Lantheus Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts are in millions of dollars except per-share data. Lantheus develops, manufactures and sells imaging diagnostics, radiotherapeutics and related technologies. Its principal revenue categories are Radiopharmaceutical Oncology, Precision Diagnostics, and Strategic Partnerships and Other Revenue.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $321.7 | $223.7 | $622.5 | $432.6 |
| Gross profit | $202.6 | $138.0 | $279.7 | $267.1 |
| Operating income | $124.1 | $63.2 | $114.8 | $122.1 |
| Net income | $94.1 | $43.1 | $91.3 | $86.0 |
| Diluted EPS | $1.33 | $0.61 | $1.31 | $1.22 |
- Q2 revenue rose 43.8%; PYLARIFY revenue increased 61.7% to $210.5 million. DEFINITY revenue grew 13.2% to $70.5 million. For the first half, PYLARIFY revenue grew 82.1% to $406.0 million.
- Q2 gross margin was approximately 63.0%, compared with 61.7% a year earlier. First-half gross margin was approximately 44.9%, down from 61.7%, largely reflecting impairment charges and the prior-year Novartis license revenue.
- Q2 operating income nearly doubled year over year. First-half operating income declined 6.0%; first-half net income increased 6.2%, supported in part by lower income tax expense and other income, including interest income.
- First-half operating cash flow was $76.2 million versus $82.9 million. Investing cash outflow was $65.2 million, including $45.3 million for the Cerveau acquisition and $19.9 million of capital expenditures. Financing cash outflow was $12.7 million.
- At June 30, cash and cash equivalents were $414.1 million, versus $415.7 million at year-end 2022. Current assets were $752.2 million and current liabilities $154.0 million.
- Debt included $575.0 million principal amount of 2.625% convertible notes due 2027; the reported carrying amount of long-term debt and other borrowings was $559.2 million, including unamortized issuance costs and lease liabilities. The $350 million revolving facility had no outstanding borrowings. The company reported compliance with its credit covenants.
Material changes and unusual items
- First-half results included $138.1 million of noncash long-lived asset impairment charges: $116.4 million in cost of goods sold for an AZEDRA-related currently marketed intangible, $15.6 million in R&D for AZEDRA in-process R&D, and $6.0 million in cost of goods sold for another asset group. These charges materially affected reported first-half gross profit and margins.
- The company paid $99.6 million in May 2023 to settle the PYLARIFY contingent value rights in full. The related liability was eliminated. Changes in fair value of contingent assets and liabilities reduced first-half G&A expense by $9.0 million, excluding the CVR settlement.
- In February, Lantheus acquired Cerveau, whose principal asset is MK-6240, a PET imaging agent targeting Tau tangles in Alzheimer’s disease. It paid $35.3 million upfront and $10.0 million following technology transfer; further regulatory and commercial milestones and royalties may be payable.
- On August 2, 2023, after quarter-end, Lantheus sold its rights to future RELISTOR royalties for an initial $98.0 million, with a potential additional $5.0 million depending on 2025 sales. The company said proceeds would support its core businesses and pipeline.
Outlook, commentary and risks
- No specific numerical revenue or earnings guidance is provided in the filing. Management stated that cash, expected operating cash generation and continued access to the revolving facility should be sufficient for cash requirements over the next 12 months and beyond.
- Management highlighted continued PYLARIFY and DEFINITY growth, pipeline investment and the importance of commercial differentiation. PNT2002 received FDA Fast Track designation in April 2023; the filing does not provide a definitive approval or commercialization timetable.
- Key risks include growing competition for PYLARIFY and other products; dependence on third-party manufacturers and suppliers; Mo-99 supply and logistics constraints; and the execution, regulatory and commercial uncertainties of pipeline programs. The filing notes that SHINE’s Mo-99 facility was then estimated to become operational in 2024, subject to regulatory approvals.
- Potential contingent payments remain, including up to approximately $85 million related to a prior acquisition and substantial development, sales-milestone and royalty obligations under the Cerveau and POINT agreements. Actual payments depend on milestone achievement and commercialization.
- The company reported no material ongoing litigation and no material changes to the risk factors in its 2022 Form 10-K. It also reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether PYLARIFY’s rapid growth can be sustained amid increasing competition and evolving reimbursement conditions.
- The size, timing and operating impact of the AZEDRA-related and other impairment charges, and whether further impairment indicators arise.
- Cash conversion and working-capital trends, especially receivables and inventory growth, alongside capital spending and acquisition commitments.
- Terms and use of the $98 million RELISTOR royalty-sale proceeds, and the royalty revenue relinquished in exchange.
- Progress, funding needs and potential milestone or royalty obligations for MK-6240, PNT2002, PNT2003 and other pipeline programs.
- Continuity of Mo-99 and other third-party supply, and the timing and regulatory status of SHINE’s planned supply capacity.