Lantheus Holdings, Inc. 10-Q

Item 1. Financial Statements (Unaudited) Lantheus Holdings, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except par value) September 30, 2023 December 31, 2022 Assets Current assets Cash and cash equivalents $ 614,131 $ 415,652 Accounts receivable, net 259,198 213,397 Inventory 56,462 35,475 Other current assets 11,485 13,092 Assets held for sale 7,159 — Total current assets 948,435 677,616 Property, plant and equipment, net 140,293 122,166 Intangibles, net 163,294 315,285 Goodwill 61,189 61,189 Deferred tax assets, net 152,189 110,647 Other long-term assets 56,210 34,355 Total assets $ 1,521,610 $ 1,321,258 Liabilities and stockholders’ equity Current liabilities Current portion of long-term debt and other borrowings $ 703 $ 354 Accounts payable 37,076 20,563 Short-term contingent liability — 99,700 Accrued expenses and other liabilities 138,823 127,084 Total current liabilities 176,602 247,701 Asset retirement obligations 22,823 22,543 Long-term debt, net and other borrowings 560,576 557,712 Other long-term liabilities 62,850 46,155 Total liabilities 822,851 874,111 Commitments and contingencies (See Note 18) Stockholders’ equity Preferred stock ($ 0.01 par value, 25,000 shares authorized; no shares issued and outstanding) — — Common stock ($ 0.01 par value, 250,000 shares authorized; 69,808 and 68,851 shares issued as of September 30, 2023 and December 31, 2022, respectively) 698 689 Additional paid-in capital 743,973 715,875 Treasury Stock at cost - 1,339 shares as of September 30, 2023 and December 31, 2022 ( 75,000 ) ( 75,000 ) Accumulated deficit 30,123 ( 193,158 ) Accumulated other comprehensive loss ( 1,035 ) ( 1,259 ) Total stockholders’ equity 698,759 447,147 Total liabilities and stockholders’ equity $ 1,521,610 $ 1,321,258 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Table of Contents Lantheus Holdings, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 319,946 $ 239,292 $ 942,430 $ 671,895 Cost of goods sold 119,995 91,859 462,756 257,363 Gross profit 199,951 147,433 479,674 414,532 Operating expenses Sales and marketing 37,399 25,414 106,472 73,260 General and administrative 35,741 23,759 85,163 93,945 Research and development 14,450 12,517 60,883 39,455 Total operating expenses 87,590 61,690 252,518 206,660 Operating income 112,361 85,743 227,156 207,872 Interest expense 5,054 1,626 14,978 4,604 Other (income) expense ( 52,649 ) 1,101 ( 60,362 ) 306 Income before income taxes 159,956 83,016 272,540 202,962 Income tax expense 27,999 21,784 49,259 55,710 Net income $ 131,957 $ 61,232 $ 223,281 $ 147,252 Net income per common share: Basic $ 1.93 $ 0.89 $ 3.27 $ 2.15 Diluted $ 1.88 $ 0.86 $ 3.18 $ 2.08 Weighted-average common shares outstanding: Basic 68,436 68,756 68,188 68,482 Diluted 70,046 71,075 70,268 70,669 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents Lantheus Holdings, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income $ 131,957 $ 61,232 $ 223,281 $ 147,252 Other comprehensive income: Foreign currency translation ( 83 ) ( 379 ) 224 ( 463 ) Unrealized gain on cash flow hedges, net of tax — 1,049 — 3,942 Total other comprehensive (loss) income ( 83 ) 670 224 3,479 Comprehensive income $ 131,874 $ 61,902 $ 223,505 $ 150,731 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents Lantheus Holdings, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) (in thousands) Nine Months Ended September 30, 2023 Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Amount Shares Amount Balance, January 1, 2023 68,851 $ 689 1,339 $ ( 75,000 ) $ 715,875 $ ( 193,158 ) $ ( 1,259 ) $ 447,147 Net loss — — — — — ( 2,807 ) — ( 2,807 ) Other comprehensive loss — — — — — — ( 119 ) ( 119 ) Stock option exercises and employee stock plan purchases 120 1 — — 2,781 — — 2,782 Vesting of restricted stock awards and units 813 8 — — ( 8 ) — — — Shares withheld to cover taxes ( 154 ) ( 2 ) — — ( 11,152 ) — — ( 11,154 ) Stock-based compensation — — — — 9,667 — — 9,667 Balance, March 31, 2023 69,630 $ 696 1,339 $ ( 75,000 ) $ 717,163 $ ( 195,965 ) $ ( 1,378 ) $ 445,516 Net income — — — — — 94,131 — 94,131 Other comprehensive income — — — — — — 426 426 Stock option exercises and employee stock plan purchases 73 1 — — 1,346 — — 1,347 Vesting of restricted stock awards and units 68 1 — — ( 1 ) — — — Shares withheld to cover taxes ( 16 ) — — — ( 1,467 ) — — ( 1,467 ) Stock-based compensation — — — — 12,692 — — 12,692 Balance, June 30, 2023 69,755 $ 698 1,339 $ ( 75,000 ) $ 729,733 $ ( 101,834 ) $ ( 952 ) $ 552,645 Net income — — — — — — 131,957 — 131,957 Other comprehensive loss — — — — — — ( 83 ) ( 83 ) Stock option exercises and employee stock plan purchases 25 — — — 1,265 — — 1,265 Vesting of restricted stock awards and units 39 — — — ( 1 ) — — ( 1 ) Shares withheld to cover taxes ( 11 ) — — — ( 1,000 ) — — ( 1,000 ) Stock-based compensation — — — — 13,976 — — 13,976 Balance, September 30, 2023 69,808 $ 698 1,339 $ ( 75,000 ) $ 743,973 $ 30,123 $ ( 1,035 ) $ 698,759 4 Table of Contents Nine Months Ended September 30, 2022 Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders’ Equity Shares Amount Shares Amount Balance, January 1, 2022 67,739 $ 677 — $ — $ 685,472 $ ( 221,225 ) $ ( 485 ) $ 464,439 Net income — — — — — 42,962 — 42,962 Other comprehensive income — — — — — — 2,396 2,396 Stock option exercises and employee stock plan purchases 296 3 — — 5,931 — — 5,934 Vesting of restricted stock awards and units 645 7 — — ( 7 ) — — — Shares withheld to cover taxes ( 110 ) ( 1 ) — — ( 5,503 ) — — ( 5,504 ) Stock-based compensation — — — — 5,623 — — 5,623 Balance, March 31, 2022 68,570 $ 686 — $ — $ 691,516 $ ( 178,263 ) $ 1,911 $ 515,850 Net income — — — — — 43,058 — 43,058 Other comprehensive income — — — — — — 413 413 Stock option exercises and employee stock plan purchases 61 1 — — 1,422 — — 1,423 Vesting of restricted stock awards and units 108 1 — — ( 1 ) — — — Shares withheld to cover taxes ( 13 ) ( 1 ) — — ( 823 ) — — ( 824 ) Stock-based compensation — — — — 7,412 — — 7,412 Balance, June 30, 2022 68,726 $ 687 — $ — $ 699,526 $ ( 135,205 ) $ 2,324 $ 567,332 Net income — — — — — 61,232 — 61,232 Other comprehensive income — — — — — — 670 670 Stock option exercises and employee stock plan purchases 53 1 — — 1,555 — — 1,556 Vesting of restricted stock awards and units 41 1 — — ( 1 ) — — — Shares withheld to cover taxes ( 11 ) ( 1 ) — — ( 842 ) — — ( 843 ) Stock-based compensation — — — — 8,103 — — 8,103 Balance, September 30, 2022 68,809 $ 688 — $ — $ 708,341 $ ( 73,973 ) $ 2,994 $ 638,050 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents Lantheus Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 30, 2023 2022 Operating activities Net income $ 223,281 $ 147,252 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation, amortization and accretion 45,028 36,048 Impairment of long-lived assets 138,050 — Asset retirement obligation acceleration — 1,229 Amortization of debt related costs 3,227 737 Changes in fair value of contingent assets and liabilities ( 9,475 ) 25,400 Provision for excess and obsolete inventory 5,251 4,980 Stock-based compensation 36,335 21,138 Gain on sale of RELISTOR licensed intangible asset associated with net sales royalties ( 51,789 ) — Deferred taxes ( 57,649 ) 14,461 Long-term indemnification receivable 3,929 668 Long-term income tax payable and other long-term liabilities ( 2,744 ) ( 538 ) Other 3,118 3,188 (Decreases) increases in cash from operating assets and liabilities: Accounts receivable ( 43,044 ) ( 112,031 ) Inventory ( 25,995 ) ( 4,666 ) Other current assets 2,496 314 Other long-term assets — ( 533 ) Accounts payable 12,150 8,409 Accrued expenses and other liabilities ( 89,196 ) 30,374 Net cash provided by operating activities 192,973 176,429 Investing activities Capital expenditures ( 34,486 ) ( 13,623 ) Proceeds from sale of assets, net 97,839 1,800 Acquisition of assets, net ( 45,345 ) — Net cash provided by (used in) investing activities 18,008 ( 11,823 ) Financing activities Payments on long-term debt and other borrowings ( 685 ) ( 7,891 ) Contingent value rights settlement ( 3,700 ) — Proceeds from stock option exercises 3,462 7,538 Proceeds from issuance of common stock 1,933 1,375 Payments for minimum statutory tax withholding related to net share settlement of equity awards ( 13,621 ) ( 7,171 ) Net cash used in financing activities ( 12,612 ) ( 6,149 ) Effect of foreign exchange rates on cash, cash equivalents and restricted cash 139 ( 266 ) Net increase in cash, cash equivalents and restricted cash 198,508 158,191 Cash, cash equivalents and restricted cash, beginning of period 417,241 100,651 Cash, cash equivalents and restricted cash, end of period $ 615,749 $ 258,842 6 Table of Contents Lantheus Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Continued) (Unaudited) (in thousands) Nine Months Ended September 30, 2023 2022 Reconciliation to amounts within the condensed consolidated balance sheets Cash and cash equivalents $ 614,131 $ 257,259 Restricted cash included in other long-term assets 1,618 1,583 Cash, cash equivalents and restricted cash at end of period $ 615,749 $ 258,842 Nine Months Ended September 30, 2023 2022 Schedule of non-cash investing and financing activities Additions of property, plant and equipment included in liabilities $ 8,573 $ 2,303 Right-of-use asset obtained in exchange for operating lease liabilities $ 29,625 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents Lantheus Holdings, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Note Regarding Company References and Trademarks Unless the context otherwise requires, references to the “Company” and “Lantheus” refer to Lantheus Holdings, Inc. and its direct and indirect wholly-owned subsidiaries; references to “Lantheus Holdings” refer to Lantheus Holdings, Inc. and not to any of its subsidiaries; references to “LMI” refer to Lantheus Medical Imaging, Inc., the direct subsidiary of Lantheus Holdings; references to “Cerveau,” “Lantheus Real Estate,” “Lantheus Two,” “Lantheus Three” and “Progenics” refer to Cerveau Technologies, Inc.; Lantheus MI Real Estate, LLC; Lantheus Two, LLC; Lantheus Three, LLC; and Progenics Pharmaceuticals, Inc., respectively, each a wholly-owned subsidiary of LMI, and references to “EXINI” refer to EXINI Diagnostics AB, a wholly-owned subsidiary of Progenics. Solely for convenience, the Company refers to trademarks, service marks and trade names without the TM, SM and ® symbols. Those references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent permitted under applicable law, its rights to its trademarks, service marks and trade names. 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Lantheus and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement have been included. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023 or any future period. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all the information and notes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities Exchange Commission (“SEC”) on February 23, 2023. Progenics Acquisition On June 19, 2020 (the “Closing Date”), pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 20, 2020 (the “Merger Agreement”), by and among Lantheus Holdings, Plato Merger Sub, Inc., a wholly-owned subsidiary of Lantheus Holdings (“Merger Sub”), and Progenics, Lantheus Holdings completed the acquisition of Progenics by means of a merger of Merger Sub with and into Progenics, with Progenics becoming an indirect subsidiary of Lantheus Holdings following the completion of such merger (the “Progenics Acquisition”). In connection with the Progenics Acquisition, Lantheus Holdings issued 26,844,877 shares of Lantheus Holdings common stock and 86,630,633 contingent value rights (each a “CVR”) tied to the financial performance of PYLARIFY to former Progenics stockholders and option holders. Each CVR entitled its holder to receive a pro rata share of aggregate cash payments equal to 40 % of United States (“U.S.”) net sales generated by PYLARIFY in 2022 and 2023 in excess of $ 100.0 million and $ 150.0 million, respectively. 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, was capped at 19.9 % of the total consideration the Company paid in the Progenics Acquisition. Based on the Company’s 2022 PYLARIFY net sales, the Company determined that the aggregate payment obligation under the CVRs was $ 99.6 million, which was the maximum amount payable. The Company paid out this amount in May 2023 in full satisfaction of the CVRs. 2. Summary of Significant Accounting Policies Recent Accounting Pronouncements The Company has not adopted any new accounting standards during the nine months ended September 30, 2023. 8 Table of Contents 3. Revenue from Contracts with Customers The following table summarizes revenue by revenue source as follows: Three Months Ended September 30, Nine Months Ended September 30, Major Products/Service Lines (in thousands) 2023 2022 2023 2022 Product revenue, net (1) $ 319,508 $ 233,366 $ 925,848 $ 631,157 License and royalty revenues (2) 438 5,926 16,582 40,738 Total revenues $ 319,946 $ 239,292 $ 942,430 $ 671,895 ________________________________ (1) The Company’s product revenue includes PYLARIFY and DEFINITY among other products. This category represents the delivery of physical goods. The Company applies the same revenue recognition policies and judgments for all 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: Radiopharmaceutical Oncology, Precision Diagnostics, and Strategic Partnerships and Other Revenue. Radiopharmaceutical Oncology includes PYLARIFY and AZEDRA. Precision Diagnostics includes DEFINITY, TechneLite and other diagnostic imaging products. Strategic Partnerships and Other Revenue includes strategic partnerships and other arrangements related to other products of the Company, including our royalty revenue from our license of RELISTOR. On August 2, 2023, the Company sold the right to its RELISTOR net sales royalties, which is classified as a licensed intangible asset (“RELISTOR royalty asset”), under its license agreement with Bausch Health Companies, Inc. (“Bausch”); the Company retained the rights to future sales-based milestone payments. 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 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 that Novartis paid to the Company pursuant to the Novartis Agreement 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 of the license to be $ 24.0 million, 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 Novartis, as 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. Revenue by product category on a net basis is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 PYLARIFY $ 215,428 $ 143,754 $ 621,419 $ 366,763 Other radiopharmaceutical oncology 848 928 2,383 3,183 Total radiopharmaceutical oncology 216,276 144,682 623,802 369,946 DEFINITY 67,336 60,740 206,688 181,374 TechneLite 23,272 22,094 65,853 64,139 Other precision diagnostics 5,740 6,175 17,002 16,803 Total precision diagnostics 96,348 89,009 289,543 262,316 Strategic partnerships and other revenue 7,322 5,601 29,085 39,633 Total revenues $ 319,946 $ 239,292 $ 942,430 $ 671,895 The Company would be required to allocate a portion of its revenue received from commercial contracts to future reporting periods to the extent the Company had performance obligations that extended beyond one year. However, the Company’s performance obligations are typically part of contracts that have an original expected duration of one year or less. As such, the Company is not 9 Table of Contents disclosing the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) as of the end of the reporting period. 4. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability of fair value measurements, financial instruments are categorized based on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: • Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. • Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). • Level 3 — Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data. The Company’s financial assets and liabilities measured at fair value on a recurring basis currently consist of money market funds and contingent consideration liabilities. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the condensed consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis: September 30, 2023 (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets: Money market $ 562,210 $ 562,210 $ — $ — Total assets $ 562,210 $ 562,210 $ — $ — Liabilities: Contingent consideration liabilities $ 2,500 $ — $ — $ 2,500 Total liabilities $ 2,500 $ — $ — $ 2,500 December 31, 2022 (in thousands) Total Fair Value Level 1 Level 2 Level 3 Assets: Money market $ 342,646 $ 342,646 $ — $ — Total assets $ 342,646 $ 342,646 $ — $ — Liabilities: Contingent consideration liabilities $ 111,600 $ — $ — $ 111,600 Total liabilities $ 111,600 $ — $ — $ 111,600 During the three and nine months ended September 30, 2023, there were no transfers into or out of Level 3. As part of the Progenics Acquisition, the Company issued CVRs and recorded the fair value as part of consideration transferred. 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, subject to a maximum cap. Refer to Note 1, “Basis of Presentation” for further details on the CVRs. Based on the U.S. net sales generated by PYLARIFY in 2022, the Company paid out the maximum amount payable under the CVRs from available cash in May 2023 in full satisfaction of the CVR obligation. 10 Table of Contents 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 (also known as 131 I-MIP-1095) and a $ 5.0 million 1095 commercialization milestone. Additionally, there is a potential payment of up to $ 10.0 million related to a 1404 commercialization milestone. 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 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 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. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the condensed consolidated statements of operations. The Company can give no assurance that the actual amounts paid, if any, in connection with the contingent consideration liabilities, will be consistent with any recurring fair value estimate of such contingent consideration liabilities. The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of liabilities using Level 3 inputs at September 30, 2023. Fair Value at Assumptions (in thousands) September 30, 2023 December 31, 2022 Valuation Technique Unobservable Input September 30, 2023 December 31, 2022 Contingent consideration liability: Net sales targets - PYLARIFY (CVRs) N/A $ 99,700 Probability adjusted discounted cash flow model Period of expected milestone achievement and sales targets N/A 2022 - 2023 Probability of success N/A 100 % 1095 commercialization milestone 1,700 1,700 Probability adjusted discounted cash flow model Period of expected milestone achievement 2026 2026 Probability of success 40 % 40 % Discount rate 4.7 % 3.8 % Net sales targets - AZEDRA and 1095 800 10,200 Monte Carlo simulation Probability of success and sales targets 0 % - 40 % 20 % - 100 % Discount rate 16 % 16 % - 17 % Total $ 2,500 $ 111,600 For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated: 11 Table of Contents Financial Assets Financial Liabilities (in thousands) Nine Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Fair value, beginning of period $ — $ 9,300 $ 111,600 $ 86,200 Changes in fair value included in net (loss) income — ( 1,100 ) ( 9,475 ) 24,300 Cash payments — — ( 99,625 ) — Fair value, end of period $ — $ 8,200 $ 2,500 $ 110,500 The change in fair value of the contingent financial liabilities resulted in a reduction of general and administrative expense of $ 9.5 million for the nine months ended September 30, 2023 and was primarily due to changes in revenue forecasts and the passage of time (excluding the CVRs). The Company made the applicable cash payment related to the CVRs in May 2023. 5. Income Taxes The Company calculates income taxes at the end of each reporting period based on the estimated effective tax rate for the full year, adjusted for any discrete events which are recorded in the period they occur. Cumulative adjustments to the tax provision are recorded in the reporting period in which a change in the estimated annual effective tax rate is determined. The Company’s income tax expense is presented below: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Income tax expense $ 27,999 $ 21,784 $ 49,259 $ 55,710 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 realizable, the Company evaluated all available evidence, and weighed the objective evidence and expected impact. The Company continues to retain immaterial valuation allowances against the net deferred tax assets of certain of its foreign subsidiaries. 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 state taxing authorities. In accordance with the Company’s accounting policy, the change in the tax liabilities, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. As these reserves change, adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the remaining 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. During the third quarter of 2023, the Company entered into a settlement agreement with one state, for which the Company was indemnified pursuant to the tax indemnification agreement, and accordingly reduced the amount of uncertain tax positions by $ 4.8 million. The Company continues to accrue interest on the outstanding uncertain tax positions. 6. Inventory Inventory consisted of the following: (in thousands) September 30, 2023 December 31, 2022 Raw materials $ 26,936 $ 19,987 Work in process 9,968 8,234 Finished goods 19,558 7,254 Total inventory $ 56,462 $ 35,475 Inventory costs associated with products that have not yet received regulatory approval are capitalized if the Company believes there is probable future commercial use of the product and future economic benefit of the asset. If future commercial use of the 12 Table of Contents product is not probable, then inventory costs associated with such product are expensed during the period the costs are incurred. The Company has no inventory pending regulatory approval as of September 30, 2023. 7. Property, Plant and Equipment, Net Property, plant and equipment, net, consisted of the following: (in thousands) September 30, 2023 December 31, 2022 Land $ 9,480 $ 13,450 Buildings 69,425 76,329 Machinery, equipment and fixtures 101,196 92,604 Computer software 26,515 25,864 Construction in progress 37,742 14,047 244,358 222,294 Less: accumulated depreciation and amortization ( 104,065 ) ( 100,128 ) Total property, plant and equipment, net $ 140,293 $ 122,166 Depreciation and amortization expense related to property, plant and equipment, net, was $ 2.9 million and $ 3.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 9.6 million and $ 10.3 million for the nine months ended September 30, 2023 and 2022, respectively. During the three months ended June 30, 2023, as a result of a decline in expected future cash flows related to a certain asset group, the Company determined certain impairment triggers had occurred. The Company reviewed revised undiscounted cash flows that were estimated to be generated by the asset group as of June 30, 2023. Based on the undiscounted cash flow analysis, the Company determined that the asset group had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then estimated the fair value 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 noncash impairment of $ 6.0 million for the six months ended June 30, 2023 in cost of goods sold in the condensed consolidated statements of operations. Long-Lived Assets Held for Sale During the first quarter of 2023, the Company committed to a plan to sell a portion of its land and buildings associated with its Billerica, Massachusetts campus. Effective March 16, 2023, the Company entered into a purchase and sale agreement (the “P&S”) with a prospective buyer. The assets were classified as held for sale and comprised entirely of property, plant and equipment, net. The Company determined that the fair value of the net assets being sold exceeded the carrying value as of September 30, 2023. The purchase price for the campus sale is $ 10.0 million in cash. The transaction is expected to close during the first half of 2024. 8. Accrued Expenses and Other Liabilities and Other Long-Term Liabilities Accrued expenses and other liabilities and other long-term liabilities are comprised of the following: (in thousands) September 30, 2023 December 31, 2022 Compensation and benefits $ 29,588 $ 30,425 Freight, distribution and operations 65,751 49,067 Accrued rebates, discounts and chargebacks 11,699 13,399 Accrued professional fees 9,229 8,668 Other 22,556 25,525 Total accrued expenses and other liabilities $ 138,823 $ 127,084 Operating lease liabilities (Note 15) $ 54,417 $ 25,442 Long-term contingent liability (Note 4) 2,500 11,900 Other long-term liabilities 5,933 8,813 Total other long-term liabilities $ 62,850 $ 46,155 13 Table of Contents 9. Asset Retirement Obligations The Company considers its legal obligation to remediate its facilities upon a potential decommissioning of its radioactive-related operations as an asset retirement obligation. The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts and Somerset, New Jersey sites. As of September 30, 2023, the liability is measured at the present value of the obligation expected to be incurred and is approximately $ 25.1 million. The following table provides a summary of the changes in the Company’s carrying value of asset retirement obligations: (in thousands) Amount Balance at January 1, 2023 $ 22,543 Accretion expense 280 Balance at September 30, 2023 $ 22,823 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, respectively, upon closure. The Company has provided this financial assurance in the form of a $ 30.3 million surety bond. 10. Intangibles, Net Intangibles, net, consisted of the following: September 30, 2023 (in thousands) Useful Lives (in years) Amortization Method Cost Accumulated Amortization Net Trademarks 15 - 25 Straight-Line $ 13,540 $ ( 12,179 ) $ 1,361 Customer relationships 5 - 25 Accelerated 157,945 ( 111,315 ) 46,630 Currently marketed products 9 Straight-Line 132,800 ( 34,588 ) 98,212 Licenses 11 - 16 Straight-Line 22,233 ( 6,665 ) 15,568 Developed technology 9 Straight-Line 2,400 ( 877 ) 1,523 Total $ 328,918 $ ( 165,624 ) $ 163,294 December 31, 2022 (in thousands) Useful Lives (in years) Amortization Method Cost Accumulated Amortization Net Trademarks 15 - 25 Straight-Line $ 13,540 $ ( 12,061 ) $ 1,479 Customer relationships 15 - 25 Accelerated 96,681 ( 95,009 ) 1,672 Currently marketed products 9 - 15 Straight-Line 275,700 ( 47,628 ) 228,072 Licenses 11 - 16 Straight-Line 85,800 ( 19,101 ) 66,699 Developed technology 9 Straight-Line 2,400 ( 677 ) 1,723 IPR&D N/A N/A 15,640 — 15,640 Total $ 489,761 $ ( 174,476 ) $ 315,285 The Company recorded amortization expense for its intangible assets of $ 11.7 million and $ 8.3 million for the three months ended September 30, 2023 and 2022, respectively, and $ 35.1 million and $ 24.9 million for the nine months ended September 30, 2023 and 2022, respectively. On August 2, 2023, the Company sold the right to its RELISTOR royalty asset under its license agreement with Bausch; the Company retained the rights to future sales-based milestone payments. The Company received an initial payment of approximately $ 98.0 million in connection with the sale and has the right to receive an additional payment from the buyer of $ 5.0 million if worldwide net sales of RELISTOR in 2025 exceed a specified threshold. The additional payment would be recognized upon 14 Table of Contents achievement of the specified threshold. Decreases of $ 63.6 million of license assets and $ 17.5 million of associated accumulated amortization, as well as a gain of $ 51.8 million were recorded as a result of the sale. In March 2023, the Company stopped all development activities in relation to a future indication associated with AZEDRA, which is classified as an in process research and development (“IPR&D”) intangible asset. The Company did not identify any alternative future uses or development programs for the asset, therefore the asset group, which consists of the IPR&D asset and a currently marketed product, was assessed for impairment as of March 31, 2023. The Company considered several factors including market share, price and competitive product offerings in evaluating the quantitative impact of the future cash flows. The Company concluded that the carrying amount exceeded the fair value of the asset group, which had no value. Accordingly, in the three months ended March 31, 2023, the Company recorded a non-cash impairment charge associated with the IPR&D asset of $ 15.6 million in research and development expenses and a non-cash impairment charge of $ 116.4 million in cost of goods sold in the condensed consolidated statements of operations. On August 15, 2023, the Company announced that it had made the decision to discontinue the production and promotion of AZEDRA and would be winding down its Somerset, New Jersey manufacturing site. The Company currently intends to continue manufacturing AZEDRA into the first quarter of 2024, to the extent feasible, with the goal of providing doses of AZEDRA to current patients so they can complete their treatment regimen. In February 2023, the Company entered into an agreement with Cerveau to purchase all of the outstanding capital stock of Cerveau for approximately $ 35.3 million. In May 2023, upon successful completion of a technology transfer, the Company paid $ 10.0 million to the selling stockholders of Cerveau. This additional contingent payment was capitalized as part of the asset cost and increased the Company’s customer relationship intangible assets. See Note 19, “Acquisition of Assets” for further discussion of the Cerveau acquisition. The below table summarizes the estimated aggregate amortization expense expected to be recognized on the above intangible assets: (in thousands) Amount Remainder of 2023 $ 11,300 2024 39,729 2025 24,409 2026 25,209 2027 19,681 2028 and thereafter 42,966 Total $ 163,294 11. Long-Term Debt, Net, and Other Borrowings As of September 30, 2023, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows: (in thousands) Amount Remainder of 2023 $ — 2024 — 2025 — 2026 — 2027 575,000 Total principal outstanding 575,000 Unamortized debt issuance costs ( 14,846 ) Finance lease liabilities 1,125 Total 561,279 Less: current portion ( 703 ) Total long-term debt, net and other borrowings $ 560,576 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, 15 Table of Contents 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 Revolving Facility 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 Revolving Loans, Letters of Credit, and the Swingline 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, 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 September 30, 2023, 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 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 Q3 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: (i) incur additional indebtedness (ii) create liens; (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; (iv) sell certain assets; (v) pay dividends on, repurchase or make distributions in respect of capital stock or make other restricted payments; (vi) make certain investments; (vii) repay subordinated indebtedness prior to stated maturity; and (viii) enter into certain transactions with its affiliates. 16 Table of Contents 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 Lantheus Holdings, and certain subsidiaries of LMI, including Progenics and Lantheus Real Estate, and obligations under the 2022 Facility are generally secured by first priority liens over substantially all of the assets of each of LMI, Lantheus Holdings, and certain subsidiaries of LMI, including Progenics and Lantheus Real Estate (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”), 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 conversion 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 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. 17 Table of Contents As of September 30, 2023, the carrying value of the Notes was $ 575.0 million and the fair value of the liability was $ 575.0 million. The Company recorded interest expense of approximately $ 3.9 million and $ 11.8 million related to the Notes for the three and nine months ended September 30, 2023, respectively. There were no conversions of Notes during the nine months ended September 30, 2023. 12. Derivative Instruments The Company has used, but does not currently use, interest rate swaps to reduce the variability in cash flows associated with portions of the Company’s interest payments on 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 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 were 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 related to the interest rate swap contracts were reclassified into earnings. 13. Accumulated Other Comprehensive (Loss) Income The components of accumulated other comprehensive (loss) income, net of tax of zero and $ 1.5 million for the nine months ended September 30, 2023 and 2022, respectively, consisted of the following: (in thousands) Foreign currency translation Unrealized loss on cash flow hedges Accumulated other comprehensive income (loss) Balance at January 1, 2023 $ ( 1,259 ) $ — $ ( 1,259 ) Other comprehensive income before reclassifications 224 — 224 Amounts reclassified to earnings — — — Balance at September 30, 2023 $ ( 1,035 ) $ — $ ( 1,035 ) Balance at January 1, 2022 $ ( 754 ) $ 269 $ ( 485 ) Other comprehensive (loss) income before reclassifications ( 463 ) 4,112 3,649 Amounts reclassified to earnings — ( 170 ) ( 170 ) Balance at September 30, 2022 $ ( 1,217 ) $ 4,211 $ 2,994 14. Stock-Based Compensation The following table presents stock-based compensation expense recognized in the Company’s accompanying condensed consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Cost of goods sold $ 2,508 $ 1,268 $ 6,381 $ 3,263 Sales and marketing 2,823 1,745 7,044 4,433 General and administrative 6,741 3,991 17,813 10,777 Research and development 1,904 1,099 5,097 2,665 Total stock-based compensation expense $ 13,976 $ 8,103 $ 36,335 $ 21,138 18 Table of Contents 15. Leases Operating and finance lease assets and liabilities are as follows: (in thousands) Classification September 30, 2023 December 31, 2022 Assets Operating Other long-term assets $ 45,910 $ 19,033 Finance Property, plant and equipment, net 1,406 582 Total leased assets $ 47,316 $ 19,615 Liabilities Current Operating Accrued expenses and other liabilities $ 1,799 $ 2,177 Finance Current portion of long-term debt and other borrowings 703 354 Noncurrent Operating Other long-term liabilities 54,417 25,442 Finance Long-term debt, net and other borrowings 422 231 Total leased liabilities $ 57,341 $ 28,204 On May 4, 2023, the Company entered into a modification to the operating lease for office space in Bedford, Massachusetts, (the “Existing Premises”) that was executed in February 2022. The lease commenced and was recorded in December 2022 for $ 11.0 million and the initial term was set to expire in June 2031. The lease modification includes a lease of additional office and laboratory space at the Bedford location (the “Additional Premises”) for a term of 15 years and 4 months and extends the term of the lease for the Existing Premises to be coterminous with the term of the lease for the Additional Premises. As a result of the extended term for the Existing Premises, the Company recorded an additional right-of-use asset and liability of $ 6.0 million in May 2023. The modification also contains a provision to convert the rent schedule of the Existing Premises from gross to triple net in 2024, which may result in an additional adjustment to the right-of-use asset and liability. The landlord provided notice to the Company that its renovations of the Additional Premises were completed. The Company is currently in discussions with the landlord as to the status of the renovations. As a result of the notice, the Company recorded an additional right-of-use asset and liability of $ 23.5 million as of September 1, 2023. To determine the value of the additional right-of-use asset and liability, the Company was required to calculate the discount rate of the lease modification. The discount rate was determined based on the expected lease term and by comparing interest rates in the market for similar borrowings with comparable credit quality of the Company. The lease for the Additional Premises allows for the extension of five years to begin immediately upon the expiration of the original term. Other information related to leases were as follows: September 30, 2023 December 31, 2022 Weighted-average remaining lease term (Years): Operating leases 13.6 7.9 Finance leases 2.7 1.9 Weighted-average discount rate: Operating leases 7.3 % 4.8 % Finance leases 7.2 % 4.4 % 19 Table of Contents 16. Net Income Per Common Share A summary of net income per common share is presented below: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Net income $ 131,957 $ 61,232 $ 223,281 $ 147,252 Basic weighted-average common shares outstanding 68,436 68,756 68,188 68,482 Effect of dilutive stock options 320 455 366 452 Effect of dilutive restricted stock 1,290 1,864 1,449 1,735 Effect of convertible debt instrument — — 265 — Diluted weighted-average common shares outstanding 70,046 71,075 70,268 70,669 Basic income per common share $ 1.93 $ 0.89 $ 3.27 $ 2.15 Diluted income per common share $ 1.88 $ 0.86 $ 3.18 $ 2.08 Antidilutive securities excluded from diluted net income per common share 435 52 422 226 Impact of the Convertible 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 earnings exceeds the current share price, regardless of whether such dividend is declared. During the nine months ended September 30, 2023 and 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 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. 17. Other Income Other income consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Foreign currency losses $ 9 $ 145 $ 31 $ 189 Tax indemnification loss, net 3,672 1,460 3,344 668 Interest income ( 4,540 ) ( 504 ) ( 12,090 ) ( 551 ) Gain on sale of RELISTOR licensed intangible asset associated with net sales royalties ( 51,789 ) — ( 51,789 ) — Other ( 1 ) — 142 — Total other (income) expense, net $ ( 52,649 ) $ 1,101 $ ( 60,362 ) $ 306 18. Commitments and Contingencies Legal Proceedings From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. In addition, the Company has in the past been, and may in the future be, subject to investigations by governmental and regulatory authorities, which expose it to greater risks associated with litigation, regulatory or other proceedings, as a result of which the Company could be required to pay significant fines or penalties. The costs and outcome of litigation, regulatory or other proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to the Company and could have a material adverse effect on the Company’s results of operations or financial condition. In addition, intellectual property disputes often 20 Table of Contents have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations. If a matter is both probable to result in material liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible material loss or range of loss. If such loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements. As of September 30, 2023, the Company did not have any material ongoing litigation to which the Company was a party. 19. Acquisition of Assets On February 6, 2023, the Company acquired Cerveau. Cerveau’s primary asset is MK-6240, a second-generation F 18-labeled positron emission tomography (“PET”) imaging agent that targets Tau tangles in Alzheimer’s disease. The Company determined that upon review of the Cerveau acquisition, the transaction did not meet the definition of a business combination and is therefore treated as an asset acquisition. In February 2023, the Company made an upfront payment of approximately $ 35.3 million to the stockholders of Cerveau (the “Selling Stockholders”) and paid the Selling Stockholders an additional $ 10.0 million in May 2023 upon the successful completion of a technology transfer. The Company could pay up to an additional $ 51.0 million in milestone payments upon achievement of specified U.S. regulatory milestones related to MK-6240. The Selling Stockholders are also eligible to receive up to $ 1.2 billion in sales milestone payments upon the achievement of specified annual commercial sales thresholds of MK-6240 in the event the Company pursues commercialization, as well as up to $ 13.5 million in research revenue milestones upon achievement of specified annual research revenue thresholds. Additionally, the Company will pay to the Selling Stockholders up to 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. The purchase agreement pursuant to which the Company purchased Cerveau specifies, among other things, that certain members of the Selling Stockholders will also provide transition and clinical development services for a prescribed time following the closing of the transaction. In December 2022, the Company made upfront payments of $ 260.0 million to POINT Biopharma Global Inc. (“POINT”) as part of an asset acquisition with the potential for additional milestone payments of approximately $ 1.8 billion for 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 license agreement between Lantheus Two and POINT for PNT2002, Lantheus Two paid POINT an upfront cash payment of $ 250.0 million, and could pay up to an additional $ 281.0 million in milestone payments upon the achievement of specified U.S. and ex-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 license agreement between Lantheus Three and POINT for PNT2003, Lantheus Three 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. and ex-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. 20. Segment Information The Company operates as one business segment. The results of this operating segment are regularly reviewed by the Company’s chief operating decision maker, the Chief Executive Officer. 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. 21 Table of Contents