Good morning, ladies and gentlemen. Welcome to the Lantheus Holdings Second Quarter 2020 Earnings Conference Call. This is your operator for today's call. Please note that all lines have been placed on mute to prevent any background noise. This call is being recorded for replay purposes. A replay of the audio webcast will be available in the Investors section of the company's website approximately two hours after the completion of the call and will be archived for 30 days. I will now turn the call over to your host for today, Mr. Mark Kinarney, Senior Director of Investor Relations. Mark?

Thank you, and good morning. Welcome to the Lantheus Holdings second quarter 2020 earnings conference call. Joining me today is our President and CEO, Mary Anne Heino; and our CFO, Bob Marshall. This morning, we issued a press release, which was furnished to the Securities and Exchange Commission under Form 8-K, reporting our second quarter 2020 results. You can find the release in the Investors section of our website at lantheus.com. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainties. In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. This means that results could change at any time, and the contemplated impact of COVID-19 on the company's business results and outlook is the best estimate based on the information available as of today's date. Please note that we assume no obligation to update these forward-looking statements, except as required by applicable law, even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. Also, discussions during this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is also included in the Investors section of our website. With that, I'll now turn over the call to Mary Anne. Mary Anne?

Thank you, Mark, and good morning, everyone. I hope this finds each of you and your families safe and well as you listen to this call. As we continue to navigate through the COVID-19 pandemic, the health and safety of our employees, patients and other partners in the healthcare community remain our top priority. We have strict safety protocols in place across our sites and have been vigilant in monitoring these protocols, as well as emerging information around virus transmission prevention. Since the start of pandemic, we have managed our business operations effectively. Our essential workers have remained on campus as we continuously manufactured and shipped our products to our customers. Our other employees continued to work remotely and we have a return-to-office plan in place that ensures the safe and thoughtful return of our employees to our different campuses. We are pleased to begin our next chapter at Lantheus, with the closing of the Progenics acquisition. At the beginning of this process, we didn't imagine our integration would be virtual, but I have been so impressed with the dedication to this effort by team members from both Lantheus and Progenics. Since the outset, my commitment has been to ensure the new Lantheus represents the complementary strengths of both companies, with the intent to be a best-in-class organization in the markets we serve. That goal has not changed, and we believe our milestones and strategic plan will deliver that vision. In the near term, milestones include the acceleration of product awareness and patient demand for AZEDRA and the build out of additional manufacturing to ensure we can meet demand, the PyL NDA submission and opportunities in our microbubble franchise. We believe our capabilities and portfolios complement each other and will ensure we serve our target market of precision diagnostics, oncology…

Thank you, Mary Anne, and good morning, everyone. I will provide highlights of the second quarter financials focusing on adjusted results, unless otherwise noted. Revenue for the second quarter were $66 million, a decrease of 23% from the prior year quarter. Revenue during the quarter demonstrated a clear progression of recovery as states and localities moved through the initial stages of economic reopening with variation across geographies. In April, the company's revenues decreased by 44.3% versus prior year. However, by June, they were down only 2.8% on a similar basis, which does not include the contribution from Progenics. Second quarter revenues include 11 days of contribution from the Progenics portfolio, adding 1.2% of sales growth to our quarterly and consolidated results year-over-year. Sales of DEFINITY in the second quarter were $40.4 million or 26.1% lower as compared to the prior year quarter. Notably, DEFINITY grew by 5.4% in June as compared to the prior year month in contrast to the 55.6% decrease experienced in April on a similar basis. TechneLite revenue was $18.9 million, down 6% from the prior year quarter. Similarly to DEFINITY, sequential improvement throughout the quarter, TechneLite grew 7% in June versus the same month prior year. Other nuclear, combined with contribution for Progenics assets decreased 32.6% to $10.3 million due mainly to the ongoing impact of COVID-19-related issues on Xenon. Rebates and allowances totaled $3.5 million. Gross profit margin in the second quarter was 41.7%, a decrease of 1,140 basis points from the second quarter of 2019 on a similar basis. The decrease was due to several factors related to COVID-19, including a change in product mix with TechneLite increased contribution to total sales relative to prior periods. We also experienced higher supply chain expenses during the quarter due to excess moly volume purchases to meet…

Thank you, Bob. In closing, I would like to recognize all Lantheus' employees, incumbent and new, for their commitment to patients and our customers. We have been in continuous operation of delivery of needed diagnostic and therapeutic products to the healthcare community and have done so with a commitment to quality and service, which defines our company. This is true both of those essential workers reporting to our manufacturing and distribution sites daily, as well as those diligently working from home as we do our part to serve patients and fight this virus. I am fortunate in my position to have such a dedicated employee group and I would like to recognize that collectively, you continue to embody the very best of our company's values. Before turning to questions, I would also like to discuss the changes to our Board of Directors that were made with the completion of the transaction. Ken Pucel and Dr. Derace Schaffer have stepped down from their Lantheus board seats and we have added Dr. Gerard Ber and Heinz Mausli, members of the former Progenics Board to our reconstituted Board of Directors. I am personally grateful to Ken and Derace for their contribution to the Lantheus Board and their support of my role. I welcome Heinz and Gerard to the Board, and I am so excited by the future we will create with this new remerged company. With that, Bob and I are now ready to take your questions. Operator, please go ahead.

Thank you. [Operator Instructions] First question comes from the line of Raj Denhoy from Jefferies. Your line is now open. You may ask your question.

Hi, good morning.

Good morning Raj.

Good morning Raj.

Maybe I could start a little bit with the data or the detail you provided on the monthly run rate of revenue. And so, a nice rebound as you moved into June, both positive for DEFINITY and TechneLite. And so, I know you're not giving guidance for the back, but I'm curious whether you think those positive growth rates you saw in the month of June, should be considered sustainable as you move into the back half of the year?

Raj, of course, any comments we make are assumptive of not seeing a large resurgence of virus or a need for return to the kind of lockdown conditions that most of the communities were in, in the first half of the year. But having said that, we do expect to see continued rebound and recovery of our product usage and with one exception in our -- I'll note that now. As Bob referenced in other revenue, the most significant negative contributing factor was a loss of revenue with Xenon. And that is related to how the Xenon modality diagnostic procedure is actually conducted. These studies are generally two parts, a ventilation and then a perfusion scan of a patient lungs, many times looking to see their alveoli the lungs. There is strong hesitancy for any ventilation-type procedures in today's market, just because of the risk of contamination to other either healthcare workers in the room or to patients who might then enter the rooms afterwards. So, across the board, any type of ventilation-related procedures have been suppressed at this time, until we figure out how to have them safely and reliably, used in patients regardless of what their kind of infection status might be. So, we do not expect in the short term to see recovery of Xenon revenue. But across our other products, we do.

Helpful. And maybe one for Bob, I know you gave some detail on the spending and your ability to realize synergies from Progenics. I guess, you mentioned $21 million of expenses that they had in the first quarter operating expenses, we should just assume that that continues given that you're going to reinvest any savings. And I suppose the question is, you know, when we might start to see some of that spending actually start to trend downward, when you might start to actually show those synergies on the P&L as opposed to reinvesting them?

Well Raj, you made me [indiscernible] have to do with, as we build out the commercial infrastructure around PyL and of course of ramping, so the AZEDRA relaunch, if you will. Together with those two things, I mean, once those are in places where you would start to see leverage return to the P&L. But it goes beyond just the synergy savings, those we have very clear paths forward in terms of what those synergy targets look like and how and when we're going to be able to capture them. The other thing that's worth noting is that if you look at the operating expense from the Lantheus side of things, it wasn't just -- this isn't just about finding synergies within the combined company but the run rate savings that we put into the P&L, you see that on an absolute dollar basis, I said 168 basis points of favorability. But that translates into $7.3 million of reduction, actual dollar savings that were put through the P&L in the second quarter. And that's inclusive of the bringing on the Progenics operating expenses in for those 11 days. So, when you start to think through manifesting that savings on a go-forward basis, I noted that it would be 12 months before we released our, so it's partly because we have some of the near-term investment but also, timing of how we will capture additional synergies. And then when we give our 2021 guidance, presuming that things are, fit back more to normal, I think we'll be able to see it at that juncture.

That's helpful. And then maybe just one last one, Mary Anne, on PyL. You noted the slight delay given, I guess, the issue with manufacturing, anything more on that? You did mention it had been remediated. But is there any risk that the timelines on PyL will slip any further based upon this?

We're confident that they won't, Raj. And I'd like to stress again, it is an equipment-related issue. And that our channel partners, which are the PET manufacturing facilities or PMF, who have been incredibly responsive. We kind of identified it very quickly. It was part of a pump that's used in the process of synthesis and we were able to replace the pumps and we already have some encouraging data from those newly replaced pumps. So, we do not expect a delay anymore than what I already cited.

Great. Thank you.

[Operator Instructions] Next question comes from the line of Larry Solow from CJS Securities. Your line is now open. You may ask your question.

Hi. Good morning, guys.

Good morning, Larry.

I joined a couple of minutes late, so I apologize if you covered this. It sounds like that PyL, you just sort of discussed a modest delay there. And AZEDRA, it sounds like it's going to start to reramp. Can you just discuss the rest of the Progenics product line? Obviously, I know RELISTOR, not talk about too much, but you're -- the greatest revenue generating product currently for Progenics. How, what's the sort of outlook for that product? And then in terms of the pipeline, I guess the product in the therapeutic side and the PSMA side, I guess those trials are still delayed?

So, yes, let me kind of break down that question, because it had several parts.

Yes, absolutely.

I'll talk to first the other products. You're right. On an absolute basis, and stand-alone Progenics, the RELISTOR revenue stream, that is the royalty stream paid by Bayer Healthcare, is the largest revenue creating item currently on the Progenics P&L. We don't speak to it because we are not controlling the commercialization of it, but as a new product, it has remained steady in the marketplace. The patients who unfortunately need that product are not in any way pandemic-related, and they would continue to need the product on a more chronic basis. For the other products in the -- that we inherited with the Progenics acquisition, the next nearest term one is 1095, which as you noted is a therapeutic and it will be for the treatment of prostate cancer. That trial has been paused only for new patients entering. Any patients who are already in the trial will continue to receive trial doses. But just on safety basis and very consistent with what is happening across clinical trials in the U.S., we are not yet reenrolling new patients. I will say from an AZEDRA perspective, you didn't ask specifically about that, but I'll note what we know for the first quarter. They were 11 therapeutic doses administered in Q2, nine of them were first doses for patients, two were second doses for patients, which usually come about three months later and second -- to-date in 2020, we have a total of 21 total doses already delivered, which is a significant ramp-up from what they had experienced in 2019. As you heard, both Bob and I mentioned, our intent has been and remains to carefully look at what the field-based structure is, because we are confident that we can increase demand generation and patient pull through, which both will contribute positively to sales for that product.

Okay, great. And I realize not providing any updated guidance and obviously understood why in this environment. But just from a global perspective, and I don't know if you touched on it in the call, but I know when you first acquired or announced the acquisition of Progenics, you sort of had a timelines for accretion. And ex-COVID or if we assume COVID, hopefully wanes over the next couple of years, do you still sort of maintain your general expectations for accretion as we look out 24-36 months?

I'll say yes and let Bob give some more details.

Yes. And in fact, that was the point I am trying to make on, toward the end of my commentary, which is that we remain committed to our financial goals and targets. As everybody knows that there are public filings out there that assumed January 1 starts. So, if you were to think in terms of dialing things forward in terms of a mid-2020 start, you know, we're now under way and we are starting to execute -- our Integration Management Office has done a fantastic job of preparing the company and each of the leaders within their own functions to be poised to capture both synergies as well as productivity gains, to be able to execute on over the near term and over the next months and years to keep us on-track along those timelines that we had previously discussed. But just sort of -- don't focus on the year but focus on the months of ownership and we're still committed to those timelines.

Got it. And Mary, I know you mentioned with lack of, I guess, access to some echocardiograms, DEFINITY was being used a little more on the ultrasound modality. Is that something that, as you look out over the long-term could eventually be a benefit for DEFINITY, different modality? I know obviously you're trying to get into different modalities. So, that -- does that sort of fit that potentially?

I think it may Larry, because I think the learning has been that, in any situation, it may be safer and more convenient if you can bring diagnostic modalities to the patient and rather than having to transport patients to those areas where stationary equipment are. And we have seen, and I may have talked about this before, but we've seen an increasing portability with ultrasound before this, where the ultrasound equipment is actually getting smaller, easier to use in a portable setting. And that in fact is part of the reason that we drove forward with our DEFINITY room temperature program. It was our commitment to make sure that if ultrasound was going more portable, that DEFINITY could be more portable as well. And so, having a room temperature formulation rather than one that requires refrigeration, we feel kind of add to that that dynamic that we're seeing in the marketplace.

Okay, got you. And then just last question, I think in Q1 you had mentioned TechneLite obviously procedures down materially, April, May and slowly coming back. But I think you had mentioned there were some inefficiencies related to the greater pharmacies actually had to use more Moly or more TechneLite in their procedures. Even though there were less procedures. So, that sort of somewhat offset the sales in the beginning of the quarter. Does that -- did you see that sort of through the quarter?

We did, and as Bob and I both noted, these are really regional variations and it really aligns very-very closely with the reopening of regions. And so, with full reopening and kind of return of normal conduct within hospitals for in and outpatient procedures, we would expect to see their channel partners or the radiopharmacies revert back at some point to their practice of having multiple deliveries to hospitals during the day instead of the one-time delivery that they adopted during the acute phase of the pandemic. But again, it's such a regional kind of aspect that I can't make a general statement about it.

I would add to that too. When we look at TechneLite, it didn't drop. That was what I was indicating about gross margin to the extent that I noted for DEFINITY. I think it was for the reasons that Mary and yourself has actually just articulated, but that same ramp, even though you might have seen a change in the way the delivery into the system was occurring throughout the period, it was still a ramp of recovery. I mean, still landing at $18.9 million, which was a pretty good result given the circumstances of the quarter, but it still did follow that same sort of trajectory. But DEFINITY recovery was a very steeper recovery, but TechneLite still it did experience an upward trajectory throughout the quarter.

Okay, great. Okay, great. Thank you. I appreciate all the color.

You're welcome.

[Operator Instructions] We show no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may disconnect and have a wonderful day.

Thank you everyone, stay safe.