Good morning ladies and gentlemen. Welcome to the Lantheus Holdings Third 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'd now like to turn the call over to your host for today, Mark Kinarney, Senior Director of Investor Relations. Mark, the floor is yours.

Thank you and good morning. Welcome to Lantheus Holdings third Quarter 2020 earnings conference call. This morning we issued a press release, which was furnished to the Securities and Exchange Commission under Form 8-K reporting our third quarter 2020 results. You can find the results in the Investors section of our website 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. Before we get started, I'd like to remind you that our comments during the 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 website. 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 comments and then we'll open the call for Q&A. With that, it's my pleasure to now turn the call over to 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. The long-term strategy for Lantheus is one of sustainable growth and I am pleased to share with you today the progress we have made across the business in those areas we feel offer significant opportunities for growth. Today, I will update you on our progress within our prostate cancer portfolio, our microbubble franchise, and in our pharma services business. I will begin with PyL, the lead product in our prostate cancer portfolio. In late September, we filed our NDA with the FDA for PyL, our prostate-specific membrane antigen or PSMA PET imaging agent. In our NDA, we included a request for priority review, which if granted, could shorten the FDA's review to six months from the time of acceptance versus the standard reviews time of ten months. We project we will receive notification from the FDA confirming acceptance of the filing for a substantive review by early December. I would like to recognize the PyL NDA team for their unwavering commitment to submitting what we feel is an excellent and comprehensive filing. Despite the disruption of the pandemic, our teams continue to come together virtually as a highly effective company. We are very excited to have PyL under review for approval and potentially available to both physicians and patients who we feel will benefit from it. Prostate cancer is the second leading cause of death in men today. Each year in the United States there are approximately 192,000 new cases of prostate cancer diagnosed, and more…

Thank you, Mary Anne, and good morning everyone. I will focus my discussion on adjusted results unless otherwise noted. Revenue for the third quarter was $88.5 million, an increase of 3.2% from the prior year quarter and a decrease of 3.6% organically. We continue to see progress across our portfolio from June through the end of the quarter with revenue up by 34.1% over Q2. Sales of DEFINITY in the third quarter were $55.4 million or 5.8% higher as compared to the prior year quarter and 37.3% higher sequentially over the second quarter. DEFINITY sustained volume strength during the quarter and when you analyze this year's performance to last year's Q3 growth rate of 19.7%, the two year stack clearly average growth rate remains in line with low to mid-teens growth expectations. TechneLite revenue was $21.5 million, down 1.2% from the prior year quarter, similar to DEFINITY’s sequential improvement TechneLite grew at a positive, but lesser pace at 13.6% sequentially. Other nuclear inclusive of some newly acquired assets increased 10.5% to $17.2 million. Rebates and allowances totaled $5.5 million. Gross profit margin for the third quarter was 47.4%, a decrease of 225 basis points from the third quarter of 2019. The decrease is due largely to unfavorable contribution on lower Xenon revenue year-over-year due to a relatively fixed cost of raw materials. Additionally, ongoing Moly logistics cost and the necessary added decay purchases to support those logistics also compared unfavorably year-over-year. Operating expenses were 39.8% of net revenue, driven primarily by ongoing investment to advance pipeline products including PyL, notably the FDA filing fee paid in the quarter, as well as costs associated with a larger employee base in our first full quarter as a combined company. Operating expenses were $15.6 million higher than Q2 2020, modestly lower than the…

In closing, I would like to recognize all Lantheus' employees for their commitment to patients and to our customers. I am very encouraged with what I've seen in the first full quarter as a combined entity. Not only have we achieved a significant milestone with our PyL submission but we also continue to make the expected progress throughout the organization in the other areas that are important to our growth strategy, our microbubble franchise and our Pharma Services business. With what I've seen, I am more optimistic than ever in our ability to deliver on our strategic vision a sustained growth for Lantheus. I look forward to future updates on the progress of our business. With that, Bob and I are now ready to take your questions. Operator, please go ahead.

[Operator Instructions] Your first question is from Larry Solow with CJS Securities. Please go ahead.

Good morning. And thanks for taking the questions. Mary Anne, perhaps I’ll start with a, maybe a global question just on Progenics. Obviously, I think you - I guess, you announced the acquisition about a year ago. You only had it for, I guess three or four months. But, just today, what surprises you the most perhaps on the plus side? And what if any things are maybe not negative, but maybe whether there is more room for improvement and maybe perhaps you thought a few months ago when you first acquired the company?

I think it's a very good question, Larry. Good morning. Hope you are doing well.

Thank you.

On the, on the plus side, as I said in my closing remarks and I went when first said from my beginning remarks, I am just incredibly impressive the way these teams have come together with no disruption to what was ongoing in the business on both sides and what was important to the business to get the PyL submission in and have that be such an outstanding file. I think it's a real testament to, not only the will of the two companies to come together, but the kind of the greater will to do it amid what was a kind of a really struggling backdrop the pandemic and then the need to do everything virtually. So, I want to say hats off to all the employees here. It really speaks to their intent to become one. On the other positive side, as Bob noted, we are on target for our synergies, and that is something that we've always been committed to, we remain committed to, but again something that was complicated by the pandemic just from almost in an administrative perspective getting everything together. So I am incredibly pleased with that. On the kind of less positive side, because I'll never say negative, but on the less positive side, we are operating in a world where our sales teams and all of our customer-facing teams have now had a complete sea change in how they access their customers. And we're trying to find out and trying to work our way through as our so many other companies, what is the coming through this, what is the right way coming out of this to go forward and be able to offer the services that we've always offered. We are very intent on medical education. We truly feel that was our success and our cornerstone with DEFINITY. It's a model that we want to apply to AZEDRA. It's certainly part of the model that we’ll apply with PyL but that model we completely rethought in a new world where on a going basis, access to customers may be permanently limited in the physical sense. So that's something we are going to have to think through and in the same sense, I will speak to the 1095 trial, the ARROW trial was underway. We were starting to see good patient enrollment and accumulation of patients in the trial and that came to a full halt for all the right reasons. We are starting now, but we are incredibly eager to bring back and have that drug offered to patients who we feel will benefit and to get ourselves to a point of patient enrollment where we can get to a point to see and make decisions around the value of that asset. So, I’d say those are some of the things that they're not really related to the acquisition or our efforts at integration, they are more related to the backdrop of the market that we're trying to accomplish with them.

Great. Great, that's very helpful. And maybe just a follow-up question for Bob. Just, you mentioned the synergies and whatnot are certainly on target. Can you, maybe, I don't know, I know you are not giving guidance, but just on some of the cost sides, the sales and marketing line was somewhat lower than I thought it would be. And I realize you just acquired Progenics. But is that what line item I would expect that to go up sequentially as we look out? And maybe cost come from – savings come from other line items. Is that fair to say?

Yes. Good morning, Larry. Yeah. That's actually an astute observation. The synergies are coming from the G&A line. Those things are though in the redundant position like C-suite and that kind of thing, as well as other administrative like Board costs or work that's done from an audit fee perspective. Those are the places that we're finding cost savings. For sales and marketing, it has really more to do with the fact that what Mary Anne was just articulating. We are doing less promotion in person. So there is less travel cost and those kinds of expenses. And from that perspective, we would expect, yes, that as we build out our commercial team and our CCO has done a good job of attracting some talent, I mean, particularly toward the end of the quarter, which is why I noted that operating expenses would be slightly higher in the fourth quarter, because we would see the beginnings of those people are starting to do their work and to be prepared for the PyL commercial launch and as well as, dependent on ongoing - whether we can get access there are regionally some places where you can get access at the hospitals. But there are not many at this juncture. But we would forecast that as access is granted in the future that people will be doing more of that in-person promotion, which is more expensive.

Got it. Okay. Great. I appreciate that color. Thanks a lot.

[Operator Instructions] And your next question is from Raj Denhoy with Jefferies. Please go ahead.

Hi, good morning. Maybe Bob, I could ask you kind of a basic question. I apologize. But there is no revenue reported from Progenics in the quarter, no RELISTOR royalty or AZEDRA sales. And I am curious what the accounting for that is and why not?

It's included in other, look I had said that we had acquired, which is why other - this is where we housed our other assets is included in there, Raj. So it's not included in that number.

Okay. Yes, I guess, I – I guess, and that sort of makes the case that you were making earlier about Xenon really falling off, I guess, because - well, maybe the question would be, could you tell us how much those two lines were so we can maybe get a sense of what the underlying other nuclear businesses did prior to Progenics coming in, those two lines, the RELISTOR and AZEDRA?

Yes. I don't mind. In fact, it's mathematically you could probably get there, given the growth rates, I gave you both the growth rate of that we had for the quarter plus the organic. So you could, you could back into it, so, from that perspective. In combination, RELISTOR continued to perform fairly, consistently as we have been seeing sort of in that sort of $4.5 million number for the quarter and AZEDRA is very much sort of in line with what we saw in the third quarter, as well, which was right around about $1.5 million worth.

Okay. That's helpful. And, Mary Anne just on PyL, I am curious you've given more information recently, just in terms of your views on the size of the market and we have a better sense on timing at this point. But I am curious your views on the cadence of the ramp should it get approved, And I appreciate, it could be anywhere from six to ten months given on the – given the expedited review path or not. How quickly does this ramp in a sense and what could constrain it? Do you have to sign contracts with the radio pharmacies? Is their capacity at cyclotrons at this point? How should we think about how this starts to roll out?

Good morning, Raj. I hope you are doing well and happy to talk about that, because I think it is really a very intuitive question. Certainly, you are probably used to pharmaceutical launches and some of the gates that kind of control how pharmaceutical comes out and coverage is certainly one of those gates. We will be - we feel we will be well prepared to launch, but as you say contracts down the channel for where we need channel partners to move the product, but there are some of the gates. One of them is the pass-through application to CMS. So, with this type of radiopharmaceutical product, you were required after approval to put application in through CMS for designation and recognition of counsel. It's not a question of whether it will be approved, but it is a question of just from the function of putting the application and there could be a 60-day gap between the approval date and when you get that application and then, when the application comes back is approved. So, I think you do need to gate the uptake based on that. If you look at the population here, this is a significant Medicare population of patients in the market that I was referring to. Well, average age of diagnosis - at time of diagnosis for prostate cancer is below the Medicare age. These gentlemen, fortunately live for 18 to 20 years. So, especially if you're talking about our addressable population, which is mainly biochemical recurrent. These are gentlemen who have been already within the treatment paradigm. And so, many of them will be of Medicare age. So, I think we need to date that way. The other gating factor is, the coverage you have across the U.S. population and with radiopharmaceuticals that are PET manufactured, when you submit your application, within your application you submit for simultaneous approval of PET manufacturing centers. These are – each site is considered an approved manufacturing site just by nature of how the product is produced as I described it in my comments earlier. And so, what is very typical with these products is, you submit with a group of PET manufacturing facilities and then, immediately at approval, you submit the next - I'll call them a basket or group of PMS that will then also be considered and approved by the FDA as additional supplemental manufacturing sites and you can do that on a six-months basis. Now there are different regulatory pathways that allow you either quicker access to those approvals or more standard review and we intend to take availability of all of them. But that will also present gating as to what percent of the total U.S. addressable population will have - I'll say, access to immediately at approval. What I will say is that, we are confident that by six months out, we will essentially be covering the U.S. population, but from the zero to six-month period, it is somewhat of a ramp.

Yes, so, given those constraints, right? So having to establish the past due payments and then ultimately getting the volume of manufacturing sites higher, do you anticipate that there could be revenue in 2020 next year? Again, I realize there is not timing constraints around the FDA approval process, but just trying to right-size how to think about this next year? A – Mary Anne Heino : So, Raj, you referenced 2020, I believe you probably meant 2021.

Sorry, 2021, yes.

We actually anticipate revenue in 2021, but we also look at it - I guess, as you are noting through the lens of those different constraints that we will face it as we come through launch. We are confident about what I said this, our file, we think is very strong. We think our approach to market is strong. We certainly know that there is unmet demand in the market and there is high anticipation for this product. And we also believe that the F 18-based product is the stronger product for the market. But, I think what would be fair to say as you think about how to think about the product, the higher ramp and that the steeper ramp comes in 2022.

Fair enough. Maybe I'll squeeze one in, I am not sure if there is other questions. But, you mentioned the other products on the market, the gallium generator-based products. One could make the case that given the ease of manufacturing of the agents or the lack of necessity cyclotron to manufacture it might make it easier to use initially. So, how do you think that ultimately plays out in terms of your competitive position versus other product assuming you guys both get approved?

So, yes, you mentioned both get approved, that product is also under consideration by the FDA for approval. And while the - I agree with you that, at immediate approval, the channel availability is broader because, it's practice is produced under the practice of pharmacy not under GMP. The significant constraint there is, how many doses can be produced by any pharmacy at any time. This is a generator produced product, and specifically with the gallium generator, there is a limited number of doses that can be produced maximally for a day by each generator and the use of those doses compete with other gallium-based products. There is also the logistics of when the doses can be produced and when they could be used because, the logistics, typically and this is current kind of current practice out in the U.S., but the logistics, typically in a nuclear medicine department is, they typically like to schedule, more of their FTG-based studies in the morning, because those patients who are undergoing FTG studies need to be fasting. And so, it's just more humane and logistically easier if they use the morning time on the PET machines for FTG-based doses. That kind of then limits the undercurrent practice limits when they can do the prostate PSMA scans in the afternoon, which further constraints how those fewer doses can be used, because you can't phase them out well over the day.

That's helpful. I appreciate. Thank you.

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 now disconnect, and have a wonderful day.