UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36569

LANTHEUS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



Delaware		35-2318913
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

331 Treble Cove Road ~~North Billerica, MA~~		01862
North Billerica,	MA
(Address of principal executive offices)		(Zip Code)



(978)	671-8001
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	LNTH	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesþ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐☑	Accelerated filer	☐

Non-accelerated filer	þ ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	☐

		Emerging Growth Company	þ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes ☐ No þ☑

The registrant had ~~37,505,996~~39,756,364 shares of common stock, $0.01 par value, outstanding as of ~~October 31, 2017.~~April 24, 2020.

LANTHEUS HOLDINGS, INC.

TABLE OF CONTENTS




		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)

~~Item 1.~~	~~Financial Statements (Unaudited)~~

	Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~	1

	Condensed Consolidated Statements of Operations ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~	2

	Condensed Consolidated Statements of Comprehensive Income ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~	3

	Condensed Consolidated Statements of ~~Cash Flows for the Nine Months Ended September 30, 2017 and 2016~~Changes in Stockholders’ Equity	4

	~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

~~Item 4.~~	~~Controls and Procedures~~	29

~~PART II. OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~	30

Item ~~1A.~~4.	~~Risk Factors~~Controls and Procedures	30
		PART II. OTHER INFORMATION
Item 2.1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

~~Item 3.~~	~~Defaults Upon Senior Securities~~	32

~~Item 4.~~	~~Mine Safety Disclosures~~	32

~~Item 5.~~	~~Other Information~~	32

~~Item 6.~~	~~Exhibits~~	33

~~SIGNATURES~~		34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Lantheus Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value)


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	68,077		$	51,178		$	95,713		$	92,919
Accounts receivable, net	41,713			36,818			44,883			43,529
Inventory	23,032			17,640			30,814			29,180
Other current assets	3,789			5,183			8,967			7,283
Total current assets	136,611			110,819			180,377			172,911
Property, plant & equipment, net	94,516			94,187
Property, plant and equipment, net							108,613			116,497
Intangibles, net	12,645			15,118			6,930			7,336
Goodwill	15,714			15,714			15,714			15,714
Deferred tax assets, net							70,454			71,834
Other long-term assets	21,535			20,060			22,037			21,627
Total assets	$	281,021		$	255,898		$	404,125		$	405,919
Liabilities and Stockholders’ Deficit
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt	$	2,750		$	3,650
Revolving line of credit	—			—
Current portion of long-term debt and other borrowings							$	10,143		$	10,143
Accounts payable	18,756			18,940			18,980			18,608
Accrued expenses and other liabilities	24,581			21,249			32,836			37,360
Total current liabilities	46,087			43,839			61,959			66,111
Asset retirement obligations	10,151			9,370			13,243			12,883
Long-term debt, net	265,523			274,460
Long-term debt, net and other borrowings							181,488			183,927
Other long-term liabilities	37,176			34,745			29,037			28,397
Total liabilities	358,937			362,414			285,727			291,318
Commitments and contingencies (See Note 12)
Stockholders’ deficit
Commitments and contingencies (See Note 15)
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; 37,498 and 36,756 shares issued and outstanding, respectively)	375			367
Common stock ($0.01 par value, 250,000 shares authorized; 39,750 and 39,251 shares issued and outstanding, respectively)							398			393
Additional paid-in capital	228,934			226,462			253,530			251,641
Accumulated deficit	(306,139		)	(332,398		)	(133,136		)	(136,473		)
Accumulated other comprehensive loss	(1,086		)	(947		)	(2,394		)	(960		)
Total stockholders’ deficit	(77,916		)	(106,516		)
Total liabilities and stockholders’ deficit	$	281,021		$	255,898
Total stockholders’ equity							118,398			114,601
Total liabilities and stockholders’ equity							$	404,125		$	405,919

The accompanying notes are an integral part of these condensed consolidated financial statements.

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,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenues	$	79,941		$	73,063		$	250,137		$	227,503		$	90,704		$	86,510
Cost of goods sold	41,414			39,382			125,901			124,370			52,702			42,426
Gross profit	38,527			33,681			124,236			103,133			38,002			44,084
Operating expenses
Sales and marketing	10,075			8,706			31,892			27,856			10,130			10,397
General and administrative	12,076			10,091			35,549			28,842			16,699			12,589
Research and development	3,554			2,849			14,149			8,493			4,048			4,929
Total operating expenses	25,705			21,646			81,590			65,191			30,877			27,915
Gain on sales of assets	—			(560		)	—			(6,505		)
Operating income	12,822			12,595			42,646			44,447			7,125			16,169
Interest expense	4,442			6,792			14,147			20,799			1,946			4,592
Debt retirement costs	—			1,415			—			1,415
Loss on extinguishment of debt	—			—			2,161			—
Other (income) expense	(908		)	148			(2,037		)	(317		)
Other income													(350		)	(1,187		)
Income before income taxes	9,288			4,240			28,375			22,550			5,529			12,764
Provision for income taxes	762			20			2,116			657
Income tax expense													2,192			2,815
Net income	$	8,526		$	4,220		$	26,259		$	21,893		$	3,337		$	9,949
Net income per common share outstanding:
Net income per common share:
Basic	$	0.23		$	0.14		$	0.71		$	0.71		$	0.08		$	0.26
Diluted	$	0.22		$	0.13		$	0.67		$	0.71		$	0.08		$	0.25
Weighted-average common shares outstanding:
Basic	37,393			31,221			37,174			30,658			39,433			38,603
Diluted	39,121			32,402			38,971			31,049			40,102			39,787

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lantheus Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended March 31,
	2017			2016		2017			2016		2020			2019
Net income	$	8,526		$	4,220	$	26,259		$	21,893	$	3,337		$	9,949
Other comprehensive (loss) income:
Reclassification adjustment for gains on sales of assets included in net income	—			435		—			435
Foreign currency translation	(115		)	234		(139		)	490		(446		)	56
Unrealized loss on cash flow hedges, net of tax											(988		)	—
Total other comprehensive (loss) income	(115		)	669		(139		)	925		(1,434		)	56
Total comprehensive income	$	8,411		$	4,889	$	26,120		$	22,818
Comprehensive income											$	1,903		$	10,005

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lantheus Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(in thousands)



	Three Months Ended March 31, 2020
	Common Stock					Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance, January 1, 2020	39,251		$	393		$	251,641		$	(136,473	)	$	(960	)	$	114,601
Net income	—		—			—			3,337			—			3,337
Other comprehensive income	—		—			—			—			(1,434		)	(1,434		)
Stock option exercises and employee stock plan purchases	33		—			366			—			—			366
Vesting of restricted stock awards and units	563		6			(6		)	—			—			—
Shares withheld to cover taxes	(97	)	(1		)	(1,546		)	—			—			(1,547		)
Stock-based compensation	—		—			3,075			—			—			3,075
Balance, March 31, 2020	39,750		$	398		$	253,530		$	(133,136	)	$	(2,394	)	$	118,398



	Three Months Ended March 31, 2019
	Common Stock					Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance, January 1, 2019	38,466		$	385		$	239,865		$	(168,140	)	$	(1,108	)	$	71,002
Net income	—		—			—			9,949			—			9,949
Other comprehensive income	—		—			—			—			56			56
Stock option exercises and employee stock plan purchases	37		—			606			—			—			606
Vesting of restricted stock awards and units	365		4			(4		)	—			—			—
Shares withheld to cover taxes	(50	)	(1		)	(1,119		)	—			—			(1,120		)
Stock-based compensation	—		—			2,720			—			—			2,720
Balance, March 31, 2019	38,818		$	388		$	242,068		$	(158,191	)	$	(1,052	)	$	83,213

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lantheus Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Operating activities
Net income	$	26,259		$	21,893		$	3,337		$	9,949
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization and accretion	15,019			12,664			3,732			3,323
Impairment of long-lived assets							7,275			—
Amortization of debt related costs	1,031			1,235			169			320
Provision for bad debt							202			(190		)
Provision for excess and obsolete inventory	1,002			982			449			511
Stock-based compensation	3,764			1,869			3,075			2,720
Gain on sales of assets	—			(6,505		)
Loss on extinguishment of debt and debt retirement costs	2,161			1,415
Deferred taxes							1,467			1,741
Long-term income tax receivable							(554		)	(802		)
Long-term income tax payable and other long-term liabilities							705			1,018
Other	1,404			(254		)	452			(6		)
Increases (decreases) in cash from operating assets and liabilities:
Accounts receivable	(4,609		)	1,071			(1,750		)	(1,040		)
Inventory	(6,361		)	(1,658		)	(2,098		)	465
Other current assets	54			(1,032		)	1,149			(1,152		)
Accounts payable	(270		)	2,684			(913		)	1,458
Accrued expenses and other liabilities	2,237			2,497			(7,289		)	(7,847		)
Net cash provided by operating activities	41,691			36,861			9,408			10,468
Investing activities
Proceeds from sales of assets	1,234			10,541
Capital expenditures	(11,589		)	(4,976		)	(2,698		)	(10,550		)
Other	—			74
Net cash (used in) provided by investing activities	(10,355		)	5,639
Net cash used in investing activities							(2,698		)	(10,550		)
Financing activities
Payments on long-term debt	(285,979		)	(57,790		)
Proceeds from issuance of long-term debt	274,313			—
Payments on long-term debt and other borrowings							(2,551		)	(717		)
Proceeds from stock option exercises							—			324
Proceeds from issuance of common stock	187			41,600			366			282
Payments for public offering costs	—			(1,266		)
Proceeds from stock option exercises	1,210			61
Payments for minimum statutory tax withholding related to net share settlement of equity awards	(2,681		)	(552		)	(1,547		)	(1,120		)
Deferred financing costs	(1,576		)	(11		)
Other	(74		)	—
Net cash used in financing activities	(14,600		)	(17,958		)	(3,732		)	(1,231		)
Effect of foreign exchange rates on cash and cash equivalents	163			57			(184		)	(27		)
Net increase in cash and cash equivalents	16,899			24,599
Net increase (decrease) in cash and cash equivalents							2,794			(1,340		)
Cash and cash equivalents, beginning of period	51,178			28,596			92,919			113,401
Cash and cash equivalents, end of period	$	68,077		$	53,195		$	95,713		$	112,061

The accompanying notes are an integral part of these condensed consolidated financial statements.

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 “Holdings” refer to Lantheus Holdings, Inc. and not to any of its subsidiaries, and references to “LMI” refer to Lantheus Medical Imaging, Inc., the direct subsidiary of Holdings. 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 Holdings, Inc. and its direct and indirect wholly-owned subsidiaries 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 of America (“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, 2017~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2017~~2020 or any future period.

The condensed consolidated balance sheet at December 31, ~~2016~~2019 has been derived from the audited consolidated financial statements at that date but does not include all of 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, ~~2016~~2019 filed with the Securities Exchange Commission (“SEC”) on February ~~23, 2017. Certain immaterial amounts~~25, 2020.

Progenics Transaction

On October 1, 2019, the Company entered into an Agreement and Plan of Merger (the “Initial Merger Agreement”) to acquire Progenics Pharmaceuticals, Inc. (NASDAQ: PGNX) (“Progenics” and, such acquisition, the “Progenics Transaction”). The terms of the Initial Merger Agreement were amended and restated on February 20, 2020 (the “Amended Merger Agreement”). Progenics is an oncology company developing innovative medicines and artificial intelligence to find, fight and follow cancer. Under the terms of the Amended Merger Agreement, the Company will acquire all of the issued and outstanding shares of Progenics common stock by means of a merger of a wholly-owned subsidiary of the Company with and into Progenics in which Progenics stockholders will receive, for each share of Progenics stock held at the time of the closing of the Progenics Transaction, merger consideration consisting of 0.31 of a share of the Company’s common stock and a non-tradeable contingent value right (a “CVR”) tied to the financial performance of PyL^TM (¹⁸F-DCFPyL), Progenics’ prostate-specific membrane antigen targeted imaging agent designed to visualize prostate cancer currently in late stage clinical development (“PyL”). Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PyL in 2022 and 2023 in excess of $100 million and $150 million, respectively. In no event will 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 Transaction, exceed 19.9% of the total consideration the Company pays in the ~~prior period have been reclassified~~Progenics Transaction. Following the closing of the Progenics Transaction, the aggregate ownership stake of the former Progenics stockholders will be approximately 40% of the combined company. Progenics’ stockholders will also be entitled to ~~conform~~appraisal rights as provided under Delaware law.

In addition, pursuant to the ~~current period~~Amended Merger Agreement, the holder of each in-the-money option to purchase shares of Progenics common stock under any equity based compensation plan of Progenics (“Progenics Stock Option”) will be entitled to receive in exchange for each such in-the-money option (i) an option to purchase common stock of the Company (each, a “Company Stock Option”) converted based on the 0.31 exchange ratio and (ii) a vested or unvested CVR depending on whether the underlying option is vested. Holders of out-of-the-money Progenics Stock Options will receive Company Stock Options converted on an exchange ratio adjusted based on actual trading prices of common stock of Progenics and the Company prior to the closing of the Progenics Transaction.

report as tax-deferred to Progenics’ stockholders with respect to the stock component of the merger consideration for U.S. federal income tax purposes, the combined company will continue to be headquartered in North Billerica, Massachusetts and will trade on the NASDAQ under the ticker symbol LNTH.

On March 15, 2020, Progenics and LMI entered into a bridge loan agreement, pursuant to which LMI agreed to provide for a secured short-term loan to Progenics on or after May 1, 2020 in an aggregate principal amount of up to $10.0 million. The bridge loan matures on the earlier to occur of (a) September 30, 2020 and (b) the date on which Progenics enters into a debt financing or similar arrangements or any amendment to, or replacement of, its existing debt provided by one or more third parties following the termination date of the merger agreement, in either case, having aggregate net cash proceeds that exceed the amount then required to repay all obligations under the bridge loan agreement in full in cash. The bridge loan bears interest at a rate per annum of 9.5% and is secured through the pledge to LMI of all of the issued and outstanding shares of capital stock of Molecular Insight Pharmaceuticals, Inc., a subsidiary of Progenics (“MIPI”), and any debt of MIPI owed to Progenics.

COVID-19

On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”), a respiratory illness first identified in Wuhan, China, a pandemic. The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary. Many organizations and individuals, including the Company and its employees, are taking additional steps to avoid or reduce infection, including limiting travel and working from home. These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial ~~statement presentation.~~

~~Manufacturing Concentrations~~markets worldwide.

The Company ~~currently relies on Jubilant HollisterStier (“JHS”)~~experienced operational and financial impacts from the COVID-19 pandemic beginning late in the first quarter of 2020, including the impact of stay-at-home mandates and related safety measures such as ~~its sole source manufacturer~~the delay of ~~DEFINITY, Neurolite, Cardiolite and evacuation vials for TechneLite. The Company has on-going development and technology transfer activities for~~elective medical procedures, resulting in a ~~next generation DEFINITY product with Samsung BioLogics (“SBL”) located~~decline in ~~Songdo, South Korea, approximately 20 miles southwest~~the volume of ~~Seoul, but can give no assurances as to when those technology transfer activities will be completed and when~~procedures using the Company’s products. As a result of the COVID-19 pandemic, the Company ~~will begin to receive supply~~undertook a thorough analysis of all of its discretionary expenses. In the first quarter of 2020, the Company implemented certain cost reduction initiatives, including, among other things, reducing travel and promotional expenses and implementing a ~~next generation DEFINITY product from SBL. In addition, those activities could be adversely affected by on-going political and military tensions~~hiring freeze through the balance of 2020.

The severity of the material impact of the COVID-19 pandemic on the ~~Korean peninsula.~~Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted. While the impact of COVID-19 on the Company’s results of operations and cash flows is expected to be material, at least in the short term, given the dynamic nature of this situation, the Company is currently unable to accurately predict the impact of COVID-19 on its overall 2020 operations and financial results or cash flows for the foreseeable future and whether the impact of COVID-19 could lead to potential impairments.

2. Summary of Significant Accounting Policies

~~Collaboration and License Agreement~~Derivative Instruments

The Company uses interest rate swaps to reduce the variability in cash flows associated with ~~GE Healthcare Limited~~

~~On April 25, 2017,~~a portion of the Company’s forecasted interest payments on its variable rate debt. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged. Further, the Company ~~announced that~~must formally document the hedging relationship at inception and, on at least a quarterly basis, continually reevaluate the relationship to ensure it ~~entered into a definitive, exclusive Collaboration and License Agreement (the “License Agreement”) with GE Healthcare Limited (“GE Healthcare”) for~~remains highly effective throughout the continued Phase III development and worldwide commercialization of flurpiridaz F 18, an investigational positron emission tomography myocardial perfusion imaging agent that may improve the diagnosis of coronary artery disease. Under the License Agreement, GE Healthcare will complete the worldwide development of flurpiridaz F 18, pursue worldwide regulatory approvals and, if successful, lead a worldwide launch and commercializationlife of the agent, with LMI collaborating on both development and commercialization through a joint steering committee. LMI has an option to co-promote the agent in the U.S. GE Healthcare’s development plan will initially focus on obtaining regulatory approvalhedge. The Company does not enter into derivative financial instruments for ~~flurpiridaz F 18 in the U.S., Japan, Europe and Canada.~~speculative or trading purposes.

Under the terms of the License Agreement, the Company received an up-front payment of $5.0 million. In addition, the Company is eligible to receive, from GE Healthcare, up to $60 million in regulatory and sales-based milestones and tiered double-digit royalties on U.S. sales and mid-single digit royalties on sales outside the U.S. Because the Company concluded there was only one significant deliverable under the License Agreement, consisting of the license of the product which occurred upon the signing of the License Agreement, the Company recognized $5.0 million associated with entering into the license as revenue during the nine months ended September 30, 2017. In addition, because the Company concluded that the regulatory and sales-based milestones are solely dependent on GE Healthcare’s performance and there are no continuing performance obligations from the Company, all development and sales milestones under the License Agreement are considered non-substantive. As of September 30, 2017, the Company has not recognized revenue for those milestones under the License Agreement and will recognize such revenue in the periods in which the milestones are achieved. Similarly, the Company will recognize royalty revenues in the periods of the sale of the related products, provided that the reported sales are reliably measurable, collectability is reasonably assured and the Company has no further performance obligations.

Recent Accounting Pronouncements

~~The following table provides a description of recent accounting pronouncements that may have a material effect on the Company’s condensed consolidated financial statements:~~



Standard	Description		Effective Date for Company		Effect on the Condensed Consolidated Financial Statements
Recently Issued Accounting Standards Not Yet Adopted
ASU 2020-04, “Reference Rate Reform (Topic 848)”
~~ASU 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~	This ASU ~~clarifies when to account~~provides optional guidance for a ~~change~~limited period of time to ease the ~~terms or conditions of a share–based payment award as a modification. Under~~potential burden in accounting for (or recognizing the new guidance, modification accounting is required only if the fair value, vesting conditions or classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ~~The new guidance will be applied prospectively to awards modified~~effects of) reference rate reform on ~~or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after~~financial reporting.	March 12, 2020 through December ~~15, 2017 for all entities. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued or made available for issuance.~~		~~January 1, 2018~~	31, 2022	The Company does not expect that the adoption of this standard will have a material impact on the Company’s condensed consolidated financial statements.

~~ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606) and related additional amendments ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-05, ASU 2017-10~~	This ASU and related amendments affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. In August 2015, the Financial Accounting Standards Board issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date of ASU 2014-09 by one year. ~~The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods:~~ ~~• A full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or~~ ~~• A modified retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).~~		~~January 1, 2018~~		The Company has established an implementation team which includes third-party specialists to assist in the evaluation and implementation of the new standard. The Company has completed its assessment of the impact of the standards on its contract portfolio by reviewing the Company’s current accounting policies and practices and identifying potential differences that would result from applying the requirements of the new standard to its revenue contracts. The Company has categorized its customers into multiple customer types and assessed significant customer arrangements within those customer types. The Company is currently in the process of formalizing its conclusion. At this time, the Company does not anticipate a significant impact to its revenue upon adoption of the new standard. The Company, in part due to the limited anticipated impact, will utilize the modified retrospective approach of adopting the ASU. In addition, during 2017 the Company has begun to identify and implement, if necessary, appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new standard.

3. Revenue from Contracts with Customers

The following table summarizes revenue by revenue source and reportable segment as follows:



	Three Months Ended March 31,
Major Products/Service Lines by Segment (in thousands)	2020		2019
U.S.
Product revenue, net⁽¹⁾	$	78,745	$	75,434
Total U.S. revenues	78,745		75,434
International
Product revenue, net⁽¹⁾	11,468		10,549
License and royalty revenues	491		527
Total International revenues	11,959		11,076
Total revenues	$	90,704	$	86,510


(1)	The Company’s principal products include DEFINITY and TechneLite and are categorized within product revenue, net. The Company applies the

same revenue recognition policies and judgments for all of its principal products.

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 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 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 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.

~~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.~~

~~At September 30, 2017 and December 31, 2016, the~~ Company’s financial assets measured at fair value on a recurring basis consist of money ~~market funds.~~market funds and interest rate swaps. 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 fair value of the interest rate swaps are determined based on observable market-based inputs, including interest rate curves and reflects the contractual terms of these instruments, including the period to maturity. Please refer to Note 10, “Derivative Instruments”, for further details on the interest rate swaps.

The ~~table~~tables below ~~presents~~present information about the Company’s assets and ~~liabilitie~~sliabilities measured at fair value on a recurring basis:

Total Fair
Value
Level 1 Level 2 Level 3
September 30, 2017 (in thousands)
Money market funds $ 6,565
$ 6,565
$ —
$ —
$ 6,565
$ 6,565
$ —
$ —
December 31, 2016
Money market funds $ 3,565
$ 3,565
$ —
$ —
$ 3,565
$ 3,565
$ —
$ —



	March 31, 2020
(in thousands)	Total Fair Value		Level 1		Level 2		Level 3
Money market	$	42,051	$	42,051	$	—	$	—
Interest rate swaps	1,330		—		1,330		—
Total	$	43,381	$	42,051	$	1,330	$	—



	December 31, 2019
(in thousands)	Total Fair Value		Level 1		Level 2		Level 3
Money market	$	39,530	$	39,530	$	—	$	—
Total	$	39,530	$	39,530	$	—	$	—

5.Income Taxes

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full year, ~~in addition to~~adjusted for any discrete events which ~~impact~~are recorded in the ~~interim period.~~period they occur. The Company’s effective tax rate in fiscal 2020 differs from the U.S. federal statutory rate of 21% principally due to the ~~change in valuation allowance~~impact of state taxes and the ~~rate impact~~accrual of interest on uncertain tax positions. Cumulative adjustments to the tax provision are recorded in the interim period in which a change in the estimated annual effective tax rate is determined. The Company’s income tax provision was $0.8 million and $20,000 for the three months ended September 30, 2017 and 2016, respectively, and $2.1 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively.expense is presented below:



	Three Months Ended March 31,
(in thousands)	2020		2019
Income tax expense	$	2,192	$	2,815

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 more-likely-than-not realizable, the Company evaluated all available positive and negative evidence, and weighed the objective evidence and expected impact. ~~Evidence the~~The Company ~~considered included its history of net operating losses, which resulted in the Company recording~~continues to record a ~~full~~ valuation allowance of $1.2 million against ~~its domestic~~the net deferred tax assets ~~beginning in 2011, and in each year thereafter. The Company was profitable on a cumulative basis for the three-year period ended September 30, 2017, but substantially all~~ of ~~that profitability was achieved during 2016 and the nine months ended September 30, 2017.~~its U.K. subsidiary.

The Company continues to evaluate other negative evidence including customer concentration and contractual risk, DEFINITY supplier risk, the risk of Moly supply availability and cost, and certain product development risks, all of which provide for uncertainties around the Company’s future level of profitability. Based on its review of all available evidence, the Company determined that it has not yet attained a sustained level of profitability sufficient to outweigh the objectively verifiable negative evidence, and has recorded a full valuation allowance against its domestic net deferred tax assets at September 30, 2017. The Company will continue to assess the level of the valuation allowance required. If a sufficient weight of positive evidence exists in future periods to support a release of some or all of the valuation allowance recorded against domestic deferred tax assets, such a release would likely have a material impact on the Company’s results of operations in that future period.

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 ~~related~~under which BMS agreed to ~~certain~~indemnify the Company for any payments made to settle those uncertain tax ~~obligations arising prior~~positions with the taxing authorities. Accordingly, a long-term receivable is recorded to account for the expected value to the ~~acquisition~~Company of future indemnification payments, net of actual tax benefits received, to be paid on behalf of the Company ~~for which the Company has the primary legal obligation.~~by BMS. The tax indemnification receivable is ~~recognized~~recorded within other long-term assets. ~~The changes in the tax indemnification asset are recognized within other income in the condensed consolidated statement of operations.~~

In accordance with the Company’s accounting policy, the change in the ~~contingent~~ tax liability, ~~and~~ penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within ~~the~~income tax ~~provision. Accordingly, as~~expense. As these reserves change, adjustments are included in ~~the~~income tax ~~provision~~expense while the offsetting adjustment is included in other income. Assuming that the receivable from BMSBMS continues to be considered recoverable by the Company, there iswill be no ~~net~~ effect on ~~earnings related to these liabilities~~net income and no net cash ~~outflows.~~outflows related to these liabilities.

5.6. Inventory

Inventory consisted of the following:



(in thousands)	March 31, 2020		December 31, 2019
Raw materials	$	11,607	$	11,417
Work in process	12,445		9,450
Finished goods	6,762		8,313
Total inventory	$	30,814	$	29,180

(in thousands) September 30,
2017
December 31,
2016
Raw materials $ 10,699
$ 9,658
Work in process 5,571
3,965
Finished goods 6,762
4,017
Total inventory $ 23,032
$ 17,640

As of September 30, 2017 and December 31, 2016, the Company had $1.2 million of inventory classified within other long-term assets, which represent raw materials not expected to be used by the Company during the next twelve months.

6.7. Property, Plant &and Equipment, Net

Property, plant &and equipment, net, consisted of the following:



(in thousands)	March 31, 2020			December 31, 2019
Land	$	13,450		$	13,450
Buildings	69,622			75,654
Machinery, equipment and fixtures	76,251			87,763
Computer software	20,768			20,739
Construction in progress	11,165			10,546
	191,256			208,152
Less: accumulated depreciation and amortization	(82,643		)	(91,655		)
Total property, plant and equipment, net	$	108,613		$	116,497

(in thousands) September 30,
2017 December 31,
2016
Land $ 14,950
$ 14,950
Buildings 74,864
70,628
Machinery, equipment and fixtures 69,549
65,407
Computer software 18,463
18,482
Construction in progress 10,068
7,224
187,894
176,691
Less: accumulated depreciation and amortization (93,378 ) (82,504 )
Total property, plant & equipment, net $ 94,516
$ 94,187

Depreciation and amortization expense related to property, plant &and equipment, net, was ~~$2.7~~$3.0 million and $2.5 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019, respectively.

The Company tests long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets may not be recoverable. As a result of a decline in expected future cash flows and ~~$11.7 million~~the effect of COVID-19 related to certain other nuclear legacy manufacturing assets in the U.S. segment, the Company determined certain impairment triggers had occurred. Accordingly, the Company performed an undiscounted cash flow analysis as of March 31, 2020. Based on the undiscounted cash flow analysis, the Company determined that the manufacturing assets had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then estimated the fair values of the asset group based on their discounted cash flows. The carrying value exceeded the fair value and ~~$8.1~~as a result, the Company recorded a non-cash impairment of $7.3 million for the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2020 in cost of goods sold in the condensed consolidated statement of operations.

7.8. Asset Retirement Obligations

The Company considers its legal obligation to remediate its facilities upon a 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 San Juan, Puerto Rico sites. As of March 31, 2020, the liability is measured at the present value of the obligation expected to be incurred, of approximately $26.9 million.

The following table provides a summary of the changes in the Company’s asset retirement obligations:



(in thousands)	Amount
Balance at January 1, 2020	$	12,883
Accretion expense	360
Balance at March 31, 2020	$	13,243

The Company is required to provide the U.S. Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurance demonstrating the Company’s ability to fund the decommissioning of its North Billerica, Massachusetts production facility upon closure, although the Company does not intend to ~~clos~~eclose the facility. The Company has provided this financial assurance in the form of a $28.2 million surety bond.

The fair value of a liability for asset retirement obligations is recognized in the period in which the liability is incurred. As of September 30, 2017, the liability is measured at the present value of the obligation expected to be incurred, of approximately $26.9 million, and is adjusted in subsequent periods as accretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying values of the related long-lived assets and depreciated over the assets’ useful lives.

~~The following table provides a summary of the changes in the Company’s asset retirement obligations:~~

(in thousands) Amount
Balance at January 1, 2017 $ 9,370
Accretion expense 781
Balance at September 30, 2017 $ 10,151

~~8. Financing Arrangements~~

On March 30, 2017, the Company refinanced its previous $365 million seven-year term loan agreement (the facility thereunder, the “2015 Term Facility”) with a new five-year $275 million term loan facility (the “2017 Term Facility” and the loans thereunder, the “Term Loans”). In addition, the Company replaced its previous $50.0 million five-year asset based loan facility (the “ABL Facility”) with a new $75.0 million five-year revolving credit facility (the “2017 Revolving Facility” and, together with the 2017 Term Facility, the “2017 Facility”). The terms of the 2017 Facility are set forth in that certain Amended and Restated Credit Agreement, dated as of March 30, 2017 (the “Credit Agreement”), by and among Holdings, the Company, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent. The 2017 Term Facility was issued net of a $0.7 million discount. The Company has the right to request an increase to the 2017 Term Facility or request the establishment of one or more new incremental term loan facilities, in an aggregate principal amount of up to $75.0 million, plus additional amounts, in certain circumstances.

~~The net proceeds~~9. Long-Term Debt, Net, and Other Borrowings

As of the 2017 Term Facility, together with approximately $15.3 million of cash on hand, were used to refinance in full the aggregate remaining principal amount of the loans outstanding under the 2015 Term Facility and pay related interest, transaction fees and expenses. No amounts were outstanding under the ABL Facility at that time. The Company accounted for the refinancing as both a debt extinguishment and debt modification by evaluating the refinancing on a creditor by creditor basis. The Company recorded a loss on extinguishment of debt of $2.2 million related to the write-off of unamortized debt issuance costs and incurred general and administrative expenses of $1.7 million related to third-party costs associated with the modified debt. In addition, the Company incurred and capitalized $1.6 million of new debt issuance costs related to the refinancing.

~~2017 Term Facility~~

~~The Term Loans under the 2017 Term Facility bear interest, with pricing based from time to time at~~March 31, 2020, the Company’s ~~election at (i) LIBOR plus a spread~~maturities of 4.50% or (ii) the Base Rate (as defined in the Credit Agreement) plus a spread of 3.50%. Interest is payable (i) with respect to LIBOR Term Loans, at the end of each Interest Period (as defined in the Credit Agreement)principal obligations under its long-term debt and ~~(ii) with respect to Base Rate Term Loans, at the end of each quarter.~~ other borrowings are as follows:



(in thousands)	Amount
Remainder of 2020	$	7,500
2021	10,000
2022	11,250
2023	15,000
2024	148,750
Total principal outstanding	192,500
Unamortized debt discount	(458		)
Unamortized debt issuance costs	(730		)
Finance lease liabilities	319
Total	191,631
Less: current portion	(10,143		)
Total long-term debt, net and other borrowings	$	181,488

At ~~September 30, 2017,~~March 31, 2020, the Company’s interest rate under the ~~2017~~2019 Term Facility was ~~5.7%~~2.5%.

10. Derivative Instruments

The Company ~~is permitted~~uses interest rate swaps to ~~voluntarily prepay~~reduce the ~~Term Loans,~~variability in ~~whole or in part. The 2017 Term Facility requires~~cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt. In March 2020, the Company entered into interest rate swap contracts to ~~make mandatory prepayments~~fix the LIBOR rate on a notional amount of $100.0 million through May 31, 2024. This agreement involves the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the ~~outstanding Term Loans in certain circumstances. The 2017 Term Facility amortizes at 1.00% per year until its June 30, 2022 maturity date.~~

~~The Company’s maturities of principal obligations under the 2017 Term Facility are as follows as of September 30, 2017:~~

(in thousands) Amount
Remainder of 2017 $ 688
2018 2,750
2019 2,750
2020 2,750
2021 2,750
2022 261,937
Total principal outstanding 273,625
Unamortized debt discount (2,273 )
Unamortized debt issuance costs (3,079 )
Total 268,273
Less: current portion (2,750 )
Total long-term debt $ 265,523

~~2017 Revolving Facility~~

~~Under the terms~~agreement without an exchange of the ~~2017 Revolving Facility,~~underlying principal amount. The interest rate swaps were designated as cash flow hedges. In accordance with hedge accounting, the ~~lenders thereunder agreed~~interest rate swaps are recorded on the Company’s condensed consolidated balance sheets at fair value, and changes in the fair value of the swap agreements are recorded to ~~extend credit~~other comprehensive loss and reclassified to interest expense in the ~~Company from time to time until~~period during which the hedged transaction affected earnings or it will become probable that the forecasted transaction would not occur. At March ~~30, 2022 (the “Revolving Termination Date”) consisting~~31, 2020, accumulated other comprehensive loss included $0.4 million of revolving loans (the “Revolving Loans” and, together with the Term Loans, the “Loans”) in an aggregate principal amount not to exceed $75.0 million (the “Revolving Commitment”) at any time outstanding. The 2017 Revolving Facility includes a $20.0 million sub-facility for the issuance of letters of credit (the “Letters of Credit”). The Letters of Credit and the borrowings under the 2017 Revolving Facilitypre-tax deferred losses that are expected to be ~~used for working capital and other general corporate purposes.~~reclassified to earnings during the next 12 months.

The ~~Revolving Loans under~~following table presents the ~~2017 Revolving Facility bear interest, with pricing based from time to time at the Company’s election at (i) LIBOR plus a spread~~location and fair value amounts of ~~3.50% or (ii) the Base Rate (as defined~~derivative instruments reported in the Credit Agreement) plus a spread of 2.50%. The 2017 Revolving Facility also includes an unused line fee, which is set at 0.375% while the Company’s secured leverage ratio (as defined in the Credit Agreement) is greater than 3.00 to 1.00 and 0.25% when the Company’s secured leverage ratio is less than or equal to 3.00 to 1.00.

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 and Letters of Credit exceeds the total Revolving Commitment, the Company must prepay the Revolving Loans in an amount equal to such excess. As of September 30, 2017~~, there were no outstanding borrowings under the 2017 Revolving Facility.~~

~~2017 Facility Covenants~~

The 2017 Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds. The 2017 Facility requires the Company to be in quarterly compliance, measured on a trailing four quarter basis, with a financial covenant. The maximumcondensed consolidated ~~leverage ratio permitted by the financial covenant is displayed in the table below:~~

~~2017 Facility Financial Covenant~~balance sheet:



(in thousands)		March 31, 2020		December 31, 2019
Derivatives type	Classification
Liabilities:
Interest rate swap	Accrued expenses and other liabilities	$	1,330	$	—



~~Period~~	~~Consolidated~~ ~~Leverage Ratio~~
~~Q3 2017 through Q1 2018~~	~~5.00 to 1.00~~
~~Q2 2018 through Q1 2019~~	~~4.75 to 1.00~~
~~Thereafter~~	~~4.50 to 1.00~~

The 2017 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.

Upon an event of default, the administrative agent under the Credit Agreement will have the right to declare the Loans and other obligations outstanding immediately due and payable and all commitments immediately terminated or reduced.

The 2017 Facility is guaranteed by Holdings and Lantheus MI Real Estate, LLC (“LMI-RE”), and obligations under the 2017 Facility are generally secured by first priority liens over substantially all of the assets of each of LMI, Holdings and LMI-RE (subject to customary exclusions set forth in the transaction documents) owned as of March 30, 2017 or thereafter acquired.

9.11. Accumulated Other Comprehensive Loss

The components of Accumulated Other Comprehensive Loss, net of tax of $0.3 million and $0.0 million for the three months ended March 31, 2020 and March 31, 2019, respectively, consisted of the following:



(in thousands)	Foreign currency translation			Unrealized loss on cash flow hedges			Accumulated other comprehensive loss
Balance at January 1, 2020	$	(960	)	$	—		$	(960	)
Other comprehensive loss before reclassifications	(446		)	(988		)	(1,434		)
Amounts reclassified to earnings	—			—			—
Balance at March 31, 2020	$	(1,406	)	$	(988	)	$	(2,394	)

Balance at January 1, 2019	$	(1,108	)	$	—		$	(1,108	)
Other comprehensive income before reclassifications	56			—			56
Amounts reclassified to earnings	—			—			—
Balance at March 31, 2019	$	(1,052	)	$	—		$	(1,052	)

12. 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 March 31,
(in thousands)	2020		2019
Cost of goods sold	$	618	$	440
Sales and marketing	253		451
General and administrative	1,815		1,574
Research and development	389		255
Total stock-based compensation expense	$	3,075	$	2,720

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands) 2017 2016 2017 2016
Cost of goods sold $ 198
$ 120
$ 514
$ 259
Sales and marketing 183
123
474
251
General and administrative 1,089
487
2,315
1,065
Research and development 187
147
461
294
Total stock-based compensation expense $ 1,657
$ 877
$ 3,764
$ 1,869

~~Increase in Shares Reserved Under the 2015 Equity Incentive Plan~~

At the Company’s annual meeting of stockholders, held on April 27, 2017 (the “Annual Meeting”), the Company’s stockholders approved an amendment to the 2015 Equity Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,200,000 shares, to an aggregate of 5,755,277 shares.

~~Employee Stock Purchase Plan~~

At the Annual Meeting, the Company’s stockholders also approved the 2017 Employee Stock Purchase Plan (“2017 ESPP”), which authorized the issuance of up to 250,000 shares of common stock thereunder. Under the terms of the 2017 ESPP, eligible U.S. employees can elect to acquire shares of the Company’s common stock through periodic payroll deductions during a series of six month offering periods, which will generally begin in March and September of each year. Purchases under the 2017 ESPP are effected on the last business day of each offering period at a 15% discount to the closing price on that day. The 2017 ESPP was implemented, subject to stockholder approval, on March 10, 2017, and the first purchases thereunder were made on September 13, 2017.

~~10.~~13. Net Income Per Common Share

~~Basic~~A summary of net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, plus the potential dilutive effect of other securities if those securities were converted or exercised. During periods in which the Company incurs net losses, both basic and diluted loss per share is calculated by dividing the net loss by the weighted-average shares outstanding and potentially dilutive securities are excluded from the calculation because their effect would be antidilutive.presented below:



	Three Months Ended March 31,
(in thousands, except per share amounts)	2020		2019
Net income	$	3,337	$	9,949

Basic weighted-average common shares outstanding	39,433		38,603
Effect of dilutive stock options	28		58
Effect of dilutive restricted stock	641		1,126
Diluted weighted-average common shares outstanding	40,102		39,787

Basic income per common share	$	0.08	$	0.26
Diluted income per common share	$	0.08	$	0.25

Antidilutive securities excluded from diluted net income per common share	604		222

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except per share amounts) 2017 2016 2017 2016
Net income $ 8,526
$ 4,220
$ 26,259
$ 21,893
Basic weighted-average common shares outstanding 37,393
31,221
37,174
30,658
Effect of dilutive stock options 318
1,084
371
391
Effect of dilutive restricted stock awards 1,410
97
1,426
—
Diluted weighted-average common shares outstanding 39,121
32,402
38,971
31,049
Basic income per common share outstanding $ 0.23
$ 0.14
$ 0.71
$ 0.71
Diluted income per common share outstanding $ 0.22
$ 0.13
$ 0.67
$ 0.71

Antidilutive securities excluded from diluted income per common share 322
448
378
1,873

~~11.~~14. Other ~~(Income) Expense~~Income

Other ~~(income) expense~~income consisted of the following:



	Three Months Ended March 31,
(in thousands)	2020			2019
Foreign currency (losses) gains	$	(314	)	$	42
Tax indemnification income, net	555			802
Interest income	109			283
Other	—			60
Total other income	$	350		$	1,187

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017 2016 2017 2016
Foreign currency (gains) losses $ (414 ) $ 349
$ (554 ) $ 330
Tax indemnification income (489 ) (196 ) (1,469 ) (632 )
Other income (5 ) (5 ) (14 ) (15 )
Total other (income) expense $ (908 ) $ 148
$ (2,037 ) $ (317 )

~~12.~~ 15. Commitments and Contingencies

Legal Proceedings ~~and Contingencies~~

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.~~Company and could have a material adverse effect on the Company’s results of operations or financial condition. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations.

As of ~~September 30, 2017,~~March 31, 2020, the Company ~~has~~had no material ongoing litigation in which the Company was a ~~party or any~~party. In addition, the Company had no material ongoing regulatory or other proceedings and ~~had~~ no knowledge of any investigations by government or regulatory authorities in which the Company is a target, in either case, that the Company believes could have a material and adverse effect on its current business.

~~13. Related Party Transactions~~

~~Related party expenses consisted of the following:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) Transaction Type 2017 2016 2017 2016
Avista Capital Partners, L.P. and its affiliates* Offering costs paid on behalf of Avista pursuant to registration rights agreement $ —
$ —
$ 326
$ —
INC Research Holdings, Inc. (“INC”)** Pharmacovigilance services —
293
—
647
VWR Scientific* Inventory supplies —
60
297
245
Total related party expenses $ —
$ 353
$ 623
$ 892

* During the quarter ended September 30, 2017, Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P. and ACP-Lantern Co-Invest, LLC (collectively, “Avista”) distributed approximately 6.3 million shares of common stock of the Company in the aggregate, representing the remainder of their holdings in the Company. The transactions were effected as distributions-in-kind of the Company’s common stock to the investors in those investment funds. As such, Avista and VWR Scientific (an entity in which Avista had an interest) are no longer related parties.

** During the year ended December 31, 2016, investment funds affiliated with Avista disposed of shares of INC common stock held by them. As a result, such investment funds were no longer a principal owner of INC. Related party expenses included in this table represent expenses incurred during the period under which investment funds affiliated with Avista held an investment in INC.

~~Amounts billed and unbilled for related parties included in accounts payable and accrued expenses are immaterial at December 31, 2016.~~

~~14.~~16. Segment Information

The Company reports ~~two~~2 operating segments, U.S. and International, based on geographic customer base. The results of these operating segments are regularly reviewed by the Company’s chief operating decision maker, the President and Chief Executive Officer. The Company’s segments derive revenues through the manufacture, marketing, selling and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging. All goodwill has been allocated to the U.S. operating segment. The Company does not identify or allocate assets to its segments.

Selected information ~~for each operating segment~~regarding the Company’s segments is provided as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017 2016 2017 2016
Revenues from external customers
U.S. $ 69,579
$ 62,621
$ 218,706
$ 192,687
International 10,362
10,442
31,431
34,816
Total revenues from external customers $ 79,941
$ 73,063
$ 250,137
$ 227,503
Operating income
U.S. $ 12,243
$ 11,649
$ 40,306
$ 35,941
International 579
946
2,340
8,506
Total operating income 12,822
12,595
42,646
44,447
Interest expense 4,442
6,792
14,147
20,799
Debt retirement costs —
1,415
—
1,415
Loss on extinguishment of debt —
—
2,161
—
Other (income) expense (908 ) 148
(2,037 ) (317 )
Income before income taxes $ 9,288
$ 4,240
$ 28,375
$ 22,550



	Three Months Ended March 31,
(in thousands)	2020			2019
Revenue by product from external customers
U.S.
DEFINITY	$	55,010		$	49,716
TechneLite	19,356			20,058
Other nuclear	9,062			9,524
Rebates and allowances	(4,683		)	(3,864		)
Total U.S. Revenues	78,745			75,434
International
DEFINITY	1,781			1,395
TechneLite	3,742			4,087
Other nuclear	6,438			5,596
Rebates and allowances	(2		)	(2		)
Total International Revenues	11,959			11,076
Worldwide
DEFINITY	56,791			51,111
TechneLite	23,098			24,145
Other nuclear	15,500			15,120
Rebates and allowances	(4,685		)	(3,866		)
Total Revenues	$	90,704		$	86,510



	Three Months Ended March 31,
(in thousands)	2020			2019
Operating income
U.S.	$	4,988		$	14,584
International	2,137			1,585
Total operating income	7,125			16,169
Interest expense	1,946			4,592
Other income	(350		)	(1,187		)
Income before income taxes	$	5,529		$	12,764

~~15.~~17. Subsequent Events

On ~~October 30, 2017, LMI~~April 1, 2020, the Company drew down $100.0 million under its 2019 Revolving Facility, the proceeds of which the Company has currently invested in short-term, interest-bearing instruments.

On April 2, 2020, the Company and Progenics issued a joint press release announcing that they had decided to reschedule their respective special meetings of stockholders to vote on matters related to the Progenics Transaction from April 28, 2020 to June 16, 2020. The rescheduled special meetings will allow both companies the time necessary to respond to the COVID-19 pandemic and its effect on each company’s business and on the combined entity and provide appropriate disclosure to their shareholders.

The Company is continuing to monitor the latest developments regarding the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations and prospects. On April 10, 2020, the Company announced several steps that it has taken to respond to the COVID-19 pandemic intended to maintain financial flexibility. These actions include transitioning to a four day work week to better align manufacturing, supply, distribution and other activities with reduced product demand, reducing non-essential discretionary expenses, and reducing executive and employee compensation effective April 13, 2020 for the balance of the second quarter of 2020. In addition, our Board of Directors has also reduced director and committee member compensation by 35% for the second half of the year and has elected to receive all remaining compensation payable in 2020 in the form of time-based restricted stock units that will vest on the first anniversary of the grant date, rather than in cash.

On April 14, 2020, the Company entered into a ~~binding commercial supply arrangement~~support agreement (the “Support Agreement”) with Velan Capital, L.P., Altiva Management Inc., Velan Capital Partners LP, Velan Capital Holdings LLC, Velan Capital Investment Management LP, Velan Principals GP LLC, Velan Capital Management LLC, Balaji Venkataraman, Deepak Sarpangal and Kevin McNeill (collectively, the “Velan Stockholders”), pursuant to which, ~~LMI will supply Cardinal Health with TechneLite generators, Xenon, Neurolite~~among other things and ~~other products through 2018. The supply arrangement specifies pricing levels~~subject to the terms and ~~requires Cardinal Health~~conditions set forth in the Support Agreement, the Velan Stockholders agreed to ~~purchase minimum volumes~~vote (or cause to be voted) their respective shares of Company and Progenics common stock in favor of certain ~~products from LMI during~~matters relating to the Progenics Transaction, and that the Velan Stockholders will abide by certain ~~periods. The supply arrangement will expire on December 31, 2018~~customary standstill provisions, in each case, subject to the terms and ~~may be terminated upon~~conditions set forth in the ~~occurrence of specified events, including a material breach by the other party and certain force majeure events.~~Support Agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements, including, in particular, statements about our plans, strategies, prospects and industry estimates are subject to risks and uncertainties. These statements identify prospective information and include words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “should,” “could,” “predicts,” “hopes” and similar expressions. Examples of forward-looking statements include ~~but are not limited to,~~ statements we make ~~regarding: (i)~~relating to our outlook and expectations including, without limitation, in connection ~~with~~with: (i) the impact of the global COVID-19 pandemic on our business, financial conditions or prospects; (ii) continued market expansion and penetration for our commercial products, particularly DEFINITY, in the face of ~~increased~~segment competition and ~~future~~potential generic competition as a result of patent and regulatory exclusivity expirations; ~~(ii) our outlook and expectations in connection with future performance of Xenon in~~(iii) the ~~face of increased competition; (iii) our outlook and expectations related to our ability to maintain and profitably renew our key customer contracts; and~~global Molybdenum-99 (“Mo-99”) supply; (iv) our ~~outlook and expectations related to~~ products manufactured at Jubilant HollisterStier (“JHS”); (v) our efforts in new product development and ~~global isotope supply.~~new clinical applications for our products; (vi) the Progenics Transaction; (vii) our capacity to use in-house manufacturing; and (viii) our ability to commercialize our products in new ex-U.S. markets. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, such statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. ~~Such~~These statements are neither statements of historical fact nor guarantees or assurances of future performance. The matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. We caution you, therefore, against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

The impact of the global COVID-19 pandemic on our business, financial condition or prospects, including a decline in the volume of procedures using our products, potential delays and disruptions to global supply chains, manufacturing activities, logistics, operations, employees and contractors, the business activities of our suppliers, distributors, customers and other business partners, as well as the effects on worldwide economies, financial markets, social institutions, labor markets and healthcare systems;

Our ability to continue to ~~increase segment penetration for~~grow the appropriate use of DEFINITY in suboptimal echocardiograms in the face of ~~increased~~ segment competition from other echocardiography contrast agents, including Optison from GE Healthcare Limited (“GE Healthcare”) and Lumason from Bracco Diagnostics Inc. (“Bracco”), and ~~future~~potential generic competition as a result of patent and regulatory exclusivity expirations;

The instability of the global Mo-99 supply, including (i) periodic outages at the NTP Radioisotopes (“NTP”) processing facility in South Africa in 2017, 2018 and 2019, and (ii) a recently resolved production volume limitations at the Australian Nuclear Science and Technology Organisation’s (“ANSTO”) new Mo-99 processing facility in Australia, in each case resulting in our inability to fill some or all of the demand for our TechneLite generators on certain manufacturing days during the outage periods;

Our dependence upon third parties for the manufacture and supply of a substantial portion of our products, raw materials and components, including DEFINITY at JHS;

The extensive costs, time and uncertainty associated with new product development, including further product development relying on external development partners or developing internally;

Our ability to identify and acquire or in-license additional products, businesses or technologies to drive our future growth;

Our ability to protect our intellectual property and the risk of claims that we have infringed on the intellectual property of others;

Risks associated with ~~revenues~~the technology transfer programs to secure production of our products at additional contract manufacturer sites, including a modified formulation of DEFINITY at Samsung BioLogics (“SBL”) in South Korea;

Risks associated with our investment in, and ~~unit volumes for Xenon in pulmonary studies and~~construction of, additional specialized manufacturing capabilities at our North Billerica, Massachusetts facility, including our ability to bring the ~~potential competition in this generic segment from Curium (formerly known as Mallinckrodt Nuclear Imaging; purchased~~new capabilities online by ~~IBA Molecular in January 2017 and renamed Curium in April 2017);~~2021;

Our dependence on key customers for our medical imaging products, and our ability to maintain and profitably renew our contracts with those key customers, including GE Healthcare, Cardinal Health (“Cardinal”), United Pharmacy Partners (“UPPI”), ~~GE Healthcare and~~Jubilant Radiopharma formerly known as Triad Isotopes, Inc. (“~~Triad”~~Jubilant Radiopharma”) and PharmaLogic Holdings Corp (“PharmaLogic”);

~~Our dependence upon third parties for the manufacture and supply of a substantial portion of our products, including DEFINITY at JHS;~~

Risks associated with our lead agent in development, flurpiridaz F 18, which in 2017 we out-licensed to GE Healthcare, including:

The ability to successfully complete the ~~technology transfer programs~~Phase 3 development program, including delays in enrollment that will result from the COVID-19 pandemic;

The ability to ~~secure production~~obtain Food and Drug Administration (“FDA”) approval; and

The ability to gain post-approval market acceptance and adequate reimbursement;

Risks associated with our development agent, LMI 1195, for patient populations that would benefit from molecular imaging of ~~our products at alternate contract manufacturer sites,~~the norepinephrine pathway, including ~~a next generation DEFINITY product at Samsung BioLogics (“SBL”)~~designing and timely completing two Phase 3 clinical trials for the diagnosis and management of neuroendocrine tumors in ~~South Korea;~~pediatric and adult populations, respectively;

Risks associated with the manufacturing and distribution of our products and the regulatory requirements related thereto;

~~The instability of the global Molybdenum-99 (“Moly”) supply;~~

The dependence of certain of our customers upon third-party healthcare payors and the uncertainty of third-party coverage and reimbursement rates;

The existence and market success of competitor products;

Uncertainties regarding the impact of ~~on-going~~ U.S. and state healthcare reform measures and proposals on our business, including measures and proposals related ~~reimbursements~~to reimbursement for our current and potential future ~~products;~~products, controls over drug pricing, drug pricing transparency and generic drug competition;

Our being subject to extensive government regulation and oversight, our ~~potential inability~~ability to comply with those ~~regulations;~~regulations and the costs of compliance;

Potential liability associated with our marketing and sales practices;

The occurrence of any serious or unanticipated side effects with our products;

Our exposure to potential product liability claims and environmental, ~~liability;~~

~~Risks associated with our lead agent in development, flurpiridaz F 18, including:~~


▪	~~The ability of GE Healthcare to successfully complete the Phase III development program;~~


▪	~~The ability to obtain Food and Drug Administration (“FDA”) approval; and~~


▪	~~The ability to gain post-approval market acceptance and adequate reimbursement;~~

~~The extensive costs, time~~health and ~~uncertainty associated with new product development, including further product development relying on external development partners or potentially developed internally;~~safety liability;

Our ~~inability~~ability to introduce new products and adapt to an evolving technology and ~~diagnostic~~medical practice landscape;

~~Our inability to identify and in-license or acquire additional products to grow our business;~~

~~Our inability to protect our intellectual property and the risk of claims that we have infringed on the intellectual property of others;~~

Risks associated with prevailing economic or political conditions and events and financial, business and other factors beyond our control;

Risks associated with our international ~~operations;~~operations, including potential global disruptions in air transport due to COVID-19, which could adversely affect our international supply chains for radioisotopes and other critical materials as well as international distribution channels for our commercial products;

Our ~~inability~~ability to adequately qualify, operate, maintain and protect our facilities, equipment and technology infrastructure;

Our ~~inability~~ability to hire or retain skilled employees and key personnel;

Our ability to utilize, or limitations in our ability to utilize, net operating loss carryforwards to reduce our future tax liability;

Risks related to our outstanding indebtedness and our ability to satisfy those obligations;

Costs and other risks associated with the Sarbanes-Oxley Act and the Dodd-Frank ~~Act;~~

~~Our inability to utilize or limitations~~Act, including in ~~our ability to utilize net operating loss carryforwards to reduce our future tax liability;~~connection with becoming a large accelerated filer as of December 31, 2019;

Risks related to the ownership of our common stock;

Risks related to the Progenics Transaction, including:

We or Progenics may be unable to obtain stockholder approval as required;

Conditions to the closing of the Progenics Transaction may not be satisfied;

The Progenics Transaction may involve unexpected costs, liabilities or delays;

The ability of our or Progenics’ business to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom we or Progenics do business, or on our or Progenics’ operating results and business generally;

Our or Progenics’ respective businesses may suffer as a result of uncertainty surrounding the Progenics Transaction and disruption of management’s attention due to the Progenics Transaction;

The occurrence of any event, change or other circumstances that could give rise to the termination of our agreement with Progenics;

Unanticipated risks to our integration plan including in connection with timing, talent, and the potential need for additional resources;

New or previously unidentified manufacturing, regulatory, or research and development issues in the Progenics business;

Risks that the anticipated benefits of the Progenics Transaction or other commercial opportunities may otherwise not be fully realized or may take longer to realize than expected;

Risks relating to the COVID-19 pandemic and its effect on each company’s business and on the combined entity;

Risks that contractual contingent value rights (“CVRs”) we will issue as part of the Progenics Transaction may result in substantial future payments and could divert the attention of our management;

Risks that in connection with the Progenics Transaction, the exercise of appraisal rights by dissenting stockholders could increase the aggregate amount we have to pay for Progenics;

We or Progenics may be adversely affected by other economic, business, and/or competitive factors;

The impact of legislative, regulatory, competitive and technological changes;

Other risks to the consummation of the Progenics Transaction, including the risk that the Progenics Transaction will not be consummated within the expected time period or at all; and

Other factors that are described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 and in Part ~~II—~~II, Item 1A. “Risk Factors” ofin this Quarterly Report on Form 10-Q.

Factors that could cause or contribute to such differences include, but are not limited to, those that are discussed in other documents we file with the SEC. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

~~Investor~~Available Information

Our global Internet site is www.lantheus.com. We routinely make available important information, including copies of our ~~annual, periodic~~Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and ~~current~~amendments to those reports filed or furnished ~~with the SEC under~~pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after those reports are electronically filed with, or furnished to, the SEC, free of charge on our website at ~~http://~~www.investor.lantheus.com. We recognize our website as a key channel of distribution to reach public investors and as a means of disclosing material non-public information to comply with our disclosure obligations under SEC Regulation FD. Information contained on our website shall not be deemed incorporated into, or to be part of this Quarterly Report on Form 10-Q, and any website references are not intended to be made through active hyperlinks.

Our reports filed with, or furnished to, the SEC are also available on the SEC’s website at www.sec.gov, and for Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, in an iXBRL (Inline Extensible Business Reporting Language) format. iXBRL is an electronic coding language used to create interactive financial statement data over the Internet. The information on our website is neither part of nor incorporated by reference in this Quarterly Report on Form 10-Q.

The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q as well as the other factors described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016 and in Part II— Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.~~2019.

Overview

Our Business

We are a global leader in the development, manufacture and commercialization of innovative diagnostic medical imaging agents and products that assist clinicians in the diagnosis and treatment of cardiovascular and other diseases. Clinicians use our imaging agents and products across a range of imaging modalities, including echocardiography and nuclear imaging. We believe that the resulting improved diagnostic information enables healthcare providers to better detect and characterize, or rule out, disease, potentially achieving improved patient outcomes, reducing patient risk and limiting overall costs for payers and the entire healthcare system.

Our commercial products are used by cardiologists, nuclear physicians, radiologists, internal medicine physicians, technologists and sonographers working in a variety of clinical settings. We sell our products to radiopharmacies, integrated delivery networks, hospitals, clinics and group practices.

We sell our products globally and ~~have operations~~operate our business in ~~the U.S., Puerto Rico and Canada and third-party distribution relationships in Europe, Canada, Australia, Asia Pacific and Latin America.~~two reportable segments, which are further described below:


•	U.S. Segment produces and markets our medical imaging agents and products throughout the U.S. In the U.S., we primarily sell our products to radiopharmacies, integrated delivery networks, hospitals, clinics and group practices.


•	International Segment operations consist of production and distribution activities in Puerto Rico and some direct distribution activities in Canada. Additionally, within our International Segment, we have established and maintain third-party distribution relationships under which our products are marketed and sold in Europe, Canada, Australia, Asia-Pacific and Latin America.

Our Product Portfolio

Our product portfolio includes an ultrasound contrast agent, ~~and~~ nuclear imaging ~~products.~~products and a radiotherapeutic product. Our principal products include the following:

DEFINITY is an ultrasound contrast agent used in ultrasound exams of the heart, also known as echocardiography exams. DEFINITY contains perflutren-containing lipid microspheres and is indicated in the U.S. for use in patients with suboptimal echocardiograms to assist in imaging the left ventricular chamber and left endocardial border of the heart in ultrasound procedures. We launched DEFINITY in 2001, and in the U.S., its composition of matter patent will expire in 2019, its manufacturing patent will expire in 2021, and a new method of use patent will expire in 2037. In numerous foreign jurisdictions, patent protection or regulatory exclusivity will currently expire in 2019. We also have an active next generation development program for this agent including pursuing additional indications, new patent protection, and new formulations, but we can give no assurance that the program will be successful or that additional patents will protect the agent.

TechneLite is a technetium generator which provides the essential nuclear material used by radiopharmacies to radiolabel Cardiolite, Neurolite and other technetium-based radiopharmaceuticals used in nuclear medicine procedures. TechneLite uses Moly as its active ingredient.

Xenon is a radiopharmaceutical gas that is inhaled and used to assess pulmonary function and also for imaging cerebral blood flow. Xenon is manufactured by a third-party and is processed and finished by us.


•	DEFINITY is a microbubble contrast agent used in ultrasound exams of the heart, also known as echocardiography exams. DEFINITY contains perflutren-containing lipid microspheres and is indicated in the U.S. for use in patients with suboptimal echocardiograms to assist in imaging the left ventricular chamber and left endocardial border of the heart in ultrasound procedures.


•	TechneLite is a Technetium (“Tc-99m”) generator that provides the essential nuclear material used by radiopharmacies to radiolabel Cardiolite, Neurolite and other Tc-99m-based radiopharmaceuticals used in nuclear medicine procedures. TechneLite uses Mo-99 as its active ingredient.

Sales of our microbubble contrast agent, DEFINITY, are made in the U.S. and Canada through ~~our~~a DEFINITY direct sales ~~team of approximately 80 employees.~~team. In the U.S., our nuclear imaging products, including TechneLite, Xenon, Neurolite and Cardiolite, are primarily distributed through commercial radiopharmacies, the majority of which are controlled by or associated with GE Healthcare, Cardinal, UPPI, ~~GE Healthcare~~Jubilant

Radiopharma and ~~Triad.~~PharmaLogic. A small portion of our nuclear imaging product sales in the U.S. are made through our direct sales force to hospitals and clinics that maintain their own in-house radiopharmaceutical preparation capabilities. ~~Outside the U.S., we~~We own one radiopharmacy in Puerto Rico where we sell our own products as well as products of third parties to end-users.

In January 2016, we sold our Canadian radiopharmacies to Isologic Innovative Radiopharmaceuticals Ltd. (“Isologic”) and entered into a supply agreement under which we supply Isologic with certain of our products on commercial terms, including certain product purchase commitments by Isologic. In August 2016, we sold our Australian radiopharmacy servicing business to Global Medical Solutions (“GMS”), and entered into a supply agreement under which we supply GMS with certain of our products on commercial terms, including certain minimum product purchase commitments by GMS.

We also maintain our own direct sales force in Canada ~~so that we can control the importation, marketing, distribution and sale~~for certain of our ~~imaging agents in Canada.~~products. In Europe, Australia, ~~Asia Pacific~~Asia-Pacific and Latin America, we generally rely on third-party distributors to market, sell and distribute our nuclear imaging and contrast agent products, either on a country-by-country basis or on a multi-country regional basis.

Progenics Transaction

On October 1, 2019, we entered into the Initial Merger Agreement to acquire all of the issued and outstanding shares of Progenics common stock by means of a merger of a wholly-owned subsidiary of the Company with and into Progenics in which Progenics stockholders would have received 0.2502 shares of our common stock for each share of Progenics common stock, representing an approximately 35% aggregate ownership stake in the combined company. The transaction contemplated by the Initial Merger Agreement was unanimously approved by the Boards of Directors of both companies and was subject to the terms and conditions set forth in the Initial Merger Agreement, including, among other things, the affirmative vote of a majority of the outstanding shares of common stock of Progenics and a majority of votes cast by the holders of the common stock of the Company.

On February 20, 2020, we entered into the Amended Merger Agreement with Progenics, which amends and restates the Initial Merger Agreement. Under the terms of the Amended Merger Agreement, the Company will acquire all of the issued and outstanding shares of Progenics common stock by means of a merger of a wholly-owned subsidiary of the Company with and into Progenics in which Progenics stockholders will receive, for each share of Progenics stock held at the time of the closing of the Progenics Transaction, merger consideration consisting of 0.31 of a share of our common stock and a non-tradeable CVR tied to the financial performance of PyL. Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PyL in 2022 and 2023 in excess of $100 million and $150 million, respectively. In no event will our aggregate payments in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Transaction, exceed 19.9% of the total consideration we pay in the Progenics Transaction. Following the closing of the Progenics Transaction, the aggregate ownership stake of the former Progenics stockholders will be approximately 40% of the combined company. Progenics’ stockholders will also be entitled to appraisal rights as provided under Delaware law.

In addition, pursuant to the Amended Merger Agreement, the holder of each in-the-money Progenics Stock Option will be entitled to receive in exchange for each such in-the-money option (i) a Company Stock Option converted based on the 0.31 exchange ratio and (ii) a vested or unvested CVR depending on whether the underlying option is vested. Holders of out-of-the-money Progenics Stock Options will receive Company Stock Options converted on an exchange ratio adjusted based on actual trading prices of common stock of Progenics and the Company prior to the closing of the Progenics Transaction.

The Progenics Transaction was unanimously approved by the Boards of Directors of both companies and requires, among other things, the affirmative vote of a majority of the outstanding shares of common stock of Progenics and a majority of votes cast by the holders of the common stock of the Company. The Progenics Transaction is currently expected to close in June 2020, subject to the satisfaction or waiver of certain closing conditions. Following the closing of the Progenics Transaction, which the parties intend to report as tax-deferred to Progenics’ stockholders with respect to the stock component of the merger consideration for U.S. federal income tax purposes, the combined company will continue to be headquartered in North Billerica, Massachusetts and will trade on the NASDAQ under the ticker symbol LNTH.

On March 15, 2020, Progenics and LMI entered into a bridge loan agreement, pursuant to which LMI agreed to provide for a secured short-term loan to Progenics on or after May 1, 2020 in an aggregate principal amount of up to $10.0 million. The bridge loan matures on the earlier to occur of (a) September 30, 2020 and (b) the date on which Progenics enters into a debt financing or similar arrangements or any amendment to, or replacement of, its existing debt provided by one or more third parties following ~~table sets~~the termination date of the merger agreement, in either case, having aggregate net cash proceeds that exceed the amount then required to repay all obligations under the bridge loan agreement in full in cash. The bridge loan bears interest at a rate per annum of 9.5% and is secured through the pledge to LMI of all of the issued and outstanding shares of capital stock of MIPI and any debt of MIPI owed to Progenics.

On April 14, 2020, the Company entered into the Support Agreement with the Velan Stockholders pursuant to which, among other things and subject to the terms and conditions set forth ~~our revenues derived from our principal products:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017
% of
Revenues
2016
% of
Revenues
2017
% of
Revenues
2016
% of
Revenues
DEFINITY $ 37,729
47.2 % $ 32,604
44.6 % $ 115,569
46.2 % $ 97,499
42.9 %
TechneLite 26,356
33.0 % 24,533
33.6 % 79,900
31.9 % 74,621
32.8 %
Xenon 7,726
9.6 % 6,677
9.1 % 23,713
9.5 % 21,625
9.5 %
Other 8,130
10.2 % 9,249
12.7 % 30,955
12.4 % 33,758
14.8 %
Total revenues $ 79,941
100.0 % $ 73,063
100.0 % $ 250,137
100.0 % $ 227,503
100.0 %
in the Support Agreement, the Velan Stockholders agreed to vote (or cause to be voted) their respective shares of Company and Progenics common stock in favor of certain matters relating to the Progenics Transaction, and that the Velan Stockholders will abide by certain customary standstill provisions, in each case, subject to the terms and conditions set forth in the Support Agreement.

The transaction is now expected to close in June 2020, subject to certain closing conditions. Upon completion of the acquisition, which the parties intend to report as tax-deferred to Progenics’ stockholders with respect to the stock component of the merger consideration for U.S. federal income tax purposes, the combined company will continue to be headquartered in North Billerica, Massachusetts and will trade on the NASDAQ under the ticker symbol LNTH.

See Part I, Item 1A. “Risk Factors” in our Annual Report on form 10-K for the year ended December 31, 2019, for information regarding certain risks associated with our proposed acquisition of Progenics.

Key Factors Affecting Our Results

Our business and financial performance have been, and continue to be, affected by the following:

COVID-19 Pandemic

The global COVID-19 pandemic will have a material impact on our business. Towards the end of the first quarter of 2020 we began to experience, and through the date of this filing we are continuing to experience, impacts to our business and operations related to the COVID-19 pandemic, including the impact of stay-at-home mandates and related safety measures such as the delay of elective medical procedures, resulting in a decline in the volume of procedures using our products. We cannot predict the magnitude or duration of the pandemic’s impact on our business.

As a result of the COVID-19 pandemic, we undertook a thorough analysis of all of our discretionary expenses. In the first quarter of 2020 we implemented certain cost reduction initiatives, including, among other things, reducing travel and promotional expenses and implementing a hiring freeze through the balance of 2020. In addition, effective April 13, 2020 for the balance of the second quarter of 2020, we reduced our work week from five days to four days in order to better align manufacturing, supply, distribution and other activities with reduced product demand. We also reduced pay for our personnel, including a 75% reduction for Mary Anne Heino, our President and Chief Executive Officer, a 35% reduction for members of our executive team, a 25% reduction for our vice presidents, and across-the-board reductions of 20% of salaries for our other salaried employees and 20% of hours for our hourly employees for that same time period. In addition, our Board of Directors has also reduced director and committee member compensation by 35% for the second half of the year and has elected to receive all remaining compensation payable in 2020 in the form of time-based restricted stock units that will vest on the first anniversary of the grant date, rather than in cash. These pay reduction measures may impact our ability to maintain employee morale and motivate and retain management personnel and other key employees. We intend to reevaluate the executive and employee pay reduction measures at the end of the second quarter. We can give no assurances that we will not have to take additional cost reduction measures if the pandemic continues to adversely affect the volume of procedures using our products.

While we are currently unable to estimate the impact of COVID-19 on our overall 2020 operations and financial results, we ended the first quarter of 2020 with $95.7 million of cash and cash equivalents. In addition, as a precaution, in early April 2020 we drew $100 million on our existing $200 million revolving line of credit, which draw we intend to repay upon consummation of the Progenics Transaction in order to remain in compliance with the applicable financial covenants in our 2019 Facility. With our available liquidity and prudent expense management, we believe we will be able to maintain a state of preparedness to resume full business activities to support our customers as external conditions allow, although we can give no assurances that we will have sufficient liquidity if the pandemic continues to adversely affect the volume of procedures using our products for an extended period of time.

Anticipated Continued Growth of DEFINITY and Expansion of Our Ultrasound Microbubble Franchise

We believe the market opportunity for our ultrasound microbubble contrast agent, DEFINITY, ~~remains~~continues to be significant. DEFINITY is ~~currently~~ our fastest growing and highest margin commercial product. We ~~believe that~~anticipate DEFINITY sales will continue to grow ~~and that DEFINITY will constitute a greater share of our overall product mix.~~over the longer term. As we ~~better~~continue to educate the physician and healthcare provider community about the benefits and risks of ~~this product,~~DEFINITY, we believe we will ~~experience further penetration of suboptimal echocardiograms.~~

~~The future~~ ~~growth of our DEFINITY sales will~~ be ~~dependent on our ability~~able to continue to increase segment penetration for DEFINITY in suboptimal echocardiograms and, as discussed below in “—Inventory Supply,” on the ability of JHS to continue to manufacture and release DEFINITY on a timely and consistent basis. See “Part II—Item 1A. Risk Factors—The growth of our business is substantially dependent on increased market penetration forgrow the appropriate use of DEFINITY in suboptimal echocardiograms.”

~~There are~~ In a U.S. market with three echocardiography contrast agents approved by the FDA, ~~for sale in the U.S.—~~we estimate that DEFINITY ~~which we estimated as having approximately~~had over 80% of the ~~U.S.~~ market ~~for contrast agents in echocardiography procedures~~ as of December 31, ~~2016, Optison from GE Healthcare and Lumason from Bracco.~~2019.

~~Competition~~As we continue to pursue expanding our microbubble franchise, our activities include:

•

Patents - We continue to actively pursue additional patents in connection with DEFINITY, both in the U.S. and internationally. In the U.S., three of our recently issued method of use patents covering DEFINITY were listed in the Orange Book. We now have a total of four Orange Book-listed method of use patents, one of which expires in 2035 and three of which expire in 2037, as well as additional manufacturing patents that are not Orange Book-listed expiring in 2021, 2023 and 2037. Outside of the U.S., while our DEFINITY patent protection and regulatory exclusivity have generally expired, we are currently prosecuting additional patents to try to obtain similar method of use and manufacturing patent protection as granted in the U.S.

Hatch-Waxman Act - Even though our longest duration Orange Book-listed DEFINITY patent extends until March 2037, because our Orange Book-listed composition of matter patent expired in June 2019, we may face generic DEFINITY challengers in the near to intermediate term. Under the Hatch-Waxman Act, the FDA can approve Abbreviated New Drug Applications (“ANDAs”) for ~~Xenon~~

~~Xenon gas for lung ventilation diagnosis~~generic versions of drugs if the ANDA applicant demonstrates, among other things, that (i) its generic candidate is ~~our third largest~~the same as the innovator product by ~~revenues. In order~~establishing bioequivalence and providing relevant chemistry, manufacturing and product data, and (ii) the marketing of that generic candidate does not infringe an Orange Book-listed patent. With respect to ~~increase~~any Orange Book-listed patent covering the ~~predictability~~innovator product, the ANDA applicant must give a notice to the innovator (a “Notice”) that the ANDA applicant certifies that its generic candidate will not infringe the innovator’s Orange Book-listed patent or that the Orange Book-listed patent is invalid. The innovator can then challenge the ANDA applicant in court within 45 days of ~~our Xenon business,~~receiving that Notice, and FDA approval to commercialize the generic candidate will be stayed (that is, delayed) for up to 30 months (measured from the date on which a Notice is received) while the patent dispute between the innovator and the ANDA applicant is resolved in court. The 30 month stay could potentially expire sooner if the courts determine that no infringement had occurred or that the challenged Orange Book-listed patent is invalid or if the parties otherwise settle their dispute.

As of the date of filing of this Quarterly Report on Form 10-Q, we have ~~entered into Xenon~~not received any Notice from an ANDA applicant. If we were to (i) receive any such Notice in the future, (ii) bring a patent infringement suit against the ANDA applicant within 45 days of receiving that Notice, and (iii) successfully obtain the full 30 month stay, then the ANDA applicant would be precluded from commercializing a generic version of DEFINITY prior to the expiration of that 30 month stay period and, potentially, thereafter, depending on how the patent dispute is resolved. Solely by way of example and not based on any knowledge we currently have, if we received a Notice from an ANDA applicant in May 2020 and the full 30 month stay was obtained, then the ANDA applicant would be precluded from commercialization until at least November 2022. If we received a Notice some number of months in the future and the full 30 month stay was obtained, the commercialization date would roll forward in the future by the same calculation.

•

Modified Formulation - We are developing at SBL a modified formulation of DEFINITY. We believe this modified formulation will provide an enhanced product profile enabling storage as well as shipment at room temperature (DEFINITY’s current formulation requires refrigerated storage), will give clinicians additional choice, and will allow for greater utility of this formulation in broader clinical settings. We were recently granted a composition of matter patent on the modified formulation which runs through 2035. If the modified formulation is approved by the FDA, then this patent would be eligible to be listed in the Orange Book. We currently believe that, if approved by the FDA, the modified formulation could become commercially available in early 2021, although that timing cannot be assured. Given its physical characteristics, the modified formulation may also be well suited for inclusion in kits requiring microbubbles for other indications and applications (including in kits developed by third parties of the type described in the next paragraph).

•

New Clinical Applications - As we continue to look for other opportunities to expand our microbubble franchise, we are evaluating new indications and clinical applications beyond echocardiography and contrast imaging generally. For example, in April 2019, we announced a strategic development and commercial collaboration with Cerevast Medical, Inc. (“Cerevast”) in which our microbubble will be used in connection with Cerevast’s ocular ultrasound device to target improving blood flow in occluded retinal veins in the eye. Retinal vein occlusion is one of the most common causes of vision loss worldwide. In December 2019, we announced a strategic commercial supply agreement with CarThera for the use of our microbubbles in combination with SonoCloud, a proprietary implantable device in development for the treatment of recurrent glioblastoma. Glioblastoma is a lethal and devastating form of brain cancer with median survival of 15 months after diagnosis.

•

In-House Manufacturing - We are currently building specialized in-house manufacturing capabilities at our North Billerica, Massachusetts facility for DEFINITY and, potentially, other sterile vial products. We believe the investment in these efforts will allow us to better control DEFINITY manufacturing and inventory, reduce our costs in a potentially more price competitive environment, and provide us with supply chain redundancy. We currently expect to be in a position to use this in-house manufacturing capability by early 2021, although that timing cannot be assured.

•

DEFINITY in China - On March 19, 2020 in connection with our Chinese development and distribution arrangement with Double Crane Pharmaceutical Company, we filed an Import Drug License application with the NMPA, or National Medical Products Administration, for the use of DEFINITY for the echocardiography indication. Our application is now undergoing initial review by the NMPA. We believe this is an important milestone in our efforts to commercialize DEFINITY in China. Double Crane is also in the process of analyzing the clinical results relating to the liver and kidney indications and will also work with us to prepare an Import Drug License application for those indications.

Global Mo-99 Supply

We currently have Mo-99 supply agreements with ~~customers at committed volumes~~Institute for Radioelements (“IRE”), running through December 31, 2022, and ~~reduced prices. These steps~~renewable by us on a year-to-year basis thereafter, and with NTP and ANTSO, running through December 31, 2021. We also have a Xenon supply agreement with IRE which runs through June 30, 2022, and which is subject to further extension.

Although we have a globally diverse Mo-99 supply with IRE in Belgium, NTP in South Africa and ANSTO in Australia, we still face supplier and logistical challenges in our Mo-99 supply chain. The NTP processing facility has had periodic outages in 2017, 2018 and 2019. When NTP was not producing, we relied on Mo-99 supply from both IRE and ANSTO to limit the impact of the NTP outages. In the second quarter of 2019, ANSTO experienced technical issues in its existing Mo-99 processing facility which resulted in ~~more predictable Xenon unit volumes. Historically, several companies, including Mallinckrodt Nuclear Imaging (now known~~a decrease in Mo-99 available to us. In addition, as ~~Curium), sold packaged Xenon as a pulmonary imaging agent~~ANSTO transitioned from its existing Mo-99 processing facility to its new Mo-99 processing facility in the ~~U.S., but from 2010 through the first~~second quarter of ~~2016,~~2019, ANSTO experienced start-up and transition challenges, which also resulted in a decrease in Mo-99 available to us. Further, starting in late June 2019 until April 2020, ANSTO’s new Mo-99 processing facility had production volume limitations imposed on it by the Australian Radiation Protection and Nuclear Safety Agency which limited our ability to receive Mo-99 from ANSTO. During that time we ~~were~~relied on IRE and NTP to limit the ~~only supplier~~impact of ~~this imaging agent in~~those ANSTO outages and volume limitations. As ANSTO increases its production volume over the ~~U.S.~~course of 2020, we expect to receive increasing supply from ANSTO. Because of the COVID-19 pandemic, we have recently experienced challenges receiving regularly scheduled orders of Mo-99 from our global suppliers due to the partial or complete delay or cancellation of international flights by our airfreight carriers. Because of these various supply chain constraints, depending on reactor and processor schedules and operations, we have not been able to fill some or all of the demand for our TechneLite generators on certain manufacturing days.

ANSTO’s new Mo-99 processing facility could eventually increase ANSTO’s Mo-99 production capacity from approximately 2,000 curies per week to 3,500 curies per week with additional committed financial and operational resources. At full ramp-up capacity, ANSTO’s new facility could provide incremental supply to our globally diversified Mo-99 supply chain and therefore mitigate some risk among our Mo-99 suppliers, although we can give no assurances to that effect. In March 2016, Mallinckrodt Nuclear Imaging received regulatory approval from the FDA to again sell packaged Xenon in the U.S. Depending upon the pricing, extent of availability and market penetration of such offering,addition, we ~~believe we are at risk for volume loss and price erosion for those customers which are not subject to price or volume commitments~~also have a strategic arrangement with ~~us. See Part I, Item 1A. “Risk Factors —We face potential supply and demand challenges for Xenon” of our Annual Report on Form 10-K~~SHINE Medical Technologies, Inc. (“SHINE”), a Wisconsin-based company, for the ~~year ended December 31, 2016.~~future supply of Mo-99. Under the terms of that agreement, SHINE will provide us Mo-99 once SHINE’s facility becomes operational and receives all necessary approvals, which SHINE now estimates will occur in 2022.

Inventory Supply

We obtain a substantial portion of our imaging agents from a third-party ~~suppliers.~~supplier. JHS is currently our sole source manufacturer of DEFINITY, Neurolite, Cardiolite and evacuation vials, the latter being an ancillary component for our TechneLite generators. We are currently seeking approval from certain foreign regulatory authorities for JHS to manufacture certain of our products. Until we receive these approvals, we will face continued limitations on where we can sell those products outside of the U.S.

In addition to JHS, we are also currently working to secure additional alternative suppliers for our key products as part of our ongoing supply chain diversification strategy. We have ~~on-going~~ongoing development and technology transfer activities for a ~~next generation~~modified formulation of DEFINITY ~~product~~ with SBL, which is located in South ~~Korea, but we~~Korea. We currently believe that if approved by the FDA, the modified formulation could be commercially available in 2021, although that timing cannot be assured. We are also building in-house specialized manufacturing capabilities at our North Billerica, Massachusetts facility, as part of a larger strategy to create a competitive advantage in specialized manufacturing, which will also allow us to optimize our costs and reduce our supply chain risk. We can give ~~any assurances~~no assurance as to when or if ~~and when those technology transfer activities~~we will be ~~completed and when~~successful in these efforts or that we will ~~begin~~be able to ~~receive supply of a next generation DEFINITY product from SBL. See Part I, Item 1A. “Risk Factors—Our dependence upon third parties for the~~successfully manufacture ~~and supply of a substantial portion of~~any additional commercial products at our products could prevent us from delivering our products to our customers in the required quantities, within the required timeframes, or at all, which could result in order cancellations and decreased revenues” of our Annual Report on Form 10-K for the year ended December 31, 2016.North Billerica, Massachusetts facility.

Radiopharmaceuticals are decaying radioisotopes with half-lives ranging from a few hours to several days. These products cannot be kept in inventory because of their limited shelf lives and are subject to just-in-time manufacturing, processing and distribution, which takes place at our North Billerica, Massachusetts facility.

~~Global Isotope Supply~~

We currently have Moly supply agreements with NTP Radioisotopes (“NTP”) of South Africa and ANSTO of Australia, and with Institute for Radioelements (“IRE”) of Belgium, each running through December 31, 2017, and a Xenon supply agreement with IRE which runs through June 30, 2019, subject to extensions.

We believe we are well-positioned with ANSTO, IRE and NTP to have a secure supply of Moly, including low-enriched uranium-based Moly produced from targets containing less than 20% of Uranium-235 (“LEU Moly”). From November 2016, the NRU reactor transitioned from providing regular supply of medical isotopes to providing only emergency back-up supply of highly-enriched uranium-based Moly through March 2018. ANSTO has already significantly increased its Moly production capacity from its existing facility in August 2016 and has under construction, in cooperation with NTP, a new Moly processing facility that ANSTO believes will expand its production capacity, which is expected to be in commercial operation in the first half of 2018. In addition, IRE received approval from its regulator to expand its production capability by up to 50% of its former capacity. The new ANSTO and IRE production capacity is expected to replace and exceed what was the NRU’s most recent routine production.

~~We are receiving bulk unprocessed Xenon from IRE, which we are processing and finishing for our customers. We believe we are well-positioned to supply Xenon to our customers. See Part I, Item 1A. “Risk Factors —We face potential supply and demand challenges for Xenon” of our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Demand for TechneLite~~

We believe that due to industry-wide cost containment initiatives that have resulted in a transition of where imaging procedures are performed, from free-standing imaging centers to the hospital setting, the total MPI market has been essentially flat since 2011. Our 2016 sales of TechneLite generators exceeded our expectations because of opportunistic sales when customers could not obtain sufficient generators from other suppliers. We can give no assurances that such opportunistic sales will be replicated in 2017.

In November 2016, CMS announced the 2017 final Medicare payment rules for hospital outpatient settings. Under the final rules, each technetium dose produced from a generator for a diagnostic procedure in a hospital outpatient setting is reimbursed by Medicare at a higher rate if that technetium dose is produced from a generator containing at least 95% LEU Moly. In January 2013, we began to offer a TechneLite generator which contains at least 95% LEU Moly and which satisfies the requirements for reimbursement under this incentive program. Although demand for LEU generators appears to be growing, we do not know when, or if, this incremental reimbursement for LEU Moly generators will result in a material increase in our generator sales.

Research and Development Expenses

To remain a leader in the marketplace, we have historically made substantial investments in new product development. ~~As a result, the positive contributions of those internally funded research and development programs have been a key factor in~~For flurpiridaz F 18, our ~~historical results and success. On~~positron emission tomography (“PET”)-based myocardial perfusion imaging agent, on April 25, 2017, we announced entering into a definitive, exclusive Collaboration and License Agreement with GE Healthcare for the agent’s continued Phase ~~III~~3 development and worldwide ~~commercialization~~commercialization. Because of ~~flurpiridaz F 18. In~~ the ~~future, we may also seek to engage strategic partners for our 18F~~COVID-19 pandemic, GE Healthcare believes enrollment in that global clinical development program will be delayed. For LMI 1195, and LMI 1174 programs, or we may choose to partially or fully fund one or more development programs ourselves. See Part I, Item 1. “Business—Research and Development—Proposed GE Healthcare Transaction” and Part I, Item 1A. “Risk Factors—We may not be able to further develop or commercialize our ~~agents in development without successful strategic partners” of our Annual Report on Form 10-K~~PET-based molecular imaging agent for the ~~year ended December 31, 2016.~~

~~Hurricane Maria~~norepinephrine pathway, we are currently designing two Phase 3 clinical trials for the use of LMI 1195 for the diagnosis and management of neuroendocrine tumors in ~~Puerto Rico~~

Inpediatric and adult populations, respectively. The FDA has granted an Orphan Drug designation for the use of LMI 1195 in the management indication. We have also received notice of eligibility for a rare pediatric disease priority review voucher for a subsequent human drug application so long as LMI 1195 is approved by the FDA for its rare pediatric disease indication prior to September ~~2017, Hurricane Maria devastated Puerto Rico, interrupting power~~30, 2022. Our investments in these additional clinical activities will increase our operating expenses and ~~telecommunications services for most~~impact our results of ~~the island~~operations and ~~limiting ground~~cash flow and air transportation. We operate a radiopharmacy in San Juan, Puerto Rico; the building that houses our radiopharmacy sustained minimal external physical damage as a result of the hurricane. From and after September 20, 2017, the number of diagnostic imaging procedures performed on the island has severely declined. While we currently believe that the number of diagnostic imaging procedures performed in Puerto Rico will slowly return to prior levels, we can give no assurances ~~of that, and failure~~as to whether or when LMI 1195 would be approved.

As part of our ~~radiopharmacy~~microbubble franchise strategy, we also conducted two Phase 3, open-label, multicenter studies (which we refer to ~~return~~as BENEFIT 1 and BENEFIT 2) to ~~such prior levels could have a negative effect on the revenue~~evaluate LVEF measurement accuracy and ~~cash flow~~reproducibility of ~~our business. See Part II, Item 1A. “Risk Factors—In the U.S., we are heavily dependent on a few large customers~~DEFINITY contrast-enhanced and group purchasing organization arrangements to generate a majority of our revenues for our medical imaging products. Outside of the U.S., we rely primarily on distributors to generate a substantial portion of our revenue.”

~~Segments~~

We report our results of operations in two operating segments: U.S. and International. We generate a greater proportion of our revenues and net income in the U.S. segment, which consists of all regions of the U.S. with the exception of Puerto Rico.

~~Executive Overview~~

~~Our results for the three and nine months ended September 30, 2017~~unenhanced echocardiography as compared to non-contrast cardiac magnetic resonance imaging (“CMRI”), used as the ~~corresponding periods in 2016 reflect~~truth standard. In February 2020, we announced the ~~following:~~

~~increased revenues and segment penetration for DEFINITY~~results of BENEFIT 1. After reviewing the BENEFIT 1 study results, we concluded that there was no statistically significant improvement in the ~~suboptimal echocardiogram segment~~accuracy of LVEF values for contrast-enhanced echocardiography versus unenhanced echocardiography as compared to CMRI. In addition, analyses of the secondary endpoints revealed no improvement in inter-reader variability between the contrast-enhanced and unenhanced echocardiograms for LVEF assessments. We have recently completed our review of the BENEFIT 2 study results, and those results are similar to the previously reported BENEFIT 1 results, namely that the BENEFIT 2 study results also did not meet its primary endpoint. Among the secondary endpoints in BENEFIT 2, inter-reader variability for left ventricular volume measurements improved when using DEFINITY versus unenhanced ultrasound, while there was no improvement in the LVEF inter-reader variability. In both studies, a ~~result of our continued focused sales efforts;~~

~~increased revenues for TechneLite, mainly the result of higher contracted volumes from certain customers;~~

~~increased revenues of $5.0 million from GE Healthcare for~~post-hoc analysis did show statistically significant improvements in left ventricular diastolic and systolic volume measurements with contrast-enhanced versus unenhanced echocardiography when compared to CMRI. Although we very much see the continued ~~Phase III development and worldwide commercialization of flurpiridaz F 18;~~

~~lower international revenues and cost of goods sold as a result~~value of the ~~sales~~use of ~~our Canadian~~contrast in suboptimal echocardiograms to opacify the left ventricular chamber and ~~Australian radiopharmacies in 2016;~~

~~increased depreciation expense as a result~~improve the delineation of the ~~scheduled decommissioning~~left ventricular endocardial border, at this point, we do not foresee spending additional time or effort pursuing an LVEF indication for DEFINITY.

New Initiatives

We continue to seek ways to expand our product portfolio, evaluating a number of ~~certain long-lived assets;~~

~~general~~different opportunities to acquire or in-license additional products, businesses and ~~administrative expense of $1.7 million incurred~~technologies to drive our future growth. We are particularly interested in ~~connection with the refinancing of~~expanding our ~~debt~~presence in oncology, in radiotherapeutics as well as diagnostics. In addition to the Progenics Transaction described above, in May 2019 we entered into a ~~related $2.2 million loss~~strategic collaboration and license agreement with NanoMab Technology Limited, a privately-held biopharmaceutical company focusing on the ~~extinguishment~~development of ~~debt;~~next generation radiopharmaceuticals for cancer precision medicine. We believe this collaboration will provide the first broadly-available imaging biomarker research tool to pharmaceutical companies and

~~decreased interest expense due~~ academic centers conducting research and development on PD-L1 immuno-oncology treatments, including combination therapies. We can give no assurance as to ~~the refinancing of long-term debt and a lower principal balance on our long-term debt.~~when or if this collaboration will be successful or accretive to earnings.

Results of Operations

The following is a summary of our consolidated results of operations:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands)	2017			2016			2017			2016			2020			2019
Revenues	$	79,941		$	73,063		$	250,137		$	227,503		$	90,704		$	86,510
Cost of goods sold	41,414			39,382			125,901			124,370			52,702			42,426
Gross profit	38,527			33,681			124,236			103,133			38,002			44,084
Operating expenses
Sales and marketing	10,075			8,706			31,892			27,856			10,130			10,397
General and administrative	12,076			10,091			35,549			28,842			16,699			12,589
Research and development	3,554			2,849			14,149			8,493			4,048			4,929
Total operating expenses	25,705			21,646			81,590			65,191			30,877			27,915
Gain on sales of assets	—			(560		)	—			(6,505		)
Operating income	12,822			12,595			42,646			44,447			7,125			16,169
Interest expense	4,442			6,792			14,147			20,799			1,946			4,592
Debt retirement costs	—			1,415			—			1,415
Loss on extinguishment of debt	—			—			2,161			—
Other (income) expense	(908		)	148			(2,037		)	(317		)
Other income													(350		)	(1,187		)
Income before income taxes	9,288			4,240			28,375			22,550			5,529			12,764
Provision for income taxes	762			20			2,116			657
Income tax expense													2,192			2,815
Net income	$	8,526		$	4,220		$	26,259		$	21,893		$	3,337		$	9,949

Comparison of the Periods Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

Revenues

Segment revenues are summarized by product as follows:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2017		2016		Change $			Change %		2017		2016		Change $			Change %		2020			2019			Change $			Change %
U.S.
DEFINITY	$	36,901	$	32,007	$	4,894		15.3	%	$	113,035	$	95,497	$	17,538		18.4	%	$	55,010		$	49,716		$	5,294		10.6	%
TechneLite	22,621		20,906		1,715			8.2	%	69,150		64,282		4,868			7.6	%	19,356			20,058			(702		)	(3.5	)%
Xenon	7,726		6,675		1,051			15.7	%	23,709		21,620		2,089			9.7	%
Other	2,331		3,033		(702		)	(23.1	)%	12,812		11,288		1,524			13.5	%
Other nuclear																			9,062			9,524			(462		)	(4.9	)%
Rebates and allowances																			(4,683		)	(3,864		)	(819		)	21.2	%
Total U.S. revenues	69,579		62,621		6,958			11.1	%	218,706		192,687		26,019			13.5	%	78,745			75,434			3,311			4.4	%
International
DEFINITY	828		597		231			38.7	%	2,534		2,002		532			26.6	%	1,781			1,395			386			27.7	%
TechneLite	3,735		3,627		108			3.0	%	10,750		10,339		411			4.0	%	3,742			4,087			(345		)	(8.4	)%
Xenon	—		2		(2		)	(100.0	)%	4		5		(1		)	(20.0	)%
Other	5,799		6,216		(417		)	(6.7	)%	18,143		22,470		(4,327		)	(19.3	)%
Other nuclear																			6,438			5,596			842			15.0	%
Rebates and allowances																			(2		)	(2		)	—			—	%
Total International revenues	10,362		10,442		(80		)	(0.8	)%	31,431		34,816		(3,385		)	(9.7	)%	11,959			11,076			883			8.0	%
Worldwide
DEFINITY																			56,791			51,111			5,680			11.1	%
TechneLite																			23,098			24,145			(1,047		)	(4.3	)%
Other nuclear																			15,500			15,120			380			2.5	%
Rebates and allowances																			(4,685		)	(3,866		)	(819		)	21.2	%
Total revenues	$	79,941	$	73,063	$	6,878		9.4	%	$	250,137	$	227,503	$	22,634		9.9	%	$	90,704		$	86,510		$	4,194		4.8	%

The increase in the U.S. segment revenues for the three months ended ~~September 30, 2017,~~March 31, 2020, as compared to the prior year period is primarily due to a ~~$4.9~~$5.3 million increase in DEFINITY ~~revenues as a result of higher unit volumes, a $1.7 million increase in TechneLite revenues primarily as a result of increased unit volumes and a $1.1 million increase in Xenon revenues~~revenue as a result of higher unit volumes. ~~Offsetting these increases~~This increase was ~~a $0.7 million decrease due to~~offset, in part, by an increase in rebate and allowance ~~provisions.~~provisions of $0.8 million, lower TechneLite revenue driven by supplier disruptions and COVID-19 impact on international logistics and a decrease in Other Nuclear revenue primarily associated with lower Xenon volume as a result of COVID-19.

The increase in the ~~U.S.~~International segment revenues for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, as compared to the prior year period is primarily due to a ~~$17.5~~$0.8 million increase in Other Nuclear revenue driven by an increase in Neurolite volume and $0.4 million increase in DEFINITY ~~revenues as a result of higher unit volumes, a $4.9 million~~revenue driven by increased volume. This increase was offset, in part, by TechneLite ~~revenues~~revenue due primarily ~~as a result of increased unit volumes and a $2.1 million increase~~to opportunistic incremental demand in Xenon as a result of higher unit volumes. In addition, there was an increase of $5.0 million in other revenue associated with the up-front license fee recognized related to the License Agreement with GE Healthcare for the continued Phase III development and worldwide commercialization of flurpiridaz F 18. Offsetting these increases was a $1.9 million decrease due to rebate and allowance provisions, as well as a $1.6 million decrease in Ablavar revenues as the product is no longer sold.

~~The International segment revenues for the three months ended September 30, 2017, were consistent compared to~~ the prior year period. The decrease in the International segment revenues for the nine months ended September 30, 2017, as compared to the prior year period is primarily the result of the sale of the Australian radiopharmacy business during 2016.

Rebates and Allowances

Estimates for rebates and allowances represent our estimated obligations under contractual arrangements with third parties. Rebate accruals and allowances are recorded in the same period the related revenue is recognized, resulting in a reduction to revenue and the establishment of a liability which is included in accrued expenses. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes and growth, Medicaid rebate programs for our products, administrative fees of group purchasing organizations ~~royalties~~ and certain distributor related commissions. The calculation of the accrual for these rebates and allowances is based on an estimate of the third-party’s buying patterns and the resulting applicable contractual rebate ~~or commission rate(s)~~ to be earned over a contractual period.

An analysis of the amount of, and change in, reserves is summarized as follows:

(in thousands) Rebates and
Allowances
Balance, as of January 1, 2017 $ 2,297
Current provisions relating to revenues in current year 6,864
Adjustments relating to prior years’ estimate (154 )
Payments/credits relating to revenues in current year (4,658 )
Payments/credits relating to revenues in prior years (1,474 )
Balance, as of September 30, 2017 $ 2,875



(in thousands)	Rebates and Allowances
Balance, January 1, 2020	$	6,985
Provision related to current period revenues	4,650
Adjustments relating to prior period revenues	35
Payments or credits made during the period	(6,070		)
Balance, March 31, 2020	$	5,600

~~Costs of Goods Sold~~

~~Cost of goods sold consists of manufacturing, distribution, intangible asset amortization, write-offs of excess and obsolete inventory and other costs related to our commercial products.~~

~~Cost of goods sold is summarized by segment as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017 2016 Change
$ Change
% 2017 2016 Change
$ Change
%
U.S. $ 32,759
$ 31,133
$ 1,626
5.2 % $ 100,225
$ 96,791
$ 3,434
3.5 %
International 8,655
8,249
406
4.9 % 25,676
27,579
(1,903 ) (6.9 )%
Total cost of goods sold $ 41,414
$ 39,382
$ 2,032
5.2 % $ 125,901
$ 124,370
$ 1,531
1.2 %

The increases in the U.S. segment cost of goods sold for the three and nine months ended September 30, 2017 as compared to the prior year periods are primarily due to costs associated with the increase in sales volume as noted above. We also incurred, increases in technology transfer expense, partially offset by lower amortization expense as a result of a fully amortized intangible asset.

The increase in the International segment cost of goods sold for the three months ended September 30, 2017 as compared to the prior year period is primarily due to higher manufacturing costs for certain products due to higher sales volume, partially offset by lower manufacturing costs as a result of the sale of our Australian radiopharmacy business.

The decrease in the International segment cost of goods sold for the nine months ended September 30, 2017 as compared to the prior year period is primarily due to lower manufacturing costs as a result of the sale of our Australian radiopharmacy business, partially offset by higher manufacturing costs for certain products due to higher sales volume and higher material costs for certain products.

Gross Profit

Gross profit is summarized by segment as follows:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2017		2016		Change $			Change %		2017		2016		Change $			Change %		2020		2019		Change $			Change %
U.S.	$	36,820	$	31,488	$	5,332		16.9	%	$	118,481	$	95,896	$	22,585		23.6	%	$	35,063	$	41,551	$	(6,488	)	(15.6	)%
International	1,707		2,193		(486		)	(22.2	)%	5,755		7,237		(1,482		)	(20.5	)%	2,939		2,533		406			16.0	%
Total gross profit	$	38,527	$	33,681	$	4,846		14.4	%	$	124,236	$	103,133	$	21,103		20.5	%	$	38,002	$	44,084	$	(6,082	)	(13.8	)%

The ~~increase~~decrease in the U.S. segment gross profit for the three months ended ~~September 30, 2017 over~~March 31, 2020, as compared to the prior year period is primarily due to an asset impairment loss on other nuclear products, and lower TechneLite unit volumes, as well as an increase in rebate and allowance provisions. This was offset by higher DEFINITY volume.

The increase in the International segment gross profit for the three months ended March 31, 2020, as compared to the prior year period is primarily due to higher DEFINITY ~~unit volumes and higher Xenon unit volumes.~~

~~The increase in the U.S. segment~~ gross profit for the nine months ended September 30, 2017 over the prior year period is primarily due to higher DEFINITY unit volumes, higher Xenon unit volumes and the recognition of $5.0 million in other revenue associated with the License Agreement with GE Healthcare for the continued Phase III development and worldwide commercialization of flurpiridaz F 18 without any associated cost of goods sold.driven by increased volume.

The decreases in the International segment gross profit for the three and nine months ended September 30, 2017 over the prior year periods are primarily due to higher manufacturing and material costs for certain products.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and other related costs for personnel in field sales, marketing ~~business development~~ and customer service functions. Other costs in sales and marketing expenses include the development and printing of advertising and promotional material, professional services, market research and sales meetings.

Sales and marketing expense is summarized by segment as follows:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2017		2016		Change $			Change %		2017		2016		Change $			Change %		2020		2019		Change $			Change %
U.S.	$	9,480	$	8,021	$	1,459		18.2	%	$	29,854	$	24,902	$	4,952		19.9	%	$	9,607	$	9,969	$	(362	)	(3.6	)%
International	595		685		(90		)	(13.1	)%	2,038		2,954		(916		)	(31.0	)%	523		428		95			22.2	%
Total sales and marketing	$	10,075	$	8,706	$	1,369		15.7	%	$	31,892	$	27,856	$	4,036		14.5	%	$	10,130	$	10,397	$	(267	)	(2.6	)%

The ~~increases~~decrease in the U.S. segment sales and marketing expenses for the three ~~and nine~~ months ended ~~September 30, 2017 over~~March 31, 2020, as compared to the prior year ~~periods are~~period is primarily due to reduced marketing promotional programs and travel due to COVID-19 impact, as well as lower employee-related ~~expenses, market research and promotional program expenses.~~costs.

The ~~decreases~~increase in the International segment sales and marketing expenses for the three ~~and nine~~ months ended ~~September 30, 2017 over~~March 31, 2020, as compared to the prior year ~~periods are~~period is primarily due to ~~lower headcount.~~higher employee-related costs.

General and Administrative

General and administrative expenses consist of salaries and other related costs for personnel in executive, finance, legal, information technology and human resource functions. Other costs included in general and administrative expenses are professional fees for information technology services, external legal fees, consulting and accounting services as well as bad debt expense, certain facility and insurance costs, including director and officer liability insurance.

General and administrative expense is summarized by segment as follows:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2017		2016		Change $			Change %		2017		2016		Change $			Change %		2020		2019		Change $			Change %
U.S.	$	11,901	$	9,693	$	2,208		22.8	%	$	35,055	$	27,629	$	7,426		26.9	%	$	16,555	$	12,348	$	4,207		34.1	%
International	175		398		(223		)	(56.0	)%	494		1,213		(719		)	(59.3	)%	144		241		(97		)	(40.2	)%
Total general and administrative	$	12,076	$	10,091	$	1,985		19.7	%	$	35,549	$	28,842	$	6,707		23.3	%	$	16,699	$	12,589	$	4,110		32.6	%

The ~~increase in the~~ U.S. segment general and administrative expenses for the three months ended ~~September 30, 2017 over~~March 31, 2020 increased as compared to the prior year ~~period are primarily due to~~period. The primary driver was an increase in acquisition-related costs associated with the pending acquisition of Progenics and higher employee-related ~~expenses and campus consolidation~~ costs.

The increase in U.S. segment general and administrative expenses for the nine months ended September 30, 2017 over the prior year period are primarily due to $1.7 million of debt refinancing costs, higher employee-related expenses and campus consolidation costs.

~~The decreases in the~~ International segment general and administrative expenses for the three ~~and nine~~ months ended ~~September 30, 2017 over~~March 31, 2020 decreased as compared to the prior year ~~periods are~~period driven primarily ~~due to lower employee headcount and related expenses.~~by favorable employee-related costs.

Research and Development

Research and development expenses relate primarily to the development of new products to add to our portfolio and costs related to ~~its~~our medical affairs, medical information and regulatory functions. We do not allocate research and development expenses incurred in the ~~United States~~U.S. to our International segment.

Research and development expense is summarized by segment as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended March 31,
(in thousands)	2017		2016		Change $		Change %		2017		2016		Change $		Change %		2020		2019		Change $			Change %
U.S.	$	3,196	$	2,685	$	511	19.0	%	$	13,265	$	7,985	$	5,280	66.1	%	$	3,913	$	4,650	$	(737	)	(15.8	)%
International	358		164		194		118.3	%	884		508		376		74.0	%	135		279		(144		)	(51.6	)%
Total research and development	$	3,554	$	2,849	$	705	24.7	%	$	14,149	$	8,493	$	5,656	66.6	%	$	4,048	$	4,929	$	(881	)	(17.9	)%

The ~~increase~~decrease in the U.S. segment research and development expenses for the three months ended ~~September 30, 2017 over~~March 31, 2020, as compared to the prior year ~~period~~ is primarily ~~due~~related to ~~an increase in higher employee-related expenses.~~clinical research expenses related to DEFINITY studies phasing.

The ~~increase~~decrease in the U.S. segment research and development expenses for the nine months ended September 30, 2017 over the prior year period is primarily due to an increase in depreciation expense and other charges as a result of the scheduled decommissioning of certain long-lived assets associated with research and development operations as well as higher employee-related expenses, partially offset by lower pharmacovigilance expenses due to the transition to a new vendor in the prior year.

~~The increases in~~ International segment research and development expenses for the three ~~and nine~~ months ended ~~September 30, 2017 over~~March 31, 2020, as compared to the prior year ~~periods were~~period is primarily driven by ~~a European Phase IV study for one of our products.~~regulatory costs relating to Brexit matters.

~~Gain on Sales of Assets~~

Effective January 7, 2016, our Canadian subsidiary entered into an asset purchase agreement, pursuant to which it would sell substantially all of the assets of our Canadian radiopharmacies and Gludef manufacturing and distribution business to one of our existing Canadian radiopharmacy customers. The purchase price for the asset sale was $9.0 million in cash and also included a working capital adjustment of $0.5 million, resulting in a pre-tax gain of $5.9 million recorded within operating income during the nine months ended September 30, 2016.

Effective August 11, 2016, we entered into a share purchase agreement, pursuant to which we sold 100% of the stock of our Australian subsidiary to one of our existing radiopharmacy customers. This sale included the radiopharmacy business as well as all the direct/bulk business. The sale price for the share sale was AUD$2.0 million (approximately $1.5 million U.S. Dollars) in cash and also included a working capital receivable adjustment of approximately AUD$2.0 million (approximately $1.5 million U.S. Dollars), resulting in a pre-tax book gain of $0.6 million, which was recorded within operating income for the nine months ended September 30, 2016.

Interest Expense

Interest expense decreased by approximately ~~$2.4 million and $6.7~~$2.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 as compared to the prior year ~~periods,~~period due to the March 2017 refinancing of our long-term debt and reductions in the principal balance of our long-term debt related to the 2017 refinancing and the voluntary principal prepayments we made during September and November 2016.

~~Loss on Extinguishment of Debt~~

~~For the nine months ended September 30, 2017, we incurred a $2.2 million loss on extinguishment of debt in connection with~~ the refinancing of our existing indebtedness ~~with~~in the ~~new term loan~~second quarter of 2019 which reduced our underlying principal amount and ~~revolving credit facilities, see Note 8, “Financing Arrangements” to~~decreased interest rates on our ~~condensed consolidated financial statements.~~long-term debt.

Income Tax Expense

Income tax expense is summarized as follows:



	Three Months Ended March 31,
(in thousands)	2020		2019		Change $			Change %
Income tax expense	$	2,192	$	2,815	$	(623	)	(22.1	)%

~~Provision for Income Taxes~~

~~Provision for~~The income ~~taxes~~tax expense for the ~~periods presented is as follows:~~three months ended March 31, 2020 was primarily due to the income generated in the period and the accrual of interest associated with uncertain tax positions.

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017 2016
Change
$

Change
%
2017 2016
Change
$

Change
%
Provision for income taxes $ 762
$ 20
$ 742
>1,000% $ 2,116
$ 657
$ 1,459
222.1 %

~~Our provision~~The income tax expense for the three months ended March 31, 2019 was primarily due to the income ~~taxes results primarily from~~generated in the period and the accrual of interest ~~and penalties~~ associated with uncertain tax positions offset by reversals of those positions as statutes lapse or such positions are settled during the year, as well as taxes due in certain foreign jurisdictions where we generate taxable income. The $0.7 million and $1.5 million increases in the tax provision for the three and nine months ended September 30, 2017, as compared to the same periods in 2016 primarily reflect a reduced amount of statute lapses and consequent liability releases in the current period, when compared with the prior year period.benefits arising from stock compensation deductions.

We regularly assess our ability to realize our deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether our deferred tax assets are ~~more likely than not~~more-likely-than-not realizable, we ~~evaluated~~evaluate all available positive and negative evidence, and ~~weighed~~weigh the objective evidence and expected impact. ~~Evidence considered included our history of net operating losses, which resulted in our recording of~~We continue to record a ~~full~~ valuation allowance against certain of our ~~domestic~~foreign net deferred tax assets beginning in 2011, and in each year thereafter. We were profitable on a cumulative basis for the three-year period ended September 30, 2017, but substantially all of that profitability was achieved during 2016 and the nine months ended September 30, 2017.

We continue to evaluate other negative evidence, including customer concentration and contractual risk, the risk of Moly supply availability and cost, DEFINITY supplier risk, and certain product development risks, all of which provide for uncertainties around our future level of profitability. Based on our review of all available evidence, we determined that we have not yet attained a sustained level of profitability sufficient to outweigh the objectively verifiable negative evidence, and have recorded a full valuation allowance against our domestic net deferred tax assets at September 30, 2017. We will continue to assess the level of the valuation allowance required. If a sufficient weight of positive evidence exists in future periods to support a release of some or all of the valuation allowance recorded against domestic deferred tax assets, such a release would likely have a material impact on our results of operations in that future period.assets.

Our effective tax rate for ~~the periods~~each reporting period is presented ~~are~~ as follows:

Nine Months Ended September 30,
2017 2016
Effective tax rate 7.5% 2.9%



	Three Months Ended March 31,
	2020	2019
Effective tax rate	39.6%	22.1%

Our effective tax rate in fiscal 2020 differs from the U.S. statutory rate of 21% principally due to the impact of U.S. state taxes and the accrual of interest on uncertain tax positions.

The increase in the effective income tax rate for the three months ended March 31, 2020 as compared to the prior year period is primarily due to the increased tax rate impact from the accrual of interest on uncertain tax positions in the current period and the benefit from stock compensation which was recorded in the comparative period.

Liquidity and Capital Resources

Cash Flows

The following table provides information regarding our cash flows:


	Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands)	2017			2016			2020			2019
Net cash provided by operating activities	$	41,691		$	36,861		$	9,408		$	10,468
Net cash (used in) provided by investing activities	$	(10,355	)	$	5,639
Net cash used in investing activities							$	(2,698	)	$	(10,550	)
Net cash used in financing activities	$	(14,600	)	$	(17,958	)	$	(3,732	)	$	(1,231	)

Net Cash Provided by Operating Activities

~~Cash~~Net cash provided by operating activities of ~~$41.7~~$9.4 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was driven primarily by net income of ~~$26.3~~$3.3 million plus ~~$15.0~~$3.7 million of depreciation, amortization and accretion expense, ~~$3.8~~impairment of long-lived assets of $7.3 million, of stock-based compensation expense of $3.1 million, and ~~a $2.2 million loss on debt extinguishment.~~changes in deferred taxes of $1.5 million. These net sources of cash were offset by a net decrease of ~~$8.9~~$10.9 million related to movements in our working capital accounts during the period. The overall decreases in cash from our working capital accounts were primarily driven by ~~higher accounts receivable related to increases in revenues to certain major customers and timing~~the payment of ~~inventory purchases during the period.~~prior year annual bonuses.

~~Cash~~Net cash provided by operating activities of ~~$36.9~~$10.5 million in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 was driven primarily by net income of ~~$21.9~~$9.9 million plus ~~$12.7~~$3.3 million of depreciation, amortization and accretion expense, ~~$1.9 million of~~ stock-based compensation expense of $2.7 million and ~~$1.4 million~~changes in deferred taxes of ~~debt retirement costs.~~$1.7 million. These net sources of cash were offset by ~~the gain on sales~~a net decrease of ~~assets of $6.5 million. In addition, we had a $3.6~~$8.1 million ~~net increase~~ related to movements in our working capital accounts during the period. The overall ~~increases~~decreases in cash from our working capital accounts were primarily driven by the ~~timing~~payment of payment runs, timing of payroll and accrued bonuses, and improved collections, which were offset by an increase in inventory due to the timing of production and receipt of inventory and an increase in prepaid expenses due to insurance renewals.prior year annual bonuses.

Net Cash ~~(Used in) Provided by~~Used in Investing Activities

Net cash used in investing activities during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 reflected ~~$11.6~~$2.7 million in capital ~~expenditures offset by the cash proceeds of $1.2 million received from the sale of assets from our Australian radiopharmacy business during the third quarter of 2016.~~expenditures.

Net cash ~~provided by~~used in investing activities during the ~~nine~~three months ended ~~September 30, 2016 was primarily due to cash proceeds of $10.5 million received from the sale of assets from our Canadian and Australian radiopharmacy businesses, which was offset by $5.0~~March 31, 2019 reflected $10.6 million in capital expenditures.

Net Cash Used in Financing Activities

Net cash used in financing activities during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 is primarily attributable to the payments on long-term debt and other borrowings of $2.5 million related to the 2019 Term Facility and payments for minimum statutory tax withholding related to net ~~outflow~~share settlement of ~~$11.9~~equity awards of $1.5 million, ~~in connection with our refinancing~~offset by proceeds of ~~our previous $365.0~~$0.4 million ~~seven-year term loan agreement with a new five-year $275.0 million term loan facility.~~from the issuance of common stock.

Net cash used in financing activities during the ~~nine~~three months ended ~~September 30, 2016 was primarily used~~March 31, 2019 reflected payments for minimum statutory tax withholding related to ~~repay $55.0~~net share settlement of equity awards of $1.1 million, payments on long-term debt and other borrowings of ~~the principal balance of our $365.0~~$0.7 million, ~~Term Facility with net~~offset by proceeds of ~~$39.9 million, which were raised upon completion of a follow-on underwritten primary offering, and $15.1~~$0.6 million from ~~cash on hand.~~the exercise of stock options and the issuance of common stock. Starting in 2019, we require certain senior executives to cover tax liabilities resulting from the vesting of their equity awards pursuant to sell-to-cover transactions under Rule 10b5-1 programs.

External Sources of Liquidity

OnIn June 30, 2015, we completed our initial public offering, entered into a $365.0 million seven-year term facility (the “2015 Term Facility”) and amended and restated our revolving facility (the “2015 Revolving Facility”) that had a borrowing capacity of $50.0 million.

In September 2016, we completed a follow-on underwritten offering of 5,200,000 shares of common stock and utilized the net proceeds to us from this offering, combined with cash on hand, to prepay $55.0 million of the principal balance of our 2015 Term Facility. In November 2016, we completed a second follow-on underwritten offering that included 1,000,000 shares of common stock

offered by us and utilized the net proceeds to us from this offering, combined with cash on hand, to prepay $20.0 million of the principal balance of our 2015 Term Facility. As of December 31, 2016, the principal balance outstanding on our 2015 Term Facility was $284.5 million.

~~In March 2017,~~2019, we refinanced ~~the 2015 Term Facility with a new~~our 2017 $275 million five-year ~~$275.0 million~~ term loan facility ~~(the “2017~~with the 2019 Term ~~Facility” and the loans thereunder, the “Term Loans”).~~Facility. In addition, we replaced our ~~2015 Revolving Facility with a new $75.0~~$75 million ~~five-year~~ revolving ~~credit~~ facility ~~(the “2017 Revolving Facility” and, together~~ with the ~~2017 Term Facility, the “2017 Facility”, the~~2019 Revolving Facility. The terms of ~~which~~the 2019 Facility are set forth in the Credit ~~Agreement). The 2017 Term Facility was issued net~~Agreement, dated as of ~~a $0.7 million discount.~~June 27, 2019, by and among us, the lenders from time to time party thereto and Wells Fargo Bank, N.A., as administrative agent and collateral agent. We have the right to request an increase to the ~~2017~~2019 Term Facility or request the establishment of one or more new incremental term loan facilities, in an aggregate principal amount of up to ~~$75.0~~$100 million, plus additional amounts, in certain circumstances.

We used the net proceeds of the 2017 Term Facility, together with approximately $15.3 million of cash on hand, to refinance in full the aggregate remaining principal amount of the loans outstanding under the 2015 Term Facility and pay related interest, transaction fees and expenses. No amounts were outstanding under the 2015 Revolving Facility at that time.

The Term Loans under the 2017 Term Facility bear interest, with pricing based from time to time at our election at (i) LIBOR plus a spread of 4.50% or (ii) the Base Rate (as defined in the Credit Agreement) plus a spread of 3.50%. Interest is payable (i) with respect to LIBOR Term Loans, at the end of each Interest Period (as defined in the Credit Agreement) and (ii) with respect to Base Rate Term Loans, at the end of each quarter. At September 30, 2017, our interest rate under the 2017 Term Facility was 5.7%.

We are permitted to voluntarily prepay the 2019 Term Loans, in whole or in ~~part.~~part, without premium or penalty. The ~~2017~~2019 Term Facility requires us to make mandatory prepayments of the outstanding 2019 Term Loans in certain circumstances. The ~~2017~~2019 Term Facility amortizes at ~~1.00%~~5.00% per year through September 30, 2022 and 7.5% thereafter, until its June ~~30, 2022~~27, 2024 maturity date.

Under the terms of the ~~2017~~2019 Revolving Facility, the lenders thereunder agreed to extend credit to us from time to time until ~~March 30, 2022 (the “Revolving Termination Date”)~~June 27, 2024 consisting of revolving loans ~~(the “Revolving Loans” and, together with the Term Loans, the “Loans”)~~ in an aggregate principal amount not to exceed ~~$75.0~~$200 million ~~(the “Revolving Commitment”)~~ at any time outstanding. The ~~2017~~2019 Revolving Facility includes a ~~$20.0~~$20 million sub-facility for the issuance of ~~letters~~Letters of ~~credit (the “Letters of Credit”).~~Credit. The 2019 Revolving Facility includes a $10 million sub-facility for Swingline Loans. The Letters of Credit, Swingline Loans and the borrowings under the ~~2017~~2019 Revolving Facility are expected to be used for working capital and other general corporate purposes.

~~The Revolving Loans under~~Please refer to our Form 10-K for fiscal year ended December 31, 2019 for further details on the 2017 Revolving Facility bear interest, with pricing based from time to time at our election at (i) LIBOR plus a spread of 3.50% or (ii) the Base Rate (as defined in the Credit Agreement) plus a spread of 2.50%. The 2017 Revolving Facility also includes an unused line fee, which is set at 0.375% while our secured leverage ratio (as defined in the Credit Agreement) is greater than 3.00 to 1.00 and 0.25% when our secured leverage ratio is less than or equal to 3.00 to 1.00.

We are 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 and Letters of Credit exceeds the total Revolving Commitment, we must prepay the Revolving Loans in an amount equal to such excess. The 2017 Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds. The 2017 Facility requires us to be in quarterly compliance, measured on a trailing four quarter basis, with a financial covenant. The maximum consolidated leverage ratio permitted by the financial covenant is displayed in the table below:

~~2017 Facility Financial Covenant~~



~~Period~~	~~Consolidated~~ ~~Leverage Ratio~~
~~Q3 2017 through Q1 2018~~	~~5.00 to 1.00~~
~~Q2 2018 through Q1 2019~~	~~4.75 to 1.00~~
~~Thereafter~~	~~4.50 to 1.00~~

The 2017 Facility contains usual and customary restrictions on our ability and that of our 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.

Our ability to fund our future capital needs will be affected by our ability to continue to generate cash from operations and may be affected by our ability to access the capital markets, money markets or other sources of funding, as well as the capacity and terms of our financing arrangements.

We may from time to time repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include prepayments of our term loans or other retirements or refinancing of outstanding debt, privately ~~negotiat~~ednegotiated transactions or otherwise. The amount of debt that may be retired, if any, could be material and would be decided at the sole discretion of our Board of Directors and will depend on market conditions, our cash position and other considerations.

Funding Requirements

Our future capital requirements will depend on many factors, including:

~~Our ability to have product manufactured and released from JHS and other manufacturing sites in a timely manner in the future;~~

The ~~pricing environment and the~~ level of product sales and the pricing environment of our currently marketed products, particularly DEFINITY and any additional products that we may market in the ~~future;~~future, including decreased product sales resulting from the COVID-19 pandemic;

Revenue mix shifts and associated volume and selling price changes that could result from contractual status changes with key customers and additional competition;

The costs of acquiring or in-licensing, developing, obtaining regulatory approval for, and commercializing, new products, businesses or technologies, together with the costs of pursuing opportunities that are not eventually consummated;

Our investment in the further clinical development and commercialization of existing products and development candidates;

The costs of investing in our facilities, equipment and technology infrastructure;

The costs and timing of establishing manufacturing and supply arrangements for commercial supplies of our products and raw materials and components;

Our ability to have product manufactured and released from JHS and other manufacturing sites in a timely manner in the future;

The costs of further commercialization of our existing products, particularly in international markets, including product marketing, sales and distribution and whether we obtain local partners to help share such commercialization costs;

~~The costs of investing in our facilities, equipment and technology infrastructure;~~

~~The costs and timing of establishing manufacturing and supply arrangements for commercial supplies of our products;~~

~~The extent to which we acquire or invest in (i) new products, businesses and technologies, or (ii) the further clinical development or commercialization of existing development candidates or products;~~

The extent to which we choose to establish collaboration, co-promotion, distribution or other similar arrangements for our marketed products;

The legal costs relating to maintaining, expanding and enforcing our intellectual property portfolio, pursuing insurance or other claims and defending against product liability, regulatory compliance or other claims; and

The cost of interest on any additional borrowings which we may incur under our financing arrangements.

Until we ~~successfully~~successfully become dual sourced for our principal products, we are vulnerable to future supply shortages. Disruption in ~~the financial~~our financial performance could also occur if we experience significant adverse changes in product or customer mix, broad economic downturns, adverse industry or company conditions or catastrophic external events, including pandemics such as COVID-19, natural disasters and political or military conflict. If we experience one or more of these events in the future, we may be required to implement ~~additional~~further expense reductions, such as a delay or elimination of discretionary spending in all functional areas, as well as scaling back select operating and strategic initiatives.

If our capital resources become insufficient to meet our future capital requirements, we would need to finance our cash needs through public or private equity offerings, debt financings, assets securitizations, ~~debt financings,~~ sale-leasebacks or other financing or strategic alternatives, to the extent such transactions are permissible under the covenants of ~~the agreements governing~~ our ~~senior secured credit facilities.~~Credit Agreement. Additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all. If any of these transactions require an amendment or waiver under the covenants in ~~the agreements governing~~ our ~~senior secured credit facilities,~~Credit Agreement, which could result in additional expenses associated with obtaining the amendment or waiver, we will seek to obtain such a waiver to remain in compliance with those covenants. However, we cannot be assured that such an amendment or waiver would be granted, or that additional capital will be available on acceptable terms, if at all.

At ~~September 30, 2017,~~March 31, 2020, our only current committed external source of funds is our borrowing availability under our ~~2017~~2019 Revolving Facility. We had ~~$68.1~~$95.7 million of cash and cash equivalents at ~~September 30, 2017.~~March 31, 2020. Our ~~2017~~2019 Facility contains a number of affirmative, negative, reporting and financial covenants, in each case subject to certain exceptions and materiality thresholds. Incremental borrowings under the ~~2017~~2019 Revolving Facility may affect our ability to comply with the covenants in the ~~2017~~2019 Facility, including the financial ~~covenant~~covenants restricting ~~total~~consolidated net ~~leverage.~~leverage and interest coverage. Accordingly, we may be limited in utilizing the full amount of our ~~2017~~2019 Revolving Facility as a source of liquidity.

On April 1, 2020, we drew down $100 million under our 2019 Revolving Facility, the proceeds of which we have currently invested in short-term, interest bearing instruments.

In addition, in connection with the Progenics Transaction, which we now expect to close in June 2020, although the merger is structured as a stock-for-stock exchange, we will incur legal, accounting, financial advisory, consulting and printing fees, and transition, integration and other costs which we intend to fund from our available cash and the available cash of Progenics. The CVRs we will issue in the Progenics Transaction will entitle holders thereof to future cash payments of 40% of PyL net sales over $100 million in 2022 and $150 million in 2023, which, if payable, we currently intend to fund from our then-available cash. In no event will our aggregate payments under the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Transaction, exceed 19.9% of the total consideration we pay in the Progenics Transaction.

Based on our current operating plans, including our prudent expense management in response to the COVID-19 pandemic, we believe that our existing cash and cash equivalents, results of operations and availability under our ~~2017~~2019 Revolving Facility will be sufficient to continue to fund our liquidity requirements for the foreseeable future.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial ~~position~~condition and results of operations isare based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements ~~in accordance with U.S. GAAP requires~~require us to make estimates and judgments that ~~may~~ affect ~~the~~our reported ~~amounts of~~ assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, inventory, impairments of long-lived assets including intangible assets, impairments of goodwill, income taxes including the valuation allowance for deferred tax assets.other financial information. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

There have been no ~~material~~other significant changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies in the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. For further information, refer to our summary of significant accounting policies and estimates in our Annual Report on Form 10-K filed for the year ended December 31, ~~2016.~~2019.

Off-Balance Sheet Arrangements

We are required to provide the U.S. Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurance demonstrating our ability to fund the decommissioning of our North Billerica, Massachusetts production facility upon closure, though we do not intend to close the facility. We have provided this financial assurance in the form of a $28.2 million surety bond.

Since inception, we have not engaged in any other off-balance sheet arrangements, including structured finance, special purpose entities or variable interest entities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, except as set forth below, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. Our exposures to market risk have not changed materially since December 31, ~~2016.~~2019.

Interest Rate Risk

The Company uses interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt. As of March 31, 2020, the Company has 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 as of March 31, 2020 was approximately 0.82%. This agreement involves 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. Please refer to Note 10, “Derivative Instruments”, for further details on the interest rate swaps.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer ~~(its~~(“CFO”), its principal executive officer and principal financial officer, ~~respectively),~~respectively, has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange ~~Act as of September 30, 2017.~~Act. Based on that evaluation, the Company’s ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer~~CFO concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of ~~September 30, 2017.~~the period covered by this report.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, certain employees began working remotely in March. Notwithstanding these changes to the working environment, we have not identified any material changes in our internal control over financial reporting. We are continually monitoring and assessing the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, ~~the Company is~~we are a party to various legal proceedings arising in the ordinary course of business. In addition, ~~the Company has~~we have in the past been, and may in the future be, subject to investigations by governmental and regulatory authorities which expose itus to greater risks associated with litigation, regulatory or other proceedings, as a result of which ~~the Company~~we 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.~~us and could have a material adverse effect on our results of operations or financial condition. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against ~~the Company,~~us, could materially and adversely affect ~~its~~our financial condition or results of operations.

As of ~~September 30, 2017, the Company has~~March 31, 2020, we had no material ongoing litigation in which ~~the Company was~~we were a ~~party or any~~party. In addition, we had no material ongoing regulatory or other proceedings and ~~had~~ no knowledge of any investigations by government or regulatory authorities in which ~~the Company is~~we are a target, in either case that we believe could have a material and adverse effect on ~~its~~our current business.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, except as set forth ~~below. For~~below:

The COVID-19 pandemic could have a material impact on our business, results of operation and financial condition, operating results, cash flows and prospects.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan China. Less than four months later, in March 2020, the World Health Organization declared COVID-19 a pandemic. While the outbreak initially was largely concentrated in China and caused significant disruptions in its economy, the virus has now spread to many other countries and regions, and every state within the United States, including Massachusetts, where our primary offices and manufacturing facility are located.

Towards the end of the first quarter of 2020 we began to experience, and through the date of this filing we are continuing to experience, impacts to our business and operations related to the COVID-19 pandemic, including the impact of stay-at-home mandates and related safety measures such as the delay of elective medical procedures, resulting in a decline in the volume of procedures using our products. In response to the pandemic, healthcare providers have, and may need to further, ~~information, refer~~reallocate resources, such as physicians, staff and facilities, as they prioritize limited resources and personnel capacity to ~~Part I, Item 1A. “Risk Factors”~~focus on the treatment of patients with COVID-19 and implement limitations on access to hospitals and other medical institutions due to concerns about the potential spread of COVID-19 in such settings. These actions have significantly delayed the provision of other medical care including elective and diagnostic procedures involving our products, having an adverse effect on our revenue. These measures and challenges may continue for the duration of the COVID-19 pandemic, and such duration is uncertain, and may significantly reduce our revenue and cash flows while the pandemic continues and thereafter until we and our customers are able to resume normal business operations. We anticipate that in the second quarter of 2020, the impact of the COVID-19 pandemic on our business will be more significant than we experienced in the first quarter as pandemic precautions continue to limit demand for our products. We cannot predict the magnitude or duration of the pandemic’s impact on our business.

In connection with the COVID-19 pandemic, the following risks could have a material effect on our business, financial condition, results of operations and prospects:

The delay or cancellation by hospitals and clinics of the elective procedures in which our products are used as a result of their COVID-19 response efforts and the duration of such effects, thereby reducing sales of our products for an unknown period of time;

The inability or unwillingness of some patients to visit hospitals or clinics in order to undergo elective procedures in which our products are used, thereby reducing sales of our products for an unknown period of time;

The inability of some patients to pay for elective procedures and/or the co-pay associated with those procedures in which our products are used due to job loss or lack of insurance, thereby reducing sales of our products for an unknown period of time;

The inability of our distributors, radiopharmacy customers, hospitals, clinics and other customers to conduct their normal operations, including supplying or conducting procedures in which our products are used, because of their COVID-19 response efforts, or the reduced capacity or productivity of their employees and contractors as a result of possible illness, quarantine or other inability to work, thereby reducing sales of our products for an unknown period of time;

The reduction in pulmonary ventilation studies in which our Xenon-133 gas is used because of institutional concerns about a hospital’s ability to adequately decontaminate equipment used to administer those studies during the COVID-19 pandemic, thereby reducing Xenon-133 sales for an unknown period of time;

The inability of global suppliers of raw materials or components used in the manufacture of our products, or contract manufacturers of our products, to supply and/or transport those raw materials, components and products to us in a timely and cost effective manner due to shutdowns, interruptions or delays, limiting and precluding the production of our finished products, impacting our ability to supply customers, reducing our sales, increasing our costs of goods sold, and reducing our absorption of overhead;

The partial or complete delay or cancellation of international or domestic flights by our airfreight carriers, resulting in our ~~Annual Report on Form 10-K for the year ended December 31, 2016.~~inability to receive raw materials, components and products from our global suppliers or to ship and deliver our finished products to our domestic and international customers in a timely or cost effective manner, thereby potentially increasing our freight costs as we seek alternate, potentially more expensive, methods to ship raw materials, components or products, and negatively impacting our sales;

The ~~growth~~reduced capacity or productivity of our ~~business is substantially dependent on increased market penetration for~~complex, on-campus operations as a result of possible illness, quarantine or other inability of our employees and contractors to work, despite all of the ~~appropriate use~~preventative measures we continue to undertake to protect the health and safety of ~~DEFINITY in suboptimal echocardiograms.~~our workforce;

The ~~growth~~illiquidity or insolvency of our suppliers, contract manufacturers and freight carriers whose business ~~is substantially dependent on increased market penetration~~activities could be shut down, interrupted or delayed;

The illiquidity or insolvency of our distributors and customers, or their inability to pay our invoices in full or in a timely manner, due to the reduction in their revenues caused by the cancellation or delay of procedures and other factors, which could potentially reduce our cash flow, reduce our liquidity and increase our bad debt reserves;

A portion of our raw materials or finished product inventory may expire due to reduced demand for our drugs;

Delays in our ability, and the ~~appropriate use~~ability of ~~DEFINITY in suboptimal echocardiograms. Of~~our development partners to conduct, enroll and complete clinical development programs such as the ~~total number~~flurpiridaz F 18 Phase 3 clinical development program currently being conducted by GE Healthcare;

Delays of ~~echocardiograms performed each year in~~regulatory reviews and approvals, including with respect to our product candidates, by the ~~U.S., over 31.8 million in 2016, based on medical literature, a third-party source estimates that 20%,~~FDA or approximately 6.4 million echocardiograms in 2016, produced suboptimal images. We estimate that DEFINITY had an approximately 80% share of the U.S. market for contrast agents in echocardiography procedures as of December 2016. We launched DEFINITY in 2001, and in the U.S., its composition of matter patent will expire in 2019, its manufacturing patent will expire in 2021, and a new method of use patent will expire in 2037. In numerous foreign jurisdictions, patent protectionother health or regulatory ~~exclusivity will currently expire~~authorities;

Decreased sales of those of our products that are promotionally sensitive, like DEFINITY, due to the reduction of in-person sales and marketing activities and training caused by travel restrictions, quarantines, other similar social distancing measures and more restrictive hospital access policies;

Our ability to maintain employee morale and motivate and retain management personnel and other key employees as a result of our recent work week and salary reductions;

A disruption or delay in ~~2019. We have an active next generation development program~~regulatory approval for, ~~this agent, including pursuing additional indications,~~and operation of, our new, ~~patent protection,~~on-campus manufacturing facility, which would delay implementation of our supply diversification strategy for certain of our key products and ~~new formulations, but~~impact our ability to benefit from a lower cost of goods for those products;

A reduction in revenue with continued incurrence of high fixed costs relating to our already-existing, complex and expensive nuclear manufacturing facility could adversely affect our cash flows, liquidity and ability to comply with the financial covenants in our 2019 Facility, and there can be no assurance that ~~this program will~~any required waiver or consent related to any such failure to comply would be granted by our current lenders;

A delay in the stockholder approval and consummation of our acquisition of Progenics and the delay in achieving, or inability to achieve, successful ~~or that new patents will protect the agent.~~

We have on-going development and technology transfer activities for a next generation DEFINITY product with SBL located in Songdo, South Korea, approximately 20 miles southwest of Seoul, but can give no assurances as to when those technology transfer activities will be completed and when we will begin to receive a supply of a next generation DEFINITY product from SBL. In addition, those activities could be adversely affected by on-going political and military tensions on the Korean peninsula.

~~If we are not able to continue to grow DEFINITY sales through increased market penetration, we will not be able to grow the revenue and cash flow~~integration of the ~~business~~two companies, or ~~leverage~~ the ~~substantial overhead~~synergies, cost savings, innovation and other anticipated benefits of the ~~balance of our business, which could have a negative effect on our prospects.~~

~~In the U.S., we are heavily dependent on a few large customers and group purchasing organization arrangements~~acquisition due to ~~generate a majority of our revenues for our nuclear medical imaging products and our other products. Outside~~impact of the ~~U.S., we rely primarily~~COVID-19 pandemic on ~~distributors to generate a substantial portion of our revenue.~~

In the U.S., we have historically relied on a limited number of radiopharmacy customers, primarily Cardinal, UPPI, GE Healthcare and Triad, to distribute our current largest volume nuclear imaging products and generate a majority of our revenues. Three customers accounted for approximately 30% of our revenues in the year ended December 31, 2016, with UPPI, Cardinal, and GE Healthcare accounting for approximately 11%, 10% and 9%, respectively. Among the existing radiopharmacies in the U.S., continued consolidations, divestitures and reorganizations may have a negative effect on our business, results of operations, financial condition or cash flows. We generally have distribution arrangements with our major radiopharmacy customers pursuant to multi-year contracts, each of which is subject to renewal. If these contracts are terminated prior to expiration of their term, or are not renewed, or are renewed on terms that are less favorable to us, then such an event could have a material adverse effect on our business, results of operations, financial condition and ~~cash flows.~~prospects of our Company and Progenics;

~~In Puerto Rico, we own~~The instability to worldwide economies, financial markets, social institutions, labor markets and ~~operate one of two radiopharmacies on~~ the island and sell our own products as well as products of third parties to end users. In September 2017, Hurricane Maria devastated the island, interrupting power and telecommunications services for most of the island and limiting ground and air transportation. The building that houses our radiopharmacy sustained

~~minimal external physical damage~~healthcare systems as a result of the hurricane. From and after September 20, 2017, the number of diagnostic imaging procedures performed on the island has severely declined. While we currently believe that the number of diagnostic imaging procedures performed in Puerto Rico will slowly return to prior levels, we can give no assurances of that, and failure of our radiopharmacy to return to such prior levels could have a negative effect on the revenue and cash flow of our business.

For all of our medical imaging products, we continue to experience significant pricing pressures from our competitors, large customers and group purchasing organizations, and any significant, additional pricing pressures could lead to a reduction in revenueCOVID-19 pandemic, which could ~~have a material adverse effect on~~result in an economic downturn that could adversely impact our

business, results of operations and financial condition, as well as that of our suppliers, distributors, customers or other business partners, including Progenics; and ~~cash flows.~~

~~Outside~~A recurrence of the ~~U.S., Canada~~COVID-19 pandemic after social distancing and ~~Puerto Rico, we~~other similar measures have ~~no sales force and, consequently, rely on third-party distributors, either on a country-by-country basis or on a multi-country, regional basis,~~been relaxed.

The extent to ~~market, sell and distribute our products. This is~~which the case in both Canada and Australia, where we formerly owned or operated radiopharmacies and are now distributing products under the Isologic Agreement and the GMS Agreement, respectively. Distributors accounted for approximately 34%, 15% and 17% of International segment revenues for the years ended December 31, 2016, 2015 and 2014, respectively. In certain circumstances, distributors may also sell competing products to our own or products for competing diagnostic modalities and may have incentives to shift sales towards those competing products. As a result, we cannot assure you that our international distributors will increase or maintain current levels of unit sales or that we will be able to increase or maintain our current unit pricing, which, in turn, could have a material adverse effect onCOVID-19 pandemic impacts our business ~~results of operations, financial condition~~ and ~~cash flows.~~

~~Our business is subject to international economic, political and other risks that could negatively affect~~ our results of operations orand financial ~~position.~~

~~For~~condition will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge in connection with the ~~years ended December 31, 2016, 2015~~severity of the virus, the ability to treat and ~~2014, we derived approximately 15%, 20%~~ultimately prevent it, its potential recurrence, and ~~22% of our revenues from outside the fifty United States, respectively. Accordingly, our business is subject to risks associated with doing business internationally, including:~~

Less stable political and economic environments and changes in a specific country’s or region’s political or economic conditions, including on-going political and military tensions on the Korean peninsula which could adversely affect our next generation DEFINITY program at SBL;

Entering into or renewing commercial agreements with international governments or provincial authorities or entities directly or indirectly controlled by such governments or authorities, such as our Chinese partner Double-Crane Pharmaceutical Company;

~~International customers which are agencies or institutions of foreign governments;~~

~~Local business practices which~~actions that may be ~~in conflict with the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act;~~taken to contain its impact.

~~Currency fluctuations;~~

~~Potential negative consequences from changes in tax laws affecting our ability to repatriate profits;~~

~~Unfavorable labor regulations;~~

~~Greater difficulties in relying on non-U.S. courts to enforce either local or U.S. laws, particularly with respect to intellectual property;~~

~~Greater potential for intellectual property piracy;~~

~~Greater difficulties in managing and staffing non-U.S. operations;~~

The need to ensure compliance with the numerous in-country and international regulatory and legal requirements applicable to our business in each of these jurisdictions and to maintain an effective compliance program to ensure compliance with these requirements;

~~Changes in public attitudes about the perceived safety of nuclear facilities;~~

~~Changes in trade policies, regulatory requirements and other barriers;~~

~~Civil unrest or other catastrophic events, including Hurricane Maria in Puerto Rico; and~~

~~Longer payment cycles of non-U.S. customers and difficulty collecting receivables in non-U.S. jurisdictions.~~

These factors are beyond our control. The realization of any of these or other risks associated with operating outside the fifty United States could have a material adverse effect on our business, results of operations, financial condition and cash flows. As our international exposure increases and as we execute our strategy of international expansion, these risks may intensify.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases

The following table presents information with respect to purchases of common stock we made during the quarter ~~ending September 30, 2017.~~ended March 31, 2020. The Company does not currently have a share repurchase program in effect. The 2015 Equity Incentive Plan, adopted by the Company on June 24, 2015, ~~and~~as amended on April 26, 2016 and as further amended on April 27, 2017 and April 24, 2019 (the “2015 Plan”), provides for the withholding of shares ~~held by employees~~ to satisfy minimum statutory tax withholding obligations. It does not specify a maximum number of shares that can be withheld for this purpose. The shares of common stock withheld to satisfy minimum tax withholding obligations may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this ~~Item.~~Item 2. These shares are then sold in compliance with Rule 10b5-1 into the market to allow the Company to satisfy the tax withholding requirements in cash.

Period
Total Number of
Shares Purchased

Average Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Programs

Approximate Dollar
Value of Shares that
May Yet Be Purchased Under
the Program
July 2017** —
$ —
* *
August 2017** 27,918
$ 17.48
* *
September 2017** 37,860
$ 16.80
* *
Total 65,778
*



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
January 2020**	—	$	—	*	*
February 2020**	72,520	$	16.16	*	*
March 2020**	24,914	$	15.04	*	*
Total	97,434			*


*	These amounts are not applicable as the Company does not have a share repurchase program in effect.


**	Reflects shares withheld to satisfy minimum statutory tax withholding amounts due from employees related to the receipt of stock which resulted from the exercise or vesting of equity awards.

* These amounts are not applicable as the Company does not have a share repurchase program in effect.

** Reflects shares withheld to satisfy minimum statutory tax withholding amounts due from employees related to the vesting of

~~restricted shares from equity-based awards.~~

Dividend Policy

We did not declare or pay any dividends, and we do not currently intend to pay dividends in the foreseeable future. We currently expect to retain future earnings, if any, for the foreseeable future, to ~~repay indebtedness and to~~ finance the growth and development of our ~~business.~~business and to repay indebtedness. Our ability to pay dividends ~~are~~is restricted by our financing arrangements. See Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-External Sources of Liquidity” for further information.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On October 30, 2017, we entered into a binding commercial supply arrangement pursuant to which we will supply Cardinal Health with TechneLite generators, Xenon, Neurolite and other products through 2018. The supply arrangement specifies pricing levels and requires Cardinal Health to purchase minimum volumes of certain products from us during certain periods. The supply arrangement will expire on December 31, 2018 and may be terminated upon the occurrence of specified events, including a material breach by the other party and certain force majeure events.None.

Item 6. Exhibits



		~~INCORPORATED BY REFERENCE~~
~~EXHIBIT~~ ~~NUMBER~~	~~DESCRIPTION OF EXHIBITS~~	~~FORM~~	~~FILE~~ ~~NUMBER~~	~~EXHIBIT~~	~~FILING~~ ~~DATE~~
31.1*	~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*	~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1*	~~Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.INS*	~~XBRL Instance Document~~

101.SCH*	~~XBRL Taxonomy Extension Schema Document~~

101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document~~

101.LAB*	~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~



		INCORPORATED BY REFERENCE
EXHIBIT NUMBER	DESCRIPTION OF EXHIBITS	FORM	FILE NUMBER	EXHIBIT	FILING DATE
2.1	Amended and Restated Agreement and Plan of Merger, dated as of February 20, 2020, among Lantheus Holdings, Inc., Plato Merger Sub, Inc. and Progenics Pharmaceuticals, Inc.	8-K	001-36569	2.1	2/20/2020
10.1	Form of Contingent Value Rights Agreement	8-K	001-36569	10.1	2/20/2020
10.2	Bridge Loan Agreement, dated as of March 15, 2020, among Lantheus Medical Imaging, Inc. and Progenics Pharmaceuticals, Inc.	S-4/A	333-234627	10.2	3/16/2020
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1**	Certification pursuant to 18 U.S.C. Section 1350.
101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)


*	Filed ~~herewith~~herewith.


**	Furnished herewith.


+	Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




LANTHEUS HOLDINGS, INC.

By:		/s/ MARY ANNE HEINO
Name:		Mary Anne Heino
Title:		President and Chief Executive Officer
		(Principal Executive Officer)
Date:		~~November 2, 2017~~April 30, 2020

LANTHEUS HOLDINGS, INC.

By:		/s/ ~~JOHN W. CROWLEY~~ROBERT J. MARSHALL, JR.
Name:		~~John W. Crowley~~Robert J. Marshall, Jr.
Title:		Chief Financial Officer and Treasurer ~~(Principal~~ (Principal Financial Officer and Principal Accounting Officer)
Date:		~~November 2, 2017~~April 30, 2020

3436



(in thousands)	Amount
Balance at January 1, 2017	$	9,370
Accretion expense	781
Balance at September 30, 2017	$	10,151



(in thousands)	Amount
Remainder of 2017	$	688
2018	2,750
2019	2,750
2020	2,750
2021	2,750
2022	261,937
Total principal outstanding	273,625
Unamortized debt discount	(2,273		)
Unamortized debt issuance costs	(3,079		)
Total	268,273
Less: current portion	(2,750		)
Total long-term debt	$	265,523



(in thousands)	Rebates and Allowances
Balance, as of January 1, 2017	$	2,297
Current provisions relating to revenues in current year	6,864
Adjustments relating to prior years’ estimate	(154		)
Payments/credits relating to revenues in current year	(4,658		)
Payments/credits relating to revenues in prior years	(1,474		)
Balance, as of September 30, 2017	$	2,875



	Nine Months Ended September 30,
	2017	2016
Effective tax rate	7.5%	2.9%

~~Standard~~

~~Description~~

~~Effective Date~~
~~for Company~~

~~Effect on the Condensed Consolidated Financial Statements~~

Accounting Standards Adopted During the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020

ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326)”

This ASU ~~2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements~~will require financial instruments measured at amortized cost and accounts receivable to ~~Employee Share-Based Payment Accounting~~

~~ASU 2016-09 simplifies several aspects~~be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information and reasonable and supportable forecasts that affect the collectability of the ~~stock compensation guidance in Topic 718 and other related guidance providing the following amendments:~~
~~•   Accounting for income taxes upon vesting or exercise of share-based payments and related EPS effects~~
~~•   Classification of excess tax benefits on the statement of cash flows~~
~~•   Accounting for forfeitures~~
~~•   Liability classification exception for statutory tax withholding requirements~~
~~•   Cash flow presentation of employee taxes paid when an employer withholds shares for tax-withholding purposes~~
~~•   Elimination of the indefinite deferral in Topic 718~~
~~For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.~~

reported amount.

January 1, ~~2017~~

The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.