Good afternoon, ladies and gentlemen. Welcome to Lantheus Holdings Fourth Quarter and Full Year 2020 Financial Results Conference Call [Operator Instructions]. This call is being recorded for replay purposes. A replay of the webcast will be available in the Investors section of the company's website approximately 2 hours after the completion of the call and will be archived for 30 days. I'll now turn the call over to your host for today, Mark Kinarney, Senior Director of Investor Relations. Mark?

Thank you, and good afternoon. Welcome to Lantheus Holdings Fourth Quarter and Full Year 2020 Financial Results Conference Call. With me on today's call are Mary Anne Heino, our President and CEO; and Bob Marshall, our Chief Financial Officer. Mary Anne will begin with some introductory remarks and a business update, and then Bob will cover our financial results. Mary Anne will conclude the call with closing remarks, and then we'll open the call for Q&A. This afternoon, we issued a press release which was furnished to the Securities and Exchange Commission under Form 8-K reporting our fourth quarter and full year 2020 results. You can find the release in the Investors section of our Web site at lantheus.com. For those of you not on the webcast, you can find the slide presentation in the Investors section of our website under the Presentations tab. But 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, the continuing impact of COVID-19 on our business results and outlook is a 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 Web site. With that, it's my pleasure to now turn the call over to Mary Anne.

Good afternoon. 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 what we all hope is the latter and last part of the COVID-19 pandemic, we remain committed to the health and safety of our employees, patients and other partners in the health care community. In 2020, we successfully and safely brought our business through a very challenging year against the backdrop of the global pandemic. We adapted daily and seamlessly to the reality of new workplace behaviors for our manufacturing quality and distribution teams and remote work for the balance of our employees, navigating complex supply chains and at times unpredictable product demand. Even with these operating challenges, we successfully closed a number of strategic transactions and partnerships, most notably the merger with Progenics, which we believe will drive sustainable growth into the future. We integrated Progenics' talented employees and exciting product portfolio into our own with no business disruption.Lastly, we also secured several important regulatory approvals even as the majority of our team worked remotely. Looking forward, in 2021 we recognize that pandemic will continue to have an impact on hospital access and patients' willingness to seek care during the first part of this year. We're encouraged by the availability of new vaccines and hopeful that administration of these vaccines, to not only vulnerable populations and frontline workers but to the general population in 2021, will restore true normalcy to our lives and confidence in accessing all parts of the health care system. We are also encouraged by the trends we are currently seeing in hospital traffic data and falling case and hospitalization rates. Today, I will update you on our progress within our prostate cancer portfolio, our key commercial franchises as…

Thank you, Maryanne, and good afternoon, everyone. I will focus my discussion on adjusted results unless otherwise noted. Revenue for the fourth quarter was $94.2 million, an increase of 5.4% from the prior year quarter and a decrease of 0.8% organically. On a year-to-date basis, revenue was $339.4 million, a decrease of 2.3%, largely due to the effects of the COVID-19 pandemic on customer demand partially offset with the Progenics portfolio contributing since late in the second quarter. Sales of DEFINITY in the fourth quarter was $60.7 million or 2.3% higher as compared to the prior year quarter, and 9.6% higher sequentially over the third quarter of 2020. DEFINITY sustained volume strength during the quarter until mid-December, as Marianne described earlier. Technelite revenue was $22.7 million, up 10.4% from the prior year quarter. Technelite grew 5.8% sequentially, but experienced a similar dynamic of DEFINITY in the latter half of December. As Mary Ann noted, the company recorded opportunistic generator sales in the quarter to Ansto, mitigating some of the impact of COVID-19 related issues. Other nuclear, including newly acquired assets increased 15% to $16 million. Rebates and allowances totaled $5.3 million. Gross profit margin for the fourth quarter was 49.8% and a decrease of 123 basis points from the fourth quarter of 2019. Positive contribution from higher net sales of DEFINITY and the addition of the Progenics commercial portfolio was offset by the unfavorable contribution from lower Xenon revenues due to a relatively fixed cost of raw materials as well as period tech transfer expenses relating to our in-house manufacturing initiative in Daripa and process improvements in our Somerset facility. Operating expenses were 36.3% of net revenue and sequentially lower by $1 million versus Q3. Noting, of course, that the third quarter included approximately $3 million NDA filing fee for…

Thank you, Bob. I would like to close by saying how proud I am of the team that came together in 2020 that we now call Lantheus. We faced many challenges, but never lost sight of our mission for patients and for each other. I am so grateful to the employees that routinely staffed our manufacturing sites, the other employees who ensured it was safe for them to do so, as well as the employees who so seamlessly transitioned Lantheus to an efficient virtual company. 2021 promises to be an exciting year as we look to the approval and launch of PyL near the end of Q2, opportunities across our commercial and pharma services businesses for growth, and the continued advancement of our pipeline. As always, the commitment remains to accomplish all this with good judgment on investment. I look forward to updating you on our progress. With that, Bob and I are now ready to take your questions. Operator, please go ahead.

[Operator instructions] Your first question comes from the line of Anthony Petrone with Jefferies.

This is Doug on for Anthony. Can you just walk through how PyL potentially shifts the landscape for prostate screening and the initial indication for monitoring patients after surgery or radiation?

Can you repeat that question? It was a little broken up.

Can you walk through how PyL potentially shifts the landscape for prostate cancer screening?

So let me speak to what the indications will potentially be. There are two populations of patients that were studied in the OSPREY and CONDOR trials. It's not yet clear to us which we'll receive approval for, but I can speak to which populations were studied. The two populations are called initial staging. And these are patients who have already been diagnosed conclusively with prostate cancer in what's called a prostate bed. So it's officially in, I would say, the prostate gland, and then there's localized lesions right outside the bed. And then there's the other patient population is what's called biochemical resistant. And these are patients who have recurred after complete removal of the prostate gland. So it means that, that was not, in fact, curative for the patient, that there had already been metsstasis of the patients. So the use of the word screening is somewhat confusing because usually you're screening patients for prevention purposes. In both cases, these are patients who have been diagnosed with cancer. And there's typically, in a prostate cancer's journey, there is a mapping that's done across the entire journey and there's points in time when a patient is more likely to receive what will be a PyL imaging scan. And we usually refer to it as the, what's called, again, initial staging or BC or biochemical resistance. Those are the points in time. I can tell you from a population size, we estimate that the biochemical resistance or BCR patient population is roughly 135,000 men or patients on an annual basis. And the initial staging population is roughly estimated to be about 40,000 patients.

And then I guess, the question is, do you think that pull eventually displace PSA testing?

Well, it's a little bit of apples and oranges there because PSA testing is serologic testing, which is blood testing. And one is not mutually exclusive of the other. They can be used for different purposes. And you can track a gentleman a PSA rising, which is the serologic test can also be used to track the gentlemen for what it would be extensive disease or significance of disease, which might be a call to action for different treatments. Whereas the PyL image would be used to detect exactly where cancer is in a body. So the two are not mutually exclusive.

Our next question comes from the line of Erin Wright with Credit Suisse.

How should we think about this finite in the cadence of growth throughout the year, just with the procedure volumes that you've seen? I know there's a lot of variables out there, but curious what you're seeing kind of quarter to date. And and what's embedded kind of generally speaking in your guidance in terms of DEFINITY?

Well, we do not offer product-specific guidance for DEFINITY. You did hear me speak to volumes for echocardiograms. And I would know we'll be obviously publishing our K, but and I'd invite you to read that. But we do track the number of echocardiograms that are performed on an annual basis as the larger market trend DEFINITY, of course, is used in a subset of those echocardiograms, and those are the suboptimal echocardiograms, which are not what we have called diagnostically certain without the addition of an image enhancing agent we certainly in -- for the year 2020, we saw a decrease in the total number of echocardiograms that were performed in the United States. And the logic is fairly easy to explain. Many echocardiograms are done on a voluntary or I would almost say a prophylactic basis in that they're done as part of annual checkups or initial cardiology screening for folks who either reach a certain age or having a certain level, I would say, a physical done and the tendency in the pandemic setting in the United States in 2020 was to offset those types of exams. People were not seeking physical ZMS. People were not seeking routine exams. And so the echocardiograms that would have gone along with them were not done similar to what was happening with elective procedures or elective surgeries, many times as a kind of good preoperative work for those types of procedures, a patient who has any type of cardiac history might have an echocardiogram done what was not being done with -- along with the electric procedures where they work ups with it. And so in 2021, what we very much hope to see, which comes along with my comments around return to normalcy, is return to the delivery of healthcare in the United States. And part of this, quite honestly, comes with return of confidence of patients in accessing healthcare. There is a very much thinking '20, a confidence issue in a patient's confidence in entering a hospital fear of infection or fear of exposure. And we very much hope that with routine delivery of vaccination and with the build of herd immunity that there'll be the restoration of confidence among the general patients in the general population around accessing healthcare in the hospital setting.Many of our procedures, DEFINITY and our nuclear procedures are done in hospital outpatient settings in the departments that are part of kind of a hospital system. And so we predict that will happen. And when Bob spoke to our guidance, and as you heard me speaking with my comments, our guidance and our assumptions are based on the assumption that, that does occur, that there is good orderly vaccine rollout and that there is return to normalcy of healthcare delivery.

And let me add, that what are the keys, and I know you didn't ask this question precisely. But the keys to the '21 guidance, one, people need to adjust their models for the Puerto Rico sale. So that first and foremost. But as Mary Anne is saying, the broad vaccine distribution in my prepared comments as well as the full year range that we've provided, it calls for what would be then robust second half growth. I mean it would start in Q2 given the weak Q2 from, due to covet in 2020. But we would certainly expect that, that accelerating. I noted it would be in the base business as well as the initial commercialization of PyL. But the big drivers are going to be the key drivers that have been with the company for years.

And we actually see, we track, as I'm sure many on the call do we track case rates, we track hospital traffic. We track, of course, our own product trends. And we're already seeing, as we've noted throughout last year, very different geographic trends around the country. That have to do with either restoration or would say, increased hospital traffic that then matched to other trends for us. And it's, there are very hopeful signs that we're seeing.

And on PyL, can you remind us when PyL in your view is going to meaningfully contribute to top line growth? And in your thoughts given the approval time line now and your thoughts also on reimbursement dynamics. And did you break out the rest of the Progenics business? I would be curious what the contributions were there in the quarter?

So we did not, Bob can speak more specifically to what gets, how it gets broken out and how it gets reported. From a meaningful perspective, I'll speak to the reimbursement, the coverage process, because I think that's something that kind of lends clarity to it. With the, with a pet based diagnostic product, you applied to what's called pass-through. And that those pass or applications are accepted and then processed by CMS on a quarterly basis. And so your application must be in by the first date of a quarter and then it's processed within that quarter by CNS and then you're listed and your coverage amount becomes available as of the first day of the next quarter. So if you allow that, our PDUFA date now is May 28, there is a process of complete application that requires some administrative steps. It would be hard-pressed to have that application completed to have it in by the June one date. So for all intents and purposes, we're assuming that our application goes in on the September one date, which means that we would have the pass-through in place by Jan 1, 2022. That does not mean that there is not coverage for your product after approval until then because remember, I'm only speaking to CMS commercial coverage exists at launch because that's an effort that you can undertake proactively with commercial payers prior to that. The Medicare, the process for Medicare coverage, the, and there is also a one-off process for Medicare coverage that you can do is fairly labor-intensive. But you can do prior to the APT actual cost through approval. But for all intents and purposes, the, we're looking at for two reasons. One, pass-through. And then as I also referenced, broad availability through the PNF channel that is also a process that builds. You offer with your NDA application, you submit with your NDA application limited number. Of PMS for concurrent approval with your NDA. And then as you come out with approval, it's a constant build up at that of adding additional pants with our goal is to have broad availability throughout the United States essential coverage within, I'd say, six months after launch.

And then your question about contribution from Progenics in the quarter. I had noted that growth rate was 5.4% and organically, minus 0.8%, that math is about $5.5 million of contribution.

And just one last question. I know you now can you tooting here. But anything kind of below the line to help us directionally here or how we should be thinking about EBITDA for the year or the operating margin target or like tax rate or any metrics kind of below the line to help us get there.

So again, as you think through the year and how we've, how it kind of maps out from a revenue and cadence and talking about the second half in terms of acceleration. The keys to think upfront is sort of a tale of two halves, if you will. Keeping in mind that as you think about 2021. We're going to be putting back some of the cost savings initiatives that we had put in place in '21, excuse me, in 2020 and Q2. And some of those savings initiatives actually are carried on into the balance of the year. And so those get added back. And then of course, you get the Progenics based business net of synergies into the first half of this year. So as you think, and then, of course, the balance is going to be the investments that we talked about in terms of commercial readiness for PyL, which involves both sales teams as well as we talked about market access and analytics and back office, but also getting the PMF qualification and set up. And of course, in MSLs or medical sales liaison, which also show up in the R&D line. You take all those things together and you're sort of looking at sort of a sort of a $42 million a quarter kind of spend. But that back half of the year gets leveraged quite nicely with, like, as I described earlier, robust growth rates in the second half of the year. So of that, too, one thing I would just sort of step you back up the P&L just a little bit. As you think about gross margins, particularly as I look at models, there are certain factors in gross margin in 2021 that will have a beneficial impact as we go through the year. One, you have improving product mix, first and foremost. And with the pandemic abating, you also have as we go forward in time, some of our custom logistics costs around bringing moly to the United States, some of those costs were down because we were having lengthened flights and so forth. We would have less non bond decay costs as well as tech transfer costs with Genesis as we bring that to conclusion. In fact, we will have batches being produced during the year ahead of what we would hope to be approval of the facility, but that would absorb labor and overhead costs. So we would expect to see gross margins improving over and above what we have seen more recently. And we probably start sort of where we are at coming out of Q4, but we would see that increasing and accelerating for each quarter from there on in. I hope that's helpful.

Our next question comes from the line of Larry Solow with CJS Securities.

It's actually Lee Jagoda for Larry. So Bob, I guess there was a ton of numbers thrown around, around Progenics. I just want to make sure I have this right. Did you disclose how much revenue you expect from PyL in 2021 as it relates to the guidance range?

We don't give product level guidance, but if you just look at models that people have and adjusting for Puerto Rico, you will see that things seem to be fairly well contemplated by those who have put together models and made them available publicly.

I guess where I'm going is, given there's a binary event coming in May or June, knowing what's in the guidance versus what is not kind of spelled out, maybe just helpful to have out there as a guidepost for people as these events occur. I don't know if there's anything you can say beyond what you said, and I appreciate you don't give the product-level guidance.

Yes, I think as we get through the year, we will evaluate how to look on a quarter-by-quarter basis. But right now, you're right, it's a binary event, but at the same time that, that event will occur closer to the end of the second quarter. So I think that we'll make sure that people are well informed on our thinking at that juncture.

And I would say, I think from our comments, it should be obvious that we are assumptive that the binary on this point, we are positively assumptive on it.

No, that makes perfect sense. And then just switching gears to the DEFINITY product, Mary Anne, you gave us a bunch of color around the additional opportunities for DEFINITY, now that we have this RT approval in place. Can you talk about sort of the plans and time line for launch? And then as a follow-up, maybe talk about how much of the RT volumes you would expect to go towards cannibalization of the existing product versus truly new opportunities and how much you could see that adding to growth over the next several years?

So I would not have you think with our current customer set, which is, let's call it, the echocardiography market predominantly in the US. I would not think of it as cannibalization because our strategy is to make the product offering available to our customers. We are, as we know and as I alluded to, the market leading product. We continue to hold over 80% share in the US echocardiography image enhancing market. And so our goal there was to cover the market. There are three currently approved products. I guess now there's four. And there is another room temperature formulation available now with the approval of DEFINITY RT, our customers have from us alone the availability to either of should that be their choice, the availability to have a room temperature or refrigerated product. So we are not actively trying to cannibalize our own product with that. But having said that, for any of our customers, they have preference is to now use the room temperature formulation, we will actively make that available to them. And I will note, in case it wasn't clear. We are also with this approval, we'll be launching what we call VIALMIX 2, or VN2. This is a VIALMIX unit, again, proprietary to only Lantheus products, which can recognize and differentiate between DEFINITY and DEFINITY RT, and so since the vials will require slightly different activation times and shake speeds, it has the intelligence to recognize either vial and activate it appropriately, and at the same time will not activate any other type of vial. So that also gives our customers the flexibility they need to choose which product they want to use and only need one piece of equipment to do so.

[Operator instructions] Your next question comes from the line of Richard Newitter with SVB Leerink.

This is Erin on for Rich. Just a quick question from us. I was just wondering if you could maybe talk about the Progenics deal and how you're progressing along in the synergy targets that you guys have laid out?

Well, I'll speak to the deal, and Bob can get to the numbers. We are thrilled with how the deal, as you say, is working out. Whether we're looking at the employees or we're looking at, in retrospect, what the assets were, from a rationale perspective, it's everything we proposed it to be before we before we proposed it to our Board. From an integration target perspective, we are on our integration target. We closed the deal last year later than we had hoped to. There was some delay that we related to, I would say, the Board process at Progenics, but for having closed the deal, the only target that we were even slightly off on was the actual filing of the PyL NDA, which we were very transparent about last year, filing it approximately 1 month late. Otherwise, we've been on time, on time, and I'll let Bob speak to budget, so to speak, with the synergy targets.

So as a reminder, the synergy target that we had outlined when we first talked about the deal was $20 million captured by 2022, which was sort of within a 24-month window of ownership. I'm happy to say that as we exited 2020, we were on a run rate that meets that goal and exceeds it slightly, but we have exceeded that goal and have been able to leverage those savings in terms of making sure that we have a robust commercial presence ahead of the PyL opportunity, which we think further leverages our P&L as we go into the coming years. And that's not only just from OpEx as a percentage of revenue declining, but also gross margin expansion opportunity that goes with it. So it's been a fantastic opportunity that the teams have embraced and have delivered on through the diligence of our project management office and as well as the different teams. And again, like I said, it affords us the ability to invest. And those savings will become more evident as you look into the second half of this year, as I noted last year in July.

I'll just add, and I probably will continue to say hats off to what isvery little time to prepare and certainly not our preference, but we did that virtually as well as the PyL NDA submission and everything else we accomplished in 2020.

And then just switching to the DEFINITY quickly. I think you had mentioned that there was maybe some expansion into emergency situations like stroke, is this included in the TAM? And if not, how would that expand your opportunity?

So please allow me to clarify it. Perhaps I wasn't clear. I was referencing an ongoing study in Brazil. That would be the reference I was using. I was offering insight into the possibilities for imaging enhancing agents. But my specific example was referring to a study that's under way in Brazil where DEFINITY is being studied for use in stroke. And there is another study under way for use in myocardial infection. But neither of those, a, are currently in the indication, the current approved indication for DEFINITY in the US market and neither, of course, are included in any revenue assumptions for DEFINITY.

There is no further question 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.