Lantheus Holdings, Inc. (LNTH) Q4 2020 Earnings Report, Transcript and Summary

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 well as with our pharma services and corporate development group. I'll begin with PyL, the lead product in our prostate cancer portfolio. 2021 will be an exciting year for Lantheus with the potential FDA approval of PyL and our commercial launch. We have the opportunity to positively impact the lives of U.S. prostate cancer patients while driving sustainable revenue growth and margin expansion for Lantheus. The FDA accepted our new drug application for PyL, a prostate-specific membrane antigen, or PSMA-targeted tech imaging agent, for prostate cancer and assigned priority review to the NDA with an action date of May 28, 2021. The priority review designation shortens the FDA's review to six months from the time of NDA acceptance, down from the standard PDUFA time -- review time of 10 months. The FDA also indicated that it is not currently planning to hold an advisory committee meeting to discuss the application. If approved, we believe PyL will be the first commercially available F-18 labeled PSMA-targeted PET diagnostic agent. Our PyL NDA is supported by data from two company-sponsored Phase III studies, OSPREY and CONDOR, both designed to establish the safety and diagnostic performance of PyL imaging across the prostate cancer disease continuum. We believe the collective results from these two studies demonstrate the ability of PyL to reliably detect and localize disease and enable more appropriate patient management. Across these studies, PyL has also shown an attractive safety profile. PyL has been administered in approximately 3,500 subjects globally, inclusive of our two company fronted studies and multiple investigated sponsored studies. Prostate cancer is the second most common form of cancer affecting men in the United States. Currently, an estimated one in eight men will be diagnosed with prostate cancer in his lifetime. We believe there is significant unmet need for a reliable targeted imaging agent in prostate cancer, particularly in the high-risk recurrent or metastatic population. In preparation for our PyL launch, we are building out our commercial and medical teams. We are also working with the PET manufacturing facility, or PMS, channel so that we could reach our goal of broad availability of PyL to the US marketplace soon after launch. In addition, we are working with PET imaging centers where those products are used as well as with the urologists, radiation oncologists and medical oncologists who order these products and patient advocacy groups to build awareness of PSMA PET imaging generally. We are fully committed to the potential of PyL to transform the lives of prostate cancer patients, and our team is working diligently to make this happen. Turning now to our commercial portfolio. I'll give an update on our key commercial products. In mid-November, the FDA-approved our supplemental new drug application, or SNDA, for DEFINITY RT, as pictured here on the right, expanding our micro global franchise offering to include a room temperature formulation. DEFINITY RT joins DEFINITY, our market-leading product that our customers and patients have trusted to enhance suboptimal echocardiograms for nearly 20 years. Because it doesn't require refrigeration, DEFINITY RT is an elegant solution for inclusion in multi lumen product kits that our partners and others are developing for indications and applications outside of echocardiography. You've heard me speak of our collaborations with cerevast, Cartera and Incitec. These companies are evaluating new indications and applications in retinal vein occlusion and glioblastoma. These are complex product applications, including multiple components and our room temperature formulation microbubble and Vialmix will be an important part of their overall product offering. I will also note having a room temperature microbubble recognizes the increasing need for portability today in the delivery of healthcare services. While image enhancing agents have traditionally been reserved for use in an ultrasound or echocardiography lab setting, new applications are being explored in emergency settings. DEFINITY is currently part of ongoing research for acute treatment for stroke and myocardial infection, both instances in which intervention with the patient begins during transportation to a treatment center. We continue also to invest in the intellectual property supporting DEFINITY. DEFINITY RT now has five Orange book listed patents, including a composition of matter patent, which expires in 2035. I will offer a brief note about DEFINITY procedural volume trends in the fourth quarter. While DEFINITY results in October and November were in line with our expectations, we did see some volume decline associated with the resurgence of COVID-19 in late December as non-urgent echocardiography procedural volumes declined. Bob will speak specifically to the trends we are seeing with DEFINITY in growth over prior periods.Our sales team continued to work largely remotely during this period to drive awareness of the appropriate use of DEFINITY in suboptimal epicardial brands, actively engaging with our customers, however, doing so predominantly using virtual tools. Finally, I'll offer an update on our project to build an in-house manufacturing facility for DEFINITY and similar sterile vial products. We have completed important steps that finalize our preparations for the FDA submission of our SNDA with the completion of our manufacturing qualification batches. This work moves us closer to FDA approval, which we still continue to expect later this year. Moving now to our Radiopharmaceuticals portfolio. Our Technelite business performed well during the quarter, supported in part by sales of generators to our international partner, and so on a temporary basis. Throughout the quarter, we continue to successfully navigate a complex moly supply chain from all three of our global suppliers.Our manufacturing and logistics team did a fantastic job dealing with changing flight logistics to ensure that we receive supply so that, in turn, our customers and their patients were minimally impacted. Contributions from the acquired Progenics portfolio continued to benefit our overall growth and margin profile. Of note, our AZEDRA sales grew significantly in 2020 over the prior year. Despite ongoing hospital access limitation for our representatives. We are encouraged by the continued utilization of AZEDRA and believe market opportunity exists for the only FDA-approved therapy for pheochromocytoma and paraganglioma. In late March, we will be hosting an oral presentation at the end of 2021 annual meeting by Dr. Jimenez of MD Anderson, who will discuss biomarker tumor response in patients who received AZEDRA. To ensure we continually improve our iodine based manufacturing reliability and capacity for AZEDRA, we implemented an iodine manufacturing efficiency plan in the fourth quarter of 2020. That's an important goal for us as our Phase II pipeline asset for prostate cancer 1095, which I will speak to more later, is also an iodine based products. Now I'd like to discuss progress in our pharma services business. Pharma services is a relatively new business that we have created to drive revenue through partnerships using our expertise with radio ligands in oncology drug development. We partnered with companies to provide imaging biomarkers for inclusion in their clinical trials. These biomarkers can be potentially used for optimizing patient selection or monitoring therapy response in clinical trials, which can reduce development risk, potentially reduce expense, shorten development time lines and potentially strengthen the overall clinical results obtained.We benefit from these partnerships with the revenue stream and access to the data generated by our product, which could be valuable to development and commercialization strategies elsewhere in our portfolio. In early December, we entered into a strategic collaboration with point Biopharma. To use PyL to determine PSMA avidity during patient selection in plant biopharma's Phase III clinical trial studying metastatic castration-resistant prostate cancer. The inclusion of PyO in point biopharma's Phase III trial reinforces our belief in the potential utility of PyL not just in assessing metastatic disease but also in selecting the most appropriate patients for PSMA-targeted therapy. In the third quarter, I have announced clinical supply agreements with both Regeneron and Bayer, who will include PyO in their clinical trials for prostate cancer. We believe these agreements are illustrative of the value pharmaceutical companies see in PyL as a next-generation diagnostic imaging agent and Lantheus as a partner. Another development in our pharma services business occurred in late January, with the filing of a drug master file with the FDA for MM-01, a PD-L1-1 imaging biomarker. We announced we will begin making the biomarker available to academic centers and pharmaceutical companies for using immuno-oncology or IO clinical trials in 2021.This is a PD-L1 biomarker in license from NanoMab technology Limited in May 2019. Evaluation of patients for I-O therapy is a key challenge for companies developing new therapeutics, and we are pleased to take an important step forward in providing a novel clinical research tool with the potential to optimize selection of IO therapy. Lastly, I'll update on M&A activity. In early December, we entered into an agreement to sell our Puerto Rico Radio Pharmacy and PNF to pharma logic.This transaction simplifies our distribution model in Puerto Rico and allows us to use the proceeds to invest in our core businesses and product pipeline. Lantheus and Pharmalogic entered into a long-term supply agreement, under which lamps will continue to supply Pharmalogic with Lantus' products. Pharmalogic is an important lites customer in the US radiopharmacy market and this transaction extends our strategic relationship with them. The transaction closed at the end of January, and Bob will provide the financial details. Moving on to our research and development pipeline. In October 2020, we resumed patient enrollment in our Phase II ARROW trial. 1095 is our I-131 PSA based targeted product candidate for the treatment of metastatic castres stent prostate cancer with active study sites in the U.S. and Canada. In February, we presented a trial in Progress abstract at the American Society of Clinical Oncology Genitor Cancer Virtual Meeting or ASCO GU, highlighting the ARROW trial. We're pleased to have this study under way again. With that, I'll now conclude my update on key commercial and strategic programs and turn the call over to Bob. Bob?

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 PyL. Both sales and marketing and R&D reflect investments prepared for the launch of PyL as well as the resumption of 1,095 patient enrollment during the quarter. G&A was essentially flat as compared to Q3 2020 with achieved synergy savings embedded. Operating profit for the quarter was $12.7 million or a decrease of 37.2% from the same period prior year. Year-to-date, operating profit was $49 million, down 35.4%. Adjustments in the quarter totaled $12.9 million before taxes. Of this amount, $3.6 million is associated with noncash stock and incentive plans $4.7 million related to acquired intangible amortization and a reduction of $2.8 million related to net changes in fair value associated with contingent consideration as well as the PyL-related contingent value rights or CVRs. An additional $4.7 million is tied to ongoing integration efforts and onetime expenses related to the Progenics acquisition and synergy capture. Lastly, we recorded $2.7 million of IR&D impairment relating to the Azedra life cycle management program during the quarter. This is due to near-term rephasing of certain R&D spend to 1095, which had reduced enrollment during 2020 relative to prior expectations due to COVID-19 from our AZEDRA life cycle management initiatives during the next 9 to 12 months. We remain committed to advancing opportunities with AZEDRA and maximizing the value of this important asset. Our effective tax rate was 54.3% in the quarter. Yes, the elevated rate is driven by fixed interest accrual associated with our uncertain tax positions for which we are indemnified. When these accruals are taken together with certain levels of profitability and other discrete items, the result impacts the underlying effective tax rate. The resulting reported net income for the fourth quarter was a loss of $3.4 million and a net profit of $4.6 million on an adjusted basis, a decrease of 66.3% compared to the prior year period. Year-to-date, reported net income was a loss of $13.5 million and a net profit of $25.8 million on an adjusted basis, a decrease of 45.1% compared to the prior year period. GAAP basic and fully diluted earnings per share in the fourth quarter were a loss of $0.05 and a profit of $0.07 on an adjusted basis. Year-to-date GAAP basic and fully diluted earnings per share were a loss of $0.25 and a profit of $0.47 on an adjusted basis. Now turning to cash flow. Fourth quarter operating cash flow was a $0.6 million as compared to $22.4 million in Q4 2019. Capital expenditures totaled $3.8 million, $1 million less than the prior year quarter. Free cash flow, which we define as operating cash flow less capital expenditures, was a use of $3.2 million, a decrease of $20.9 million from the prior year period. Net income variances as well as net working capital differences were the main drivers of the decrease in the quarter. Importantly, we continue to focus our efforts on driving diligent working capital management and making prudent investments to deliver sustainable long longer-term growth. Cash and cash equivalents net of restricted cash now stands at $79.6 million. We continue to have access to our undrawn bank revolver and are comfortable with our strong liquidity position. Now turning to 2021. We believe that the latest resurgence of COVID-19 and the resulting impact on hospital traffic and patient behavior could create lingering revenue pressure in Q1 and less so in Q2. We would expect this impact to diminish as vaccines are distributed more broadly. As such, we would expect revenue in Q1 to be in a range of $85 million to $89 million and adjusted diluted earnings per share to be a loss ranging from minus $0.03 to flat. Accelerated investment in PyL commercial readiness will impact near-term profitability. However, with both a recovering base business as well as PyL commercialization, assuming approval consistent with priority review timing, we project accelerating profitability and free cash flow generation in the second half of the year. As we think about the full year, assuming broad vaccination adoption and PyL approval as of the PDUFA date near the end of Q2, we see full year revenue in the $385 million to $400 million range, with adjusted fully diluted earnings per share in a range of $0.34 to $0.39, both targets considering the sale of our Puerto Rico assets. To that end, as Mary Anne stated, we closed the sale of our Puerto Rico operations on January 29, 2021. For comparative purposes, during 2020, the Puerto Rico business generated net revenue of $10.7 million, $1.8 million of net income and both GAAP fully diluted EPS and adjusted EPS of $0.03, keeping in mind that the 2020 results reflects headwinds stemming from the COVID-19 pandemic. Looking ahead to 2021, for purposes of adjusting financial models to account for the sale of the Puerto Rico operations in 2021, you should remove net revenue of approximately $11 million and $3 million of net income and GAAP fully diluted EPS and adjusted EPS of $0.04 from your models. These results are netted for the supply agreement we have put in place with our new owners of the operation. Additionally, for the longer term, we have generally modeled growth in the low single digits each year for the Puerto Rico business. You can find a copy of the 2020 P&L on our website in the Investors section under supplemental financial information. Lastly, fully diluted weighted average shares outstanding should be in a range of 69 million to 70 million shares for the full year. And depreciation and amortization are expected to be approximately $15 million and $25 million, respectively, for 2021. With that, let me turn the call back over to Mary Anne.

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.