Lantheus Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparison is primarily with FY2021. Lantheus develops and markets diagnostic imaging agents, radiotherapeutics and imaging software. It reports as one business segment.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $935.1 million | $425.2 million |
| Gross profit / gross margin | $581.7 million / 62.2% | $187.7 million / 44.1% |
| Operating income (loss) / margin | $36.2 million / 3.9% | $(60.8) million / (14.3)% |
| Net income (loss) | $28.1 million; diluted EPS $0.40 | $(71.3) million; diluted EPS $(1.06) |
| Cash provided by operating activities | $281.8 million | $53.9 million |
| Capital expenditures | $18.3 million | $12.1 million |
| Cash and cash equivalents at year-end | $415.7 million | $98.5 million |
Revenue increased 119.9%, mainly reflecting PYLARIFY’s commercial expansion. Radiopharmaceutical Oncology revenue was $531.5 million, including $527.4 million from PYLARIFY, versus $48.9 million and $43.4 million, respectively, in 2021. Precision Diagnostics revenue rose 1.6% to $356.7 million: DEFINITY increased 5.3% to $245.0 million, while TechneLite declined 2.7% to $88.9 million. PYLARIFY represented 56.4% of revenue and DEFINITY 26.2%; no customer accounted for more than 10% of revenue.
Operating cash flow rose substantially, but included significant noncash adjustments, including the $260.0 million POINT acquired in-process R&D charge. Receivables also increased with PYLARIFY sales. Year-end current assets were $677.6 million and current liabilities $247.7 million. Long-term debt, net, was $557.7 million, primarily the $575.0 million principal amount of 2.625% convertible notes due 2027. The $350.0 million revolving facility was undrawn at year-end; the company reported covenant compliance.
Material changes and unusual items
- PYLARIFY revenue grew to $527.4 million after its June 2021 launch; the manufacturing network expanded from 21 to 37 activated sites, reaching customers in 46 states and the District of Columbia.
- R&D expense increased to $311.7 million from $45.0 million, principally due to a $260.0 million upfront payment for POINT’s PNT2002 and PNT2003 licenses. The payment was expensed because the acquired IPR&D had no alternative future use.
- A $24.0 million Novartis intellectual-property license payment was recognized as revenue in 2022. It was a one-time payment under a settlement and license agreement.
- The company recorded a $99.7 million current liability for Progenics acquisition CVR payments tied to PYLARIFY sales, expected to be paid in the first half of 2023.
- In December, Lantheus issued $575.0 million of convertible notes, refinanced its credit facilities, repaid the prior facility, and repurchased $75.0 million of shares. Net proceeds from the notes were approximately $557.8 million.
Outlook, commentary and risks
The filing provides no specific consolidated revenue or earnings guidance. Management stated that cash on hand, expected operating cash generation and access to the revolving facility should be sufficient for cash requirements over the next twelve months and beyond. This assessment is subject to operating performance and other risks.
- PYLARIFY reimbursement and competition: Medicare outpatient pass-through payment status is expected to expire December 31, 2024. Under current policy, payment would then generally be bundled into the procedure payment. Competitors, including approved PSMA imaging agents and potential new entrants, could pressure market share.
- Supply and manufacturing: TechneLite depends on globally sourced Mo-99; outages have at times constrained generator output. The IRE supply agreement runs through 2023 and the NTP/ANSTO agreement through 2024. SHINE projected its facility could become operational in 2024, but supply and timing are uncertain. The company also relies on third parties and specialized facilities for products including PYLARIFY and DEFINITY.
- DEFINITY: Management cited potential generic challenges, competition and product-safety concerns. FDA approval for commercial production at Lantheus’s in-house facility was received in February 2022, adding manufacturing capacity and redundancy.
- Development and licensing: PNT2002 and PNT2003 remain in clinical development and could require up to approximately $1.8 billion in contingent regulatory and sales milestone payments, in addition to royalties. Flurpiridaz met stated Phase 3 endpoints; commercialization was anticipated in 2024 if approved, but regulatory approval and commercial success are not assured.
- Other exposures: Risks include healthcare reimbursement and regulation, clinical-trial outcomes, partner performance, supply-chain disruption, inflation, cybersecurity and the company’s debt obligations. Management reported no material ongoing litigation as of December 31, 2022.
After year-end, Lantheus acquired Cerveau Technologies on February 6, 2023, paying $35 million upfront for rights to the MK-6240 Alzheimer’s imaging agent, with potential milestones and royalties.
Important facts for investors to verify
- Whether PYLARIFY’s growth, manufacturing capacity and customer adoption can be sustained amid competition and reimbursement changes after 2024.
- The expected timing and cash impact of the $99.7 million CVR payment, and the effect of the 2022 working-capital build on cash conversion.
- Progress, funding responsibilities and milestone exposure for PNT2002/PNT2003, and regulatory and launch prospects for flurpiridaz and other pipeline programs.
- Reliability and renewal of Mo-99 supply contracts, progress of SHINE’s proposed supply and resilience of other sole-source manufacturing arrangements.
- Convertible-note terms, future interest obligations, covenant headroom and liquidity after planned development spending and the Cerveau acquisition.