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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-36569
LANTHEUS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 35-2318913
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
331 Treble Cove Road01862
North Billerica,MA 
(Address of principal executive offices) (Zip Code)
(978)671-8001
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareLNTHThe Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   


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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act)    Yes      No  
The registrant had 67,486,935 shares of common stock, $0.01 par value, outstanding as of April 27, 2021.


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LANTHEUS HOLDINGS, INC.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Lantheus Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except par value)
March 31,
2021
December 31,
2020
Assets
Current assets
Cash and cash equivalents$68,861 $79,612 
Accounts receivable, net58,991 54,002 
Inventory30,357 35,744 
Other current assets10,145 9,625 
Assets held for sale 5,242 
Total current assets168,354 184,225 
Property, plant and equipment, net118,381 120,171 
Intangibles, net371,331 376,012 
Goodwill61,189 58,632 
Deferred tax assets, net62,832 70,147 
Other long-term assets61,361 60,634 
Total assets$843,448 $869,821 
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt and other borrowings$10,251 $20,701 
Accounts payable19,099 16,284 
Accrued expenses and other liabilities35,240 41,726 
Liabilities held for sale 1,793 
Total current liabilities64,590 80,504 
Asset retirement obligations14,408 14,020 
Long-term debt, net and other borrowings171,474 197,699 
Other long-term liabilities64,857 63,393 
Total liabilities315,329 355,616 
Commitments and contingencies (See Note 18)
Stockholders’ equity
Preferred stock ($0.01 par value, 25,000 shares authorized; no shares issued and outstanding)
  
Common stock ($0.01 par value, 250,000 shares authorized; 67,434 and 66,875 shares issued and outstanding, respectively)
674 669 
Additional paid-in capital669,623 665,530 
Accumulated deficit(140,938)(149,946)
Accumulated other comprehensive loss(1,240)(2,048)
Total stockholders’ equity528,119 514,205 
Total liabilities and stockholders’ equity$843,448 $869,821 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

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Lantheus Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
20212020
Revenues$92,509 $90,704 
Cost of goods sold51,479 52,702 
Gross profit41,030 38,002 
Operating expenses
Sales and marketing14,173 10,130 
General and administrative16,138 16,699 
Research and development10,360 4,048 
Total operating expenses40,671 30,877 
Gain on sale of assets15,263  
Operating income15,622 7,125 
Interest expense2,718 1,946 
Gain on extinguishment of debt(889) 
Other income(549)(350)
 Income before income taxes14,342 5,529 
Income tax expense5,334 2,192 
Net income$9,008 $3,337 
Net income per common share:
Basic$0.13 $0.08 
Diluted$0.13 $0.08 
Weighted-average common shares outstanding:
Basic67,094 39,433 
Diluted67,714 40,102 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

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Lantheus Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20212020
Net income$9,008 $3,337 
Other comprehensive income (loss):
Foreign currency translation102 (446)
Unrealized gain (loss) on cash flow hedges, net of tax706 (988)
Total other comprehensive income (loss)808 (1,434)
Comprehensive income$9,816 $1,903 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

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Lantheus Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in thousands)

Three Months Ended March 31, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmount
Balance, January 1, 202166,875 $669 $665,530 $(149,946)$(2,048)$514,205 
Net income— — — 9,008 — 9,008 
Other comprehensive income— — — — 808 808 
Stock option exercises and employee stock plan purchases155 1 2,379 — — 2,380 
Vesting of restricted stock awards and units489 5 (5)— —  
Shares withheld to cover taxes(85)(1)(1,598)— — (1,599)
Stock-based compensation— — 3,317 — — 3,317 
Balance, March 31, 202167,434 $674 $669,623 $(140,938)$(1,240)$528,119 


Three Months Ended March 31, 2020
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmount
Balance, January 1, 202039,251 $393 $251,641 $(136,473)$(960)$114,601 
Net income— — — 3,337 — 3,337 
Other comprehensive loss— — — — (1,434)(1,434)
Stock option exercises and employee stock plan purchases33 — 366 — — 366 
Vesting of restricted stock awards and units563 6 (6)— —  
Shares withheld to cover taxes(97)(1)(1,546)— — (1,547)
Stock-based compensation— — 3,075 — — 3,075 
Balance, March 31, 202039,750 $398 $253,530 $(133,136)$(2,394)$118,398 


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

4

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Lantheus Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20212020
Operating activities
Net income$9,008 $3,337 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization and accretion8,123 3,732 
Impairment of long-lived assets 7,275 
Amortization of debt related costs(61)169 
Changes in fair value of contingent assets and liabilities300  
Gain on extinguishment of debt(889) 
Provision for excess and obsolete inventory1,395 449 
Stock-based compensation3,317 3,075 
Gain on sale of assets(15,263) 
Deferred taxes4,581 1,467 
Long-term income tax receivable(573)(554)
Long-term income tax payable and other long-term liabilities728 705 
Other655 654 
Increases (decreases) in cash from operating assets and liabilities:
Accounts receivable(2,346)(1,750)
Inventory3,889 (2,098)
Other current assets(536)1,149 
Accounts payable4,110 (913)
Accrued expenses and other liabilities(6,620)(7,289)
Net cash provided by operating activities9,818 9,408 
Investing activities
Capital expenditures(2,520)(2,698)
Proceeds from sale of assets, net15,823  
Net cash provided by provided by (used in) investing activities13,303 (2,698)
Financing activities
Payments on long-term debt and other borrowings(35,572)(2,551)
Proceeds from stock option exercises2,043  
Proceeds from issuance of common stock337 366 
Payments for minimum statutory tax withholding related to net share settlement of equity awards(1,599)(1,547)
Net cash used in financing activities(34,791)(3,732)
Effect of foreign exchange rates on cash, cash equivalents and restricted cash(21)(184)
Net (decrease) increase in cash, cash equivalents and restricted cash(11,691)2,794 
Cash, cash equivalents and restricted cash, beginning of period82,694 92,919 
Cash, cash equivalents and restricted cash, end of period$71,003 $95,713 






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Lantheus Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20212020
Reconciliation to amounts within the condensed consolidated balance sheets
  Cash and cash equivalents$68,861 $95,713 
  Restricted cash included in other long-term assets2,142  
      Cash, cash equivalents and restricted cash at end of period$71,003 $95,713 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Lantheus Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note Regarding Company References and Trademarks
Unless the context otherwise requires, references to the “Company” and “Lantheus” refer to Lantheus Holdings, Inc. and its direct and indirect wholly-owned subsidiaries, references to “Holdings” refer to Lantheus Holdings, Inc. and not to any of its subsidiaries, references to “LMI” refer to Lantheus Medical Imaging, Inc., the direct subsidiary of Holdings and references to “Progenics” refer to Progenics Pharmaceuticals, Inc., a wholly-owned subsidiary of LMI. Solely for convenience, the Company refers to trademarks, service marks and trade names without the TM, SM and ® symbols. Those references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent permitted under applicable law, its rights to its trademarks, service marks and trade names.
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Holdings and its direct and indirect wholly-owned subsidiaries, including Progenics (as of the closing date, June 19, 2020), and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 2021 or any future period.
In the first quarter of fiscal year 2021, the Company completed the evaluation of its operating and reporting structure, which resulted in a change in operating segments. Please refer to Note 19, “Segment Information”, for further details.
The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities Exchange Commission (“SEC”) on February 25, 2021.
Progenics Acquisition
On June 19, 2020 (the “Closing Date”), pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of February 20, 2020 (the “Merger Agreement”), by and among Holdings, Plato Merger Sub, Inc., a wholly-owned subsidiary of Holdings (“Merger Sub”), and Progenics, Holdings completed the previously announced acquisition of Progenics, by means of a merger of Merger Sub with and into Progenics, with Progenics surviving such merger as a wholly-owned subsidiary of Holdings (the “Progenics Acquisition”).
In accordance with the Merger Agreement, at the effective time of the Progenics Acquisition (the “Effective Time”), each share of Progenics common stock, par value $0.0013 per share, issued and outstanding immediately prior to the Effective Time (other than shares of Progenics common stock owned by Holdings, Progenics or any of their wholly-owned subsidiaries) was automatically cancelled and converted into the right to receive (i) 0.31 (the “Exchange Ratio”) of a share of Holdings common stock, par value $0.01 per share, and (ii) one contingent value right (a “CVR”) tied to the financial performance of PyL (18F-DCFPyL), Progenics’ prostate-specific membrane antigen (“PSMA”) targeted imaging agent designed to visualize prostate cancer, currently a late stage clinical candidate (“PyL”). Each CVR will entitle its holder to receive a pro rata share of aggregate cash payments equal to 40% of U.S. net sales generated by PyL in 2022 and 2023 in excess of $100.0 million and $150.0 million, respectively. In no event will the Company’s aggregate payments in respect of the CVRs, together with any other non-stock consideration treated as paid in connection with the Progenics Acquisition, exceed 19.9% (which the Company estimates could be approximately $100.0 million) of the total consideration the Company pays in the Progenics Acquisition. No fractional shares of Holdings common stock were issued in the Progenics Acquisition, and Progenics’ former stockholders have received cash in lieu of any fractional shares of Holdings common stock. As a result of the acquisition, Holdings issued 26,844,877 shares of Holdings common stock and 86,630,633 CVRs to former Progenics stockholders.
Please refer to Note 8, “Business Combinations”, for further details on the acquisition.
COVID-19
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The Company experienced operational and financial impacts from the COVID-19 pandemic beginning late in the first quarter of 2020 and through the date of this filing, including the impact of stay-at-home mandates and advisories, and a decline in the volume of certain procedures and treatments using the Company’s products. As a result of the COVID-19 pandemic, the Company undertook a thorough analysis of all of its discretionary expenses. In the first quarter of 2020, the Company implemented certain cost reduction initiatives. For most of the second quarter, the Company reduced the Company’s work week from five days to four days and reduced the pay for employees by varying amounts depending on level of seniority.
During the second quarter of 2020, Progenics also implemented certain cost reduction initiatives and paused new enrollment in the Phase 2 trial of 1095 in metastatic castrate-resistant prostate cancer (“mCRPC”) patients to minimize the risk to subjects and healthcare providers during the pandemic. New enrollment in that study restarted in October 2020. GE Healthcare Limited (“GE Healthcare”), the Company’s development and commercialization partner for flurpiridaz F 18, also delayed enrollment in the second Phase 3 clinical trial of flurpiridaz F 18 because of the pandemic and resumed enrollment in the third quarter of 2020.
The on-going impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, and the extent and severity of the impact on the Company's customers and suppliers, all of which remain uncertain and cannot be predicted. While the impact of COVID-19 on the Company’s results of operations and cash flows has been, and is expected to continue to be, material, given the continually evolving nature of the pandemic, the Company remains unable to accurately predict the impact of COVID-19 on its overall 2021 operations and financial results or cash flows and whether the on-going impact of COVID-19 could lead to potential future impairments.
2. Summary of Significant Accounting Policies
Reclassifications
Certain immaterial reclassifications in the prior period consolidated statement of cash flows have been reclassified to conform to the current year period financial statement presentation. Reclassifications include $0.2 million from provision for bad debt to other at March 31, 2020. The Company had a reclassification in presentation related to rebates and allowances within product revenue. Please refer to Note 3, “Revenue from Contracts with Customers” for further details.
Recent Accounting Pronouncements
StandardDescription 
Effective Date
for Company
 
Effect on the Condensed Consolidated  Financial Statements
Accounting Standards Adopted During the Three Months Ended March 31, 2021
ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”
This ASU provides guidance to simplify the complexity associated with accounting for convertible instruments and derivatives. For convertible instruments, the number of major separation models required were reduced. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. This ASU further amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The ASU simplifies the diluted net income per share calculation in certain areas as well.
January 1, 2021The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
3. Revenue from Contracts with Customers
The following table summarizes revenue by revenue source as follows:
Three Months Ended
March 31,
Major Products/Service Lines (in thousands)20212020
    Product revenue, net(1)

$87,319 $90,213 
    License and royalty revenues5,190 491 
Total revenues$92,509 $90,704 
________________________________
(1)The Company’s principal products include DEFINITY and TechneLite and are categorized within product revenue, net. The Company applies the
same revenue recognition policies and judgments for all of its principal products.

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The Company classifies its revenues into three product categories: precision diagnostics, radiopharmaceutical oncology, and strategic partnerships and other. Precision diagnostics includes DEFINITY, TechneLite and other imaging diagnostic products. Radiopharmaceutical oncology consists of AZEDRA and other oncologic therapeutics. Strategic partnerships and other includes partnerships related to other products, such as RELISTOR, that improve patient outcomes and care.
Revenue by product category on a net basis is as follows:
Three Months Ended
March 31,
(in thousands)2021
2020(1)
   DEFINITY$55,971 $52,505 
   TechneLite22,800 22,779 
   Other precision diagnostics6,984 13,057 
Total precision diagnostics85,755 88,341 
Radiopharmaceutical oncology1,500 1,968 
Strategic partnerships and other5,254 395 
   Total revenues$92,509 $90,704 
________________________________
(1)The Company reclassified rebates and allowances of $4.7 million for the three months ended March 31, 2020 within each product category, which included $4.3 million for DEFINITY, $0.3 million for TechneLite and $0.1 million for other precision diagnostics.
The Company’s performance obligations are typically part of contracts that have an original expected duration of one year or less. As such, the Company is not disclosing the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) as of the end of the reporting period.
4. Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability of fair value measurements, financial instruments are categorized based on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.
The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of money market funds, interest rate swaps, a contingent receivable and contingent consideration liabilities. The Company invests excess cash from its operating cash accounts in overnight investments and reflects these amounts in cash and cash equivalents in the condensed consolidated balance sheets at fair value using quoted prices in active markets for identical assets. The fair value of the interest rate swaps are determined based on observable market-based inputs, including interest rate curves and reflects the contractual terms of these instruments, including the period to maturity. Please refer to Note 13, “Derivative Instruments”, for further details on the interest rate swaps. The Company recorded a contingent receivable and the contingent consideration liabilities resulting from the Progenics Acquisition at fair value based on inputs that are not observable in the market. Please refer to Note 8, “Business Combinations”, for further details on the acquisition.
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The tables below present information about the Company’s assets and liabilities measured at fair value on a recurring basis:
March 31, 2021
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
   Money market$39,416 $39,416 $ $ 
   Contingent receivable12,200   12,200 
Total assets$51,616 $39,416 $ $12,200 
Liabilities:
   Interest rate swaps$960 $ $960 $ 
   Contingent consideration liabilities17,000   17,000 
Total liabilities$17,960 $ $960 $17,000 
December 31, 2020
(in thousands)Total Fair
Value
Level 1Level 2Level 3
Assets:
   Money market$35,457 $35,457 $ $ 
   Contingent receivable11,300   11,300 
Total assets$46,757 $35,457 $ $11,300 
Liabilities:
   Interest rate swaps$1,908 $ $1,908 $ 
   Contingent consideration liabilities15,800   15,800 
Total liabilities$17,708 $ $1,908 $15,800 

During the three months ended March 31, 2021, there were no transfers into or out of Level 3.
As part of the Progenics Acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics from CytoDyn Inc. related to a prior sale of certain intellectual property. The Company has the right to receive $5.0 million upon regulatory approval and a 5% royalty on net sales of approved products. The Company considers the contingent receivable a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flows that included significant estimates and assumptions pertaining to regulatory events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.
As part of the Progenics Acquisition, the Company issued CVRs and recorded the fair value as part of consideration transferred. Refer to Note 1, “Basis of Presentation” for further details on the CVRs. Additionally, the Company assumed contingent consideration liabilities related to a previous acquisition completed by Progenics in 2013 (“2013 Acquisition”). These contingent consideration liabilities include potential payments of up to $70.0 million if the Company attains certain net sales targets primarily for AZEDRA and 1095 and a $5.0 million 1095 commercialization milestone. Additionally, there is a potential payment of up to $10.0 million related to a 1404 commercialization milestone. The Company’s total potential payments related to the 2013 Acquisition are approximately $85.0 million. The Company considers the contingent consideration liabilities a Level 3 instrument (one with significant unobservable inputs) in the fair value hierarchy. The estimated fair value was determined based on probability adjusted discounted cash flows and Monte Carlo simulation models that included significant estimates and assumptions pertaining to commercialization events and sales targets. The most significant unobservable inputs are the probabilities of achieving regulatory approval of the development projects and subsequent commercial success.
Significant changes in any of the probabilities of success or the probabilities as to the periods in which milestones will be achieved would result in a significantly higher or lower fair value measurement. The Company records the contingent consideration liability at fair value with changes in estimated fair values recorded in general and administrative expenses in the condensed consolidated statements of operations.
The following tables summarize quantitative information and assumptions pertaining to the fair value measurement of assets and liabilities using Level 3 inputs at March 31, 2021.

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Fair Value atAssumptions
(in thousands)March 31, 2021December 31, 2020Valuation TechniqueUnobservable InputMarch 31, 2021December 31, 2020
Contingent receivable:
Regulatory milestone$3,200 $3,200 Probability adjusted discounted cash flow modelPeriod of expected milestone achievement20212021
Probability of success90 %90 %
Discount rate23 %24 %
Royalties9,000 8,100 Probability adjusted discounted cash flow model
Probability of success
13% - 77%
13% - 77%
Discount rate23 %24 %
Total$12,200 $11,300 

Fair Value atAssumptions
(in thousands)March 31, 2021December 31, 2020Valuation TechniqueUnobservable InputMarch 31, 2021December 31, 2020
Contingent consideration liability:
Net sales targets - PyL (CVRs)$4,600 $4,200 Monte-Carlo simulationPeriod of expected milestone achievement2022 - 20232022 - 2023
Discount rate23 %24 %
1095 commercialization milestone2,100 2,200 Probability adjusted discounted cash flow model
Period of expected milestone achievement20262026
Probability of success45 %45 %
Discount rate1.0 %0.5 %
Net sales targets - AZEDRA and 109510,300 9,400 Monte-Carlo simulation
Probability of success
40% - 100%
40% - 100%
Discount rate
22% - 23%
23% - 24%
Total$17,000 $15,800 

For those financial instruments with significant Level 3 inputs, the following table summarizes the activities for the periods indicated:

Financial AssetsFinancial Liabilities
(in thousands)Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2021
Fair value, beginning of period$11,300 $15,800 
Changes in fair value included in net income900 1,200 
Fair value, end of period$12,200 $17,000 

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The change in fair value of the contingent financial asset and contingent financial liabilities resulted in a loss of $0.3 million for the three months ended March 31, 2021 and was primarily due to changes in market conditions and the passage of time.
5. Income Taxes
The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full year, adjusted for any discrete events which are recorded in the period they occur. Cumulative adjustments to the tax provision are recorded in the interim period in which a change in the estimated annual effective tax rate is determined. The Company’s income tax expense is presented below:
                
Three Months Ended
March 31,
(in thousands)20212020
Income tax expense$5,334 $2,192 
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence, and weighed the objective evidence and expected impact. The Company assessed the need for a valuation allowance against certain deferred state tax credits added through the Progenics Acquisition. The Company continues to record other valuation allowances of $1.2 million against the net deferred tax assets of its U.K. subsidiary, and $2.3 million against the net deferred tax assets of its Sweden subsidiary.
In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into a tax indemnification agreement with BMS under which BMS agreed to indemnify the Company for any payments made to settle those uncertain tax positions with the taxing authorities. Accordingly, a long-term receivable is recorded to account for the expected value to the Company of future indemnification payments, net of actual tax benefits received, to be paid on behalf of the Company by BMS. The tax indemnification receivable is recorded within other long-term assets.
In accordance with the Company’s accounting policy, the change in the tax liability, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. As these reserves change, adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there will be no effect on net income and no net cash outflows related to these liabilities.
On June 19, 2020, the Company completed the Progenics Acquisition in a transaction that is expected to qualify as a tax-deferred reorganization under Section 368 of the Internal Revenue Code. The transaction resulted in an ownership change of Progenics under Section 382 of the Internal Revenue Code and a limitation on the utilization of Progenics’ precombination tax attributes. All of Progenics’ precombination research credits and Orphan drug credits have been removed from the balance sheet, and the gross carrying value of the tax loss carryforwards reduced to their realizable value on the opening balance sheet, in accordance with the Section 382 limitation. Deferred tax liabilities arising from the purchase accounting basis step-up in identified intangibles were recorded at acquisition, resulting in a net overall deferred tax liability for Progenics after the application of acquisition accounting.
During the current period, the Company finalized the acquisition accounting for income taxes resulting in a reduction of deferred tax assets, primarily related to state research credits and an increase to goodwill of $2.6 million.
6. Inventory
Inventory consisted of the following:
        
(in thousands)March 31,
2021
December 31,
2020
Raw materials$15,297 $16,000 
Work in process8,606 11,212 
Finished goods6,454 8,532 
Total inventory$30,357 $35,744 
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7. Property, Plant and Equipment, Net
Property, plant and equipment, net, consisted of the following:
(in thousands)March 31,
2021
December 31,
2020
Land$13,450 $13,450 
Buildings71,622 70,381 
Machinery, equipment and fixtures79,460 77,854 
Computer software23,751 23,644 
Construction in progress9,638 11,254 
197,921 196,583 
Less: accumulated depreciation and amortization(79,540)(76,412)
Total property, plant and equipment, net$118,381 $120,171 
Depreciation and amortization expense related to property, plant and equipment, net, was $3.0 million for the three months ended March 31, 2021 and 2020.
The Company tests long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets may not be recoverable. During the three months ended March 31, 2020, as a result of a decline in expected future cash flows and the effect of COVID-19 related to certain other nuclear legacy manufacturing assets, the Company determined certain impairment triggers had occurred. Accordingly, the Company performed an undiscounted cash flow analysis as of March 31, 2020. Based on the undiscounted cash flow analysis, the Company determined that the manufacturing assets had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then estimated the fair values of the asset group based on their discounted cash flows. The carrying value exceeded the fair value and as a result, the Company recorded a non-cash impairment of $7.3 million for the three months ended March 31, 2020 in cost of goods sold in the condensed consolidated statement of operations.
8. Business Combinations
On June 19, 2020, the Company completed the Progenics Acquisition. Progenics is an oncology company developing innovative medicines and artificial intelligence to Find, Fight and Follow cancer. The acquisition combined the commercialization, supply chain and manufacturing expertise of the Company with the currently commercialized products and research and development (“R&D”) pipeline of Progenics. Progenics brings to the Company several commercial products and a pipeline of product candidates that will further diversify the Company’s commercial and clinical development portfolios.
Under the terms of the Merger Agreement, the Company acquired all of the issued and outstanding shares of Progenics common stock for a purchase price of $419.0 million by means of an all-stock transaction, which includes options to purchase Holdings common stock (“Replacement Stock Options”) for precombination services as well as CVRs.
The CVRs were accounted for as contingent consideration, the fair value of which was determined using a Monte-Carlo simulation. Additionally, the fair value of Replacement Stock Options related to precombination services was recorded as a component of consideration transferred. Finally, as a result of the acquisition, Lantheus effectively settled an existing bridge loan with Progenics at the recorded amount (principal and accrued interest) of $10.1 million, representing the effective settlement of a preexisting relationship. This effective settlement of the bridge loan was treated as a component of consideration transferred. The Company determined that the bridge loan was at market terms and no gain or loss was recorded upon settlement.
The acquisition date fair value of the consideration transferred in the acquisition consisted of the following:
(in thousands)Amount
Issuance of common stock$398,110 
Fair value of replacement options7,125 
Fair value of bridge loan settled at close10,074 
Fair value of contingent considerations (CVRs)3,700 
Total consideration transferred(1)
$419,009 
(1)Non-cash investing and financing activities in the condensed consolidated statements of cash flows
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The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed on the acquisition date, its estimates and assumptions are subject to refinement. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The Company recorded a measurement period adjustment of $2.6 million related to deferred taxes for the three months ended March 31, 2021, which finalized all measurement period adjustments related to the Progenics Acquisition.
The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made to the amounts initially recorded in June 2020. The measurement period adjustments primarily resulted from finalizing the fair values of certain intangible assets and liabilities, deferred taxes and other changes to certain tangible assets and liability accounts. Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date. The related impact to net loss that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date is immaterial to the consolidated financial statements.
(in thousands)Amounts Recognized as of Acquisition Date
(as previously reported)
Measurement Period AdjustmentsAmounts Recognized as of Acquisition Date
(as adjusted)
Cash and cash equivalents$15,421 $— $15,421 
Accounts receivable5,787 — 5,787 
Inventory915 160 1,075 
Other current assets3,250 434 3,684 
Property, plant and equipment14,972 — 14,972 
Identifiable intangible assets (weighted average useful life):
Currently marketed product (15 years)
142,100 800 142,900 
Licenses (11.5 years)
87,500 (1,700)85,800 
Developed technology (9 years)
3,000 (600)2,400 
IPR&D150,900 200 151,100 
Other long-term assets37,631 — 37,631 
Accounts payable(1,616)— (1,616)
Accrued expenses and other liabilities(8,207)(80)(8,287)
Other long-term liabilities(30,778)(380)(31,158)
Long-term debt and other borrowings(40,200)— (40,200)
Deferred tax liabilities(3,717)(2,258)(5,975)
Goodwill42,051 3,424 45,475 
Total consideration transferred$419,009 $ $419,009 
Intangible assets acquired consist of currently marketed products, licenses, developed technology and in-process research and development (“IPR&D”). The fair value of the acquired intangible assets was determined based on estimated future revenues, royalty rates and discount rates, among other variables and estimates. The acquired intangible assets subject to amortization were assigned useful lives based on the expected use of the assets and the regulatory and economic environment within which they are being used and are being amortized on a straight-line basis over the respective estimated useful lives. The estimated fair values of the IPR&D assets were determined based on the present values of the expected cash flows to be generated by the respective underlying assets. The Company used a discount rate of 23.0% and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions.
As part of the Progenics Acquisition, the Company acquired the right to receive certain future milestone and royalty payments due to Progenics, related to a prior sale of certain intellectual property. The estimated fair value of the acquired contingent receivable of $10.1 million was determined by applying a probability adjusted discounted cash flow model based on estimated future expected payments and recorded in other long-term assets.
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The goodwill recognized is attributable to future technologies that are not separately identifiable that could potentially add to the currently developed and pipeline products and Progenics’ assembled workforce. Future technologies did not meet the criteria for recognition separately from goodwill because they are part of the future development and growth of the business. Goodwill of $45.5 million recognized in connection with the acquisition is not deductible for tax purposes.
9. Sale of Puerto Rico Subsidiary
During the fourth quarter of 2020, the Company entered into a stock purchase agreement (the “SPA”) with one of its existing radiopharmacy customers to sell all of the stock of its Puerto Rico radiopharmacy subsidiary. The assets were classified as held for sale and the Company determined that the fair value of the net assets being sold significantly exceeded the carrying value as of December 31, 2020. The transaction was consummated on January 29, 2021.
The purchase price for the stock sale was $18.0 million in cash, which includes a holdback amount of $1.8 million to be due to the Company in January 2022, and will also include a working capital adjustment once settled. The SPA contains customary representations, warranties and covenants by each of the parties. Subject to certain limitations, the buyer will be indemnified for damages resulting from breaches or inaccuracies of the Company’s representations, warranties and covenants in the SPA.
As part of the transaction, the Company and the buyer also entered into a customary transition services agreement and a long-term supply contract under which the Company will supply the buyer with certain of the Company’s products on commercial terms and under which the buyer has agreed to certain product minimum purchase commitments.
The Company does not believe this sale of certain net assets, reported as held for sale in the international segment prior to the change in segments in Q1 2021, constituted a strategic shift that would have a major effect on its operations or financial results. As a result, this transaction is not classified as discontinued operations in the Company’s accompanying consolidated financial statements.
The following table summarizes the major classes of assets and liabilities sold as of January 29, 2021 (date of sale) and held for sale as of December 31, 2020:
(in thousands)
January 29, 2021December 31, 2020
Current Assets:
Cash and cash equivalents
$540 $941 
Accounts receivable, net
1,959 2,191 
Inventory
530 420 
Other current assets
65 43 
Total current assets
3,094 3,595 
Non-Current Assets:
Property, plant & equipment, net
780 761 
Intangibles, net
96 96 
Other long-term assets
774 790 
Total assets held for sale
$4,744 $5,242 
Current Liabilities:
Accounts payable
$185 $224 
Accrued expense and other liabilities
369 661 
Total current liabilities
554 885 
Non-Current Liabilities:
Asset retirement obligations
306 302 
Other long-term liabilities
588 606 
Total liabilities held for sale
$1,448 $1,793 

The sale resulted in a pre-tax book gain of $15.3 million, which was recorded within operating income in the condensed consolidated statement of operations for the three months ended March 31, 2021.
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10. Asset Retirement Obligations
The Company considers its legal obligation to remediate its facilities upon a decommissioning of its radioactive-related operations as an asset retirement obligation. The Company has production facilities which manufacture and process radioactive materials at its North Billerica, Massachusetts site. As of March 31, 2021, the liability is measured at the present value of the obligation expected to be incurred, of approximately $26.4 million.
The Company previously operated a production facility which manufactured and processed radioactive materials at its San Juan, Puerto Rico site. As of December 31, 2020, the liability for the San Juan, Puerto Rico site was recorded in liabilities held for sale and the sale was consummated on January 29, 2021.
The following table provides a summary of the changes in the Company’s asset retirement obligations:
(in thousands)Amount
Balance at January 1, 2021$14,020 
Accretion expense388 
Balance at March 31, 2021$14,408 
The Company is required to provide the U.S. Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurance demonstrating the Company’s ability to fund the decommissioning of its North Billerica, Massachusetts production facility upon closure, although the Company does not intend to close the facility. The Company has provided this financial assurance in the form of a $28.2 million surety bond.
11. Intangibles, Net
Intangibles, net, consisted of the following:
March 31, 2021
(in thousands)Amortization MethodCostAccumulated AmortizationNet
TrademarksStraight-Line$13,540 $(11,096)$2,444 
Customer relationshipsAccelerated96,941 (94,055)2,886 
Currently marketed productStraight-Line142,900 (7,434)135,466 
LicensesStraight-Line85,800 (5,895)79,905 
Developed technologyStraight-Line2,400 (210)2,190 
IPR&DN/A148,440 — 148,440 
   Total$490,021 $(118,690)$371,331 

December 31, 2020
(in thousands)Amortization MethodCostAccumulated AmortizationNet
TrademarksStraight-Line$13,540 $(10,958)$2,582 
Customer relationshipsAccelerated96,865 (93,770)3,095 
Currently marketed productStraight-Line142,900 (5,053)137,847 
LicensesStraight-Line85,800 (4,008)81,792 
Developed technologyStraight-Line2,400 (144)2,256 
IPR&DN/A148,440 — 148,440 
   Total$489,945 $(113,933)$376,012 

The Company recorded amortization expense for its intangible assets of $4.7 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.
The below table summarizes the estimated aggregate amortization expense expected to be recognized on the above intangible assets:
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(in thousands)Amount
Remainder of 2021$14,051 
202218,477 
202317,878 
202417,808 
202517,753 
2026 and thereafter136,924 
   Total$222,891 
12. Long-Term Debt, Net, and Other Borrowings
As of March 31, 2021, the Company’s maturities of principal obligations under its long-term debt and other borrowings are as follows:
(in thousands)Amount
Remainder of 2021$7,500 
202211,250 
202315,000 
2024148,750 
Total principal outstanding182,500 
Unamortized debt discount(647)
Unamortized debt issuance costs(559)
Finance lease liabilities431 
Total181,725 
Less: current portion(10,251)
Total long-term debt, net and other borrowings$171,474 

At March 31, 2021, the Company’s interest rate under the five-year secured term loan facility, which matures on June 30, 2024 (the “2019 Term Facility”) was 3.4%.
On March 31, 2021, the Company voluntarily repaid in full the entire outstanding principal on the original $50.0 million loan agreement (the “Royalty-Backed Loan”) with a fund managed by HealthCare Royalty Partners III, L.P. in the amount of $30.9 million, which included a prepayment amount of $0.5 million, and terminated the agreement governing the Royalty-Backed Loan. The Company recorded a gain on extinguishment of debt of $0.9 million related to the write-off of an unamortized debt premium offset by the prepayment amount.

13. Derivative Instruments
The Company uses interest rate swaps to reduce the variability in cash flows associated with a portion of the Company’s forecasted interest payments on its variable rate debt. In March 2020, the Company entered into interest rate swap contracts to fix the LIBOR rate on a notional amount of $