different oncological diseases.

For example, piflufolastat F 18 is currently being used by Curium, Novartis, POINT and Regeneron in those companies’ prostate cancer therapeutic drug development programs.

Our acquisition of Cerveau in February 2023 added MK-6240 to our biomarker portfolio.

MK-6240 is currently being used in more than sixty academic and industry clinical trials for several late-stage Alzheimer’s disease therapeutic candidates being developed by more than sixteen pharmaceutical companies.

MK-6240 is currently being used in more than sixty academic and industry clinical trials for several Alzheimer’s disease therapeutic candidates being developed by more than sixteen pharmaceutical companies.

Most recently, in collaboration with Ratio Therapeutics, we initiated a Phase I study for LNTH-1363S to evaluate the pharmokinetics, biodistribution and radiation dosimetry in adult health volunteers.

LNTH-1363S is our novel fibroblast activation protein, alpha targeted, copper-64 labeled PET imaging agent candidate.

In addition, we continue to expand our Microbubble Platform.

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Our digital solutions include aPROMISE and aBSI (as defined below).

aPROMISE, which is currently sold as PYLARIFY AI in the U.S., is artificial intelligence medical device software that is designed to allow healthcare professionals and researchers to perform standardized quantitative assessment of PSMA PET/CT images in prostate cancer, including those images obtained by using PYLARIFY.

Automated Bone Scan Index (“aBSI”) automatically calculates the disease burden of prostate cancer by detecting and classifying bone scan tracer uptakes as metastatic or benign lesions using an artificial neural network.

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Research and Development Expenses

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

To ensure we remain the leading radiopharmaceutical-focused company in our industry, we have historically made and will continue to make substantial investments in new product development and lifecycle management for existing products, including:

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

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

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

• For 1095, our PSMA-targeted iodine-131-labeled small molecule product candidate, we enrolled the last patient in our ARROW Phase 2 study during the second quarter of 2022.

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

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

• We are also developing additional lifecycle management opportunities for PYLARIFY, including preparing a clinical study in favorable intermediate-risk prostate cancer patients, and exploring other possibilities beyond prostate cancer.

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.

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Three Months Ended

(in thousands) 2023 2022 Change $ Change %

June 30, Six Months Ended

(in thousands) 2023 2022 Change $ Change % 2023 2022 Change $ Change %

Revenues $ 321,700 $ 223,723 $ 97,977 43.8 % $ 622,484 $ 432,603 $ 189,881 43.9 %

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Total operating expenses 78,508 74,825 3,683 4.9 % 164,928 144,970 19,958 13.8 %

Operating (loss) income (9,344) 58,925 (68,269) (115.9) %

Operating income 124,139 63,204 60,935 96.4 % 114,795 122,129 (7,334) (6.0) %

Interest expense 4,933 1,469 3,464 235.8 % 9,924 2,978 6,946 233.2 %

Other income (4,482) (310) (4,172) 1345.8 % (7,713) (795) (6,918) 870.2 %

(Loss) income before income taxes (11,104) 57,901 (69,005) (119.2) %

Income tax (benefit) expense (8,297) 14,939 (23,236) (155.5) %

Net (loss) income $ (2,807) $ 42,962 $ (45,769) (106.5) %

Comparison of the Periods Ended March 31, 2023 and 2022

Income before income taxes 123,688 62,045 61,643 99.4 % 112,584 119,946 (7,362) (6.1) %

Income tax expense 29,557 18,987 10,570 55.7 % 21,260 33,926 (12,666) (37.3) %

Net income $ 94,131 $ 43,058 $ 51,073 118.6 % $ 91,324 $ 86,020 $ 5,304 6.2 %

Comparison of the Periods Ended June 30, 2023 and 2022

We classify our revenues into three product categories:

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Three Months Ended

(in thousands) 2023 2022 Change $ Change %

PYLARIFY 195,470 92,777 102,693 N/A

June 30, Six Months Ended

(in thousands) 2023 2022 Change $ Change % 2023 2022 Change $ Change %

PYLARIFY $ 210,522 $ 130,232 $ 80,290 61.7 % $ 405,992 $ 223,009 $ 182,983 82.1 %

Other radiopharmaceutical oncology 818 928 (110) (11.9) % 1,535 2,255 (720) (31.9) %

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Total revenues $ 321,700 $ 223,723 $ 97,977 43.8 % $ 622,484 $ 432,603 $ 189,881 43.9 %

The increase in revenues for the three months ended March 31, 2023, is primarily driven by an increase in PYLARIFY and DEFINITY sales volume.

The increase is offset, in part, by a decrease in Strategic Partnerships and Other Revenue due to the revenue recognized from the Novartis licensing agreement in the prior year and lower sales volumes from TechneLite driven by opportunistic sales in the prior year.

The increase in revenues for the three months ended June 30, 2023, is primarily driven by an increase in PYLARIFY, DEFINITY and TechneLite sales volume, as well as revenue generated by Cerveau, as recorded in Strategic Partnerships and Other Revenue.

The increase in revenues for the six months ended June 30, 2023, is primarily driven by an increase in PYLARIFY and DEFINITY sales volume, as well as revenue generated by Cerveau, as recorded in Strategic Partnerships and Other Revenue.

The increase is offset, in part, by a decrease in Strategic Partnerships and Other Revenue due to the revenue recognized from the Novartis licensing agreement in the prior year.

Rebates and Allowances

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Payments or credits made during the period (15,918)

Balance, March 31, 2023 $ 11,925

The decrease in gross profit for the three months ended March 31, 2023, as compared to the prior year period, is primarily due to the impairment of the AZEDRA currently marketed intangible asset and the Novartis licensing settlement in the prior year partially offset by increased PYLARIFY and DEFINITY sales volumes.

Balance, June 30, 2023 $ 11,087

The increase in gross profit for the three months ended June 30, 2023, as compared to the prior year period, is primarily due to increased PYLARIFY and DEFINITY sales volumes, partially offset by the impairment related to a certain asset group.

The increase in gross profit for the six months ended June 30, 2023, as compared to the prior year period, is primarily due to the increased PYLARIFY and DEFINITY sales volumes, partially offset by the impairment of the AZEDRA currently marketed intangible asset, the Novartis licensing settlement in the prior year, amortization of Cerveau intangible assets and the impairment related to a certain asset group.

Sales and Marketing

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

Sales and marketing expenses increased $12.3 million for the three months ended March 31, 2023 as compared to the prior year period.

Sales and marketing expenses increased $9.0 million and $21.2 million for the three and six months ended June 30, 2023, respectively, as compared to the prior year period.

This was primarily driven by the continued promotion activities of PYLARIFY and increased employee-related costs.

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

General and administrative expenses decreased $14.3 million for the three months ended March 31, 2023 compared to the prior period.

This was primarily driven by an $19.8 million net reduction for the fair value adjustments to the contingent asset and liabilities in the first quarter of 2022 (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs) and insurance settlement in 2022.

General and administrative expenses decreased $6.4 million for the three months ended June 30, 2023 compared to the prior period.

This was primarily driven by a $16.0 million net reduction for the fair value adjustments to the contingent asset and liabilities in the second quarter of 2023 (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

This decrease is partially offset by increased employee-related costs, professional fees and investment in technology.

General and administrative expenses decreased $20.8 million for the six months ended June 30, 2023 compared to the prior period.

This was primarily driven by a $35.8 million net reduction for the fair value adjustments to the contingent asset and liabilities in the first half of 2023 (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

This decrease is partially offset by increased employee-related costs, professional fees and investment in technology.

Research and Development

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

Research and development expenses increased $18.3 million for the three months ended March 31, 2023 as compared to the prior year period.

This was primarily driven by the AZEDRA IPR&D asset impairment loss of $15.6 million and higher costs driven by an increased headcount.

Research and development expenses increased $1.2 million for the three months ended June 30, 2023 as compared to the prior year period.

This was primarily driven by increased employee-related costs.

Research and development expenses increased $19.5 million for the six months ended June 30, 2023 as compared to the prior year period.

This was primarily driven by the AZEDRA IPR&D asset impairment loss of $15.6 million and higher employee-related costs driven by an increased headcount.

These increases were offset, in part, by lower clinical expenses related to our ARROW Phase 2 study.

Interest Expense

Interest expense increased by approximately $3.5 million for the three months ended March 31, 2023 as compared to the prior year period due to the issuance of the Notes on December 8, 2022, which was partially offset by the interest rate swap agreements from the prior year.

Interest expense increased by approximately $6.9 million for the six months ended June 30, 2023 as compared to the prior year period due to the issuance of the Notes on December 8, 2022, which was partially offset by the interest rate swap agreements from the prior year.

Income Tax Expense

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

Three Months Ended

Six Months Ended

Effective tax rate 18.9% 28.3%

Our effective tax rate for the three months ended March 31, 2023 differs from the U.S.

statutory rate of 21% primarily due to the income tax benefit associated with stock compensation deductions.

The increase in the effective income tax rate for the three months ended March 31, 2023 is primarily due to the impact of our stock compensation deductions in relation to the pre-tax loss.

Our effective tax rate for the six months ended June 30, 2023 differs from the U.S.

statutory rate of 21% primarily due to the income tax benefit associated with stock compensation deductions, partially offset by state income taxes.

The decrease in the effective income tax rate for the six months ended June 30, 2023 is primarily due to the decrease in non-deductible contingency reserve expense and the increase in our stock compensation deductions.

Liquidity and Capital Resources

The following table provides information regarding our cash flows:

Three Months Ended

Six Months Ended

(in thousands) 2023 2022

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Net Cash Provided by Operating Activities

Net cash provided by operating activities of $108.5 million in the three months ended March 31, 2023 was primarily comprised of net income adjusted for the net effect of non-cash items such as impairment of long-lived assets, depreciation, amortization and accretion expense and stock-based compensation expense.

The primary working capital sources of cash were the timing of payments for income taxes and to large vendors.

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

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

Net cash provided by operating activities of $76.2 million in the six months ended June 30, 2023 was primarily comprised of net income adjusted for the net effect of non-cash items such as impairment of long-lived assets, depreciation, amortization and accretion expense and stock-based compensation expense.

The primary working capital sources of cash were the timing of payments to large vendors.

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

The primary working capital uses of cash were a decrease to accruals related to the CVR payment, an increase in trade receivables associated primarily with the increase in PYLARIFY revenues, and an increase in inventory related to the timing of batch processes.

Net cash provided by operating activities of $82.9 million in the six months ended June 30, 2022 was primarily comprised of net income adjusted for the net effect of non-cash items such as the change in fair value of contingent assets and liabilities of $26.9 million (refer to Note 4, “Fair Value of Financial Instruments”, for further details on contingent consideration liabilities, including CVRs).

The primary working capital sources of cash were the timing of payments to large vendors.

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

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months ended March 31, 2023 was due to $35.3 million for our asset acquisition of Cerveau and $9.2 million of capital expenditures.

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

Net cash used in investing activities during the six months ended June 30, 2023 was due to $45.3 million for our asset acquisition of Cerveau and $19.9 million of capital expenditures.

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

Net Cash Used in Financing Activities

Net cash used in financing activities during the three months ended March 31, 2023 is primarily attributable to the payments for minimum statutory tax withholding related to net share settlement of equity awards of $11.2 million offset by proceeds of $1.8 million from stock option exercises.

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

Net cash used in financing activities during the six months ended June 30, 2023 is primarily attributable to the payments for minimum statutory tax withholding related to net share settlement of equity awards of $12.6 million and the CVR initial valuation as of June 30, 2020 of $3.7 million offset by proceeds of $3.2 million from stock option exercises.

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

External Sources of Liquidity

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

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

The 2022 Revolving Facility includes a $10.0 million sub-facility for swingline loans (the “Swingline Loans”).

The Letters of Credit, Swingline

Loans and the borrowings under the 2022 Revolving Facility are expected to be used for working capital and other general corporate purposes.

The 2022 Revolving Facility includes a $20.0 million sub-facility for the issuance of Letters of Credit.

The 2022 Revolving Facility includes a

$10.0 million sub-facility for Swingline Loans.

The Letters of Credit, Swingline Loans and the borrowings under the 2022 Revolving Facility are expected to be used for working capital and other general corporate purposes.

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

As of March 31, 2023, we were in compliance with all financial and other covenants under the 2022 Credit Agreement.

As of June 30, 2023, we were in compliance with all financial and other covenants under the 2022 Credit Agreement.

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

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

Bank, as Trustee.

The Notes were issued under the Indenture.

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

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

• The amount and timing of the calculated cash payment related to the CVRs (as described further in Note 4, “Fair Value of Financial Instruments”);

• The level of product sales and the pricing environment of our currently marketed products, particularly PYLARIFY and DEFINITY, as well as any additional products that we may market in the future;

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

• Our investment in the further clinical development and commercialization of products and development candidates, including PNT2002, PNT2003, 1095 and MK-6240;

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

• Our investment in the further clinical development and commercialization of products and development candidates, including PNT2002, PNT2003, 1095 and NM-01;

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

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

At March 31, 2023, our only current committed external source of funds is our borrowing availability under our 2022 Revolving Facility.

We had $470.9 million of cash and cash equivalents at March 31, 2023.

At June 30, 2023, our only current committed external source of funds is our borrowing availability under our 2022 Revolving Facility.

We had $414.1 million of cash and cash equivalents as of June 30, 2023.

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

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Accordingly, we may be limited in utilizing the full amount of our 2022 Revolving Facility as a source of liquidity.

The CVRs we issued in our acquisition of Progenics entitle holders thereof to future cash payments of a pro rata share of aggregate cash payments equal to 40% of U.S.

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

Based on our 2022 PYLARIFY net sales, we determined that the aggregate payment obligation under the CVRs was $99.7 million, which is the maximum amount payable under the CVRs.

We expect to make that payment during the second quarter of 2023 in full satisfaction of the CVRs.

Based on our current operating plans, we believe our balance of cash and cash equivalents, which totaled $470.9 million as of March 31, 2023, along with cash generated by ongoing operations and continued access to our 2022 Revolving Facility, will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

Based on our current operating plans, we believe our balance of cash and cash equivalents, which totaled $414.1 million as of June 30, 2023, along with cash generated by ongoing operations and continued access to our 2022 Revolving Facility, will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

Critical Accounting Policies and Estimates

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

There have been no significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the three months ended March 31, 2023.

There have been no significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the six months ended June 30, 2023.

For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, 2022.

Off-Balance Sheet Arrangements

We are required to provide the Massachusetts Department of Public Health and New Jersey Department of Environmental Protection financial assurance demonstrating our ability to fund the decommissioning of our North Billerica, Massachusetts and Somerset, New Jersey production facilities upon closure, though we do not intend to close the facilities.

We have provided this financial assurance in the form of a $30.3 million surety bond.

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

Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A.

“Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2022.

Our exposures to market risk have not changed materially since December 31, 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis