Lantheus Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Amounts are in U.S. dollars; financial statement figures are in millions unless otherwise noted.
Business context
Lantheus develops, manufactures and sells diagnostic imaging products, radiopharmaceuticals and related solutions. Its categories are precision diagnostics, radiopharmaceutical oncology, and strategic partnerships and other revenue. PYLARIFY, its prostate cancer imaging agent launched in June 2021, was the principal driver of growth. The company reports one operating segment.
Key financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $239.3 | $102.1 | $671.9 | $295.6 |
| Gross profit | $147.4 | $42.7 | $414.5 | $129.8 |
| Gross margin | 61.6% | 41.8% | 61.7% | 43.9% |
| Operating income (loss) | $85.7 | $(14.3) | $207.9 | $(25.5) |
| Net income (loss) | $61.2 | $(13.4) | $147.3 | $(31.1) |
| Diluted EPS | $0.86 | $(0.20) | $2.08 | $(0.46) |
| Operating cash flow | Not separately stated | Not separately stated | $176.4 | $40.0 |
- Q3 revenue rose 134% year over year; nine-month revenue rose 127%. PYLARIFY revenue was $143.8 million in Q3 and $366.8 million for the nine months, versus $7.7 million and $8.0 million, respectively, in the comparable 2021 periods.
- Q3 precision diagnostics revenue was $89.0 million, up 1%; DEFINITY increased 5.4% to $60.7 million, while TechneLite and other precision diagnostics declined. Nine-month precision diagnostics revenue was down 0.6%.
- Nine-month strategic partnerships and other revenue was $39.6 million, including a one-time $24.0 million Novartis license fee recognized in Q1 2022. The payment was received in April.
- Nine-month operating cash flow increased to $176.4 million. Growth in PYLARIFY billings and payment timing contributed; the increase in accounts receivable, primarily related to PYLARIFY, used $112.0 million of cash.
Balance sheet and liquidity
- At September 30, cash and cash equivalents were $257.3 million, versus $98.5 million at December 31, 2021. Current assets were $501.9 million and current liabilities $236.0 million.
- Total debt and other borrowings were $167.4 million, including $15.4 million current and $152.1 million long-term. Principal maturities are $3.8 million for the remainder of 2022, $15.0 million in 2023 and $148.8 million in 2024. The term loan rate was 4.6%; the company reported compliance with credit covenants.
- The company had a $200 million revolving facility available through June 2024, subject to credit agreement terms. Management stated that cash, operating cash generation and continued access to the revolver should meet requirements for the next 12 months and beyond.
- Capital expenditures were $13.6 million for the nine months. Cash provided by financing activities was negative $6.1 million, including debt payments and tax withholding on equity awards.
Material changes, outlook and risks
- Profitability turned positive versus losses in 2021, driven primarily by PYLARIFY’s commercial growth. Operating expenses increased 8% in Q3 and 21% for the nine months, including higher sales and marketing costs supporting the launch.
- PYLARIFY contingent value rights (CVRs) require payments equal to 40% of U.S. sales above specified thresholds for 2022 and 2023, subject to a cap. The company estimated the obligation at $99.7 million, classified it as a current liability, and expected payment in the first half of 2023. The related fair-value change contributed to a $25.4 million expense for the nine-month period.
- No numerical revenue or earnings guidance is provided in the filing. Management cited continued PYLARIFY growth, expanded manufacturing capacity and market access as priorities. It reported the Phase III flurpiridaz F 18 trial met co-primary endpoints; development and potential approval remain uncertain.
- Key risks include FDA approval and capacity at individual PYLARIFY manufacturing sites, reimbursement and competition, including the expected expiration of PYLARIFY’s transitional Medicare pass-through status at the end of 2024; reliance on third-party suppliers and global Mo-99 availability; DEFINITY competition and potential generic challenges; and hospital staffing, procedure volumes, inflation and COVID-19-related disruption.
- DEFINITY sales increased, but management said Q3 performance was affected by hospital nursing shortages and fewer in-person cardiology visits. The company also noted the $24.0 million Novartis license revenue and the expected CVR cash payment as significant non-recurring or unusual items. It reported no material ongoing litigation.
Important facts for investors to verify
- Whether PYLARIFY sales, market access and manufacturing capacity continue to support growth, and how competition and reimbursement affect uptake.
- The final CVR payment amount, timing and impact on cash after the expected first-half 2023 payment.
- Whether strong operating cash flow persists as receivables rise with sales and as working-capital timing normalizes.
- The 2024 term-loan maturity and revolving-facility availability under applicable covenants.
- Whether DEFINITY demand and supply remain resilient amid staffing constraints, competition and potential generic entry.