Lantheus Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unless otherwise noted, amounts below are in U.S. dollars; financial figures are rounded to millions. The quarter-to-quarter comparison is affected by the June 2020 Progenics acquisition: the 2021 results include its business, while Q1 2020 does not.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Revenue | $92.5m | $90.7m | Up 2.0% |
| Gross profit / margin | $41.0m / 44.4% | $38.0m / 41.9% | Gross profit up 8.0% |
| Operating income | $15.6m | $7.1m | 2021 includes a $15.3m gain on sale of the Puerto Rico subsidiary; excluding that gain, operating income was about $0.4m. |
| Net income / diluted EPS | $9.0m / $0.13 | $3.3m / $0.08 | Net income up 169.9%; 2021 share count was substantially higher following the Progenics acquisition. |
| Operating cash flow | $9.8m | $9.4m | Cash from operations was broadly similar. |
| Cash and cash equivalents | $68.9m | $79.6m at Dec. 31, 2020 | Quarter-end cash, cash equivalents and restricted cash totaled $71.0m. |
| Debt and other borrowings | $181.7m net carrying amount | $218.4m at Dec. 31, 2020 | Principal outstanding was $182.5m; the company repaid its Royalty-Backed Loan in full. |
Investing cash flow was positive $13.3m, primarily from $15.8m in net proceeds from the Puerto Rico sale, less $2.5m of capital expenditures. Financing cash outflow was $34.8m, mainly reflecting debt repayments. The company reported compliance with its debt covenants at March 31, 2021. A $200m revolving facility is available subject to its terms and covenants; the filing does not provide a clear figure for undrawn availability.
Revenue and material changes
- DEFINITY revenue rose 6.6% to $56.0m; TechneLite was essentially flat at $22.8m.
- Other precision diagnostics declined 46.5% to $7.0m, and radiopharmaceutical oncology revenue fell 23.8% to $1.5m.
- Strategic partnerships and other revenue increased to $5.3m from $0.4m, primarily reflecting the Progenics portfolio.
- Management attributed the overall revenue increase mainly to DEFINITY volume and Progenics, partly offset by COVID-related reductions in Xenon volumes and the Puerto Rico divestiture.
- Research and development expense rose 155.9% to $10.4m, largely reflecting the Progenics pipeline. Sales and marketing expense increased 39.9% to $14.2m, including PyL launch preparation.
Outlook, risks and unusual items
- PyL: The FDA’s priority-review action date was May 28, 2021. Management anticipated a potential launch following approval, but emphasized that approval, manufacturing-site authorizations and adequate reimbursement were not assured. The company aimed for broad U.S. availability within six months of approval.
- Liquidity outlook: Management believed cash, operating results and revolving-facility availability would fund requirements for the foreseeable future, while cautioning that COVID-19 and other uncertainties could affect liquidity.
- COVID-19 and supply: The pandemic continued to affect procedure volumes, notably Xenon, and could affect customers, suppliers, cash flows and clinical trials. The company also cited reliance on global Mo-99 suppliers and third-party manufacturers, including JHS and SBL.
- Product and execution risks: DEFINITY faces potential generic competition and safety-label risks; an April 2021 FDA labeling change added a contraindication concerning prior PEG hypersensitivity. Progenics integration, clinical development costs, PyL commercialization and reimbursement are additional uncertainties.
- Debt and contingent payments: The Royalty-Backed Loan was repaid on March 31, 2021; the repayment produced a $0.9m gain on extinguishment. Progenics CVRs may require cash payments equal to 40% of PyL U.S. sales above specified 2022 and 2023 thresholds, subject to an aggregate cap described in the filing.
- Other unusual item: The Puerto Rico subsidiary sale generated a $15.3m pretax gain. Q1 2020 included a $7.3m noncash impairment charge, affecting year-over-year gross-profit comparisons.
- Contingencies: The filing describes ongoing European patent opposition and German PSMA-617 ownership litigation, plus a U.S. post-grant patent review petition. Outcomes are uncertain; the filing does not provide a clear quantified loss estimate for these matters.
Key facts for investors to verify
- Whether PyL received FDA approval and manufacturing-site clearance, and whether launch, supply capacity and reimbursement developed as anticipated.
- Whether DEFINITY growth can continue amid safety-label considerations, generic competition risk and evolving market conditions.
- How COVID-19 affects Xenon and other product volumes, and whether Mo-99 and third-party manufacturing supply remain reliable.
- Actual revolving-credit availability, covenant headroom and debt reduction following the Royalty-Backed Loan repayment.
- Potential CVR payments tied to PyL sales and developments in the disclosed patent and ownership disputes.