Gary Santo - Head, Capital Markets & IR Mary Anne Heino - President & CEO Jack Crowley - CFO.

Larry Biegelsen - Wells Fargo Erin Wright - Credit Suisse Anthony Petrone - Jefferies.

Good afternoon, ladies and gentlemen. I would like to welcome everyone to the Lantheus Holdings' First Quarter 2017 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 Investors section of the company's website approximately two hours after completion of the call through June 2, 2017. I would now like to turn the call over to your host for today, Gary Santo, Head of Capital Markets and Investor Relations..

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Lantheus Holdings' first quarter 2017 earnings conference call. With me on the call today are Mary Anne Heino, our President and Chief Executive Officer; and Jack Crowley, our Chief Financial Officer.

Please note that earlier this afternoon, we issued a press release also filed with the Securities and Exchange Commission under Form 8-K reporting our first quarter 2017 results. Later this afternoon, we anticipate filing our Form 10-Q with the SEC for the quarter ended March 31, 2017.

You can find these documents as well as a replay of this call in the Investor section of our website at www.lantheus.com.

Remarks that we make today regarding future expectations, plans and prospects for the Company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors which we disclose in more detail in the risk factor section of our Form 10-K.

We remind you that any forward-looking statements represents our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so.

Finally, on today's call, we may reference certain non-GAAP financial measures with respect to our performance. We use these non-GAAP indicators for financial and operational decision-making and as a means to evaluate our performance.

The definitions of EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, adjusted net income for diluted common share and free cash flow along with reconciliations to GAAP metrics are set forth in our earnings press release.

On particular note, these tables include the reconciliation of our GAAP net income to adjusted EBITDA, a metric we consider to be particularly relevant at this time due to the variability of our technology transfer activities and related costs.

Mary Anne will begin her comments today with a high level review of our first quarter accomplishments, after which Jack will then a more detailed review of our financial performance during the quarter. Mary Anne will then return with closing comments. With that, I will now turn the call over to Mary Anne..

Thank you, Gary. And welcome to everyone joining us today on our conference call. We ended 2017 with a goal to build upon the momentum established in 2016. And with the first quarter now behind us, I am pleased to report that the momentum has persisted.

During the first quarter of 2017, we once again grew revenue and volume in our higher margin products and improved our liquidity and capital structure to the refinancing of our debt facility.

Shortly following the end of the quarter we finalized our collaboration agreement with GE Healthcare for the worldwide development and commercialization of flurpiridaz F 18.

Further as disclosed in our earnings released earlier today, we've exceeded our first quarter guidance and as Jack will discuss in more detail shortly Henry stern guidance for the full year. In short it is clear that 2017 is off to a strong start.

During the first quarter, we continue to grow revenue of our flagship imaging agent DEFINITY, with US revenues up 20% year-over-year. Our reintroduction of DEFINITY in UK, Germany, Austria and the Netherlands continued to gain traction. With international revenues up by 25% over that same time period.

We have also continued to successfully pursue regulatory approval to sell DEFINITY in other markets around the world, most recently with our approval in Taiwan. Our nuclear product portfolio was once again anchored TechneLite sales growth worldwide.

Regarding our nuclear medicine products contracting strategy, we have now renewed multi-year commercial supply agreement with two of the four major radio pharmacy groups. In addition to our UPPI contract that runs through 2019 announced last year, we recently announced a new expanded contract with GE Healthcare that runs through 2020.

Under the GE agreement Lantheus will supply TechneLite Xenon-133 and Gallium-67 at committed pricing and increased volume level for these products.

Focusing now on our continued effort to improve upon our capital structure, we announced during the first quarter the closing of a $275 million term loan facility as well as a new $750 million five year cash flow revolver.

The transaction led by JP Morgan chase with Citizen's Bank and Wells Fargo's Securities acting as joint lead arrangers, replaced our previous term loan and active base loan facilities. We believe the more attractive provisions under this term loan should yield an improvement to our cash flow of approximately $5 million per year over the term.

Additionally, the revolver provides increased liquidity and flexibility to support strategic initiative. Finally, a few words on our flurpiridaz F 18 collaboration with GE Healthcare. We are thrilled to have GE healthcare as our global partner to bring this next generation pet cardiac imaging agent to market.

GE Healthcare's presence across the entire pet diagnostic spectrum crates exciting opportunities for this agent on a global basis. Following the signing of the DEFINITY agreement last week, we received our initial upfront payment of $5 million.

The process will now focus on executing the knowledge transfer necessary for GE to assume responsibility for future development and commercialization of this agent.

We will continue to collaborate in both the development and commercialization of this promising agent, through a joint hearing committee as GE drives the development and commercialization process and timelines.

I now invite Jack to provide a more detailed review of our first quarter 2017 results as well as our updated guidance for the year, after which I will provide closing comments.

Jack?.

Thanks, Mary Anne and good afternoon everyone. As a reminder the tables included in today's press release include a reconciliation our GAAP results to the as adjusted NON-GAAP performance I'll be covering with you today. Lantheus delivered $81.4 million in revenue for the first quarter of 2017, an increase of 6.4% compared with first quarter of 2016.

These results were driven by continued growth of DEFINITY and the successful execution of our nuclear contracting strategy. Looking at our revenue results on a product line basis, DEFINITY posted worldwide revenue of $37.7 million in the first quarter or a 20% percent increase over the same period in 2016.

Our TechneLite business also grew during the first quarter posting worldwide revenue of $26.8 million an improvement of 8% compared to the first quarter of 2016. Worldwide Xenon revenue totaled $8.1 million in the first quarter consistent with performance from one year ago.

Finally, worldwide revenue from our other products category which represents approximately 11% of our total revenue was $8.8 million during the first quarter 2017, down $3.3 million as compared to the same period last year.

This decrease was attributable to the divestiture of our Canadian and Australian radio pharmacy businesses in the first and third quarters of 2016 respectively.

Moving below the revenue line; our first quarter 2017 gross profit margin, excluding technology transfer activities, which we referred to in our reconciliations as new manufacturing costs totaled approximately 50% an increase of 500 basis points on a year over year basis.

This improvement demonstrates the impact of higher DEFINITY revenues and savings related to Xenon production cost as we now process in finish Xenon at our Billerica facility. Operating expenses were $27.8 million for the first quarter of 2017, an increase of $6 million from the same period one year ago.

This is primarily attributable to $2.4 million in R&D expense related to accelerate depreciation under our campus consolidation plan, $1.7 million in G&A expense related to costs associated with our debt refinancing as well as continued investment in our echo business.

Operating income for the first quarter of 2017 was $11.9 million, a decrease of $5.8 million on a year-over-year basis.

Excluding last year's gain on the sale of the Canadian radio pharmacy business, as well as this year's accelerated depreciation and debt refinancing and offering costs, adjusted operating income for the first quarter of 2017 grew by $4.5 million or 38% compared to the prior year period.

Moving below operating income; first quarter interest expense totaled $5.4 million, a 23% improvement over the same period one year ago as a result of our aggregate $75 million of voluntary pre payments made on the principle of our term facility over the course of 2016.

A lower interest rate and additional reduction in principle associated with our refinancing activities during the first quarter did not have a material impact on interest expense for the quarter as the transaction closed one day prior to quarter end.

We believe that the more attractive provisions under the term loan should yield and improvement to our cash flow of approximately $5 million per year over the term of the facility.

Net income for the first quarter of 2017 was $4.1 million or 11 cents per diluted share compared to $10.3 million or 34 cents per diluted share for the first quarter of 2016.

Excluding last year's gain on the sale of the Canadian radio pharmacy business, as well as this year's accelerated depreciation, debt refinancing and offering cost and loss on debt extinguishment, adjusted net income for the first quarter 2017 grew by $6.2 million or 138% compared to the prior year period.

Moving on to our quarter end balance sheet cash flow and liquidity, as of March 31, 2017 we had cash and cash equivalents totaling $40.9 million.

Borrowing capacity under our revolving credit facility was $75 million making our total liquidity including cash on hand $115.9 million providing substantial support for our operating needs and representing a 48% improvement compared to the same period one year ago.

First quarter 2017 operating cash flow totaled $5.5 million compared to $3.8 million for the first quarter of 2016. Capital expenditure during the first quarter of 2017 were $4.9 million compared to $1.7 million in the first quarter of 2016.

Turning to our guidance for both the upcoming quarter and full year, as Mary Anne mentioned earlier, we exceeded our first quarter guidance for both total revenue and adjusted EBITDA.

As a result we are increasing our full year guidance to a total revenue range of $313 million to $318 million in a range of $80 million to $83 million for adjusted EBITDA. The second quarter of 2017, we anticipate a total revenue range of $79 million to $82 million in an adjusted EBITDA range of $18 million to $20 million.

Please note our guidance does not reflect any impact of the partnership for flurpiridaz F 18. In closing, we are very happy with our performance in the first quarter of 2017 and look forward to building upon our early success throughout the remainder of the year. With that, I will now turn the call back over to Mary Anne..

Thank you, Jack. On our last earnings call, I shared our vision that 2017 would be the start of the story of our group. Our accomplishments during the first few months of 2017 demonstrate this. We are very excited by our prospects.

Our ability to continually advance our other pipeline assets, deploy additional resources towards our next generation program for DEFINITY and opportunistically pursue additional near term business development activities should also help us to realize this vision.

In the months to come, you'll hear me speak in more detail about some of these projects and how they can contribute to the Lantheus growth story. In the meantime, we remain committed to building value for our shareholders. With that, I'll conclude my comments and open the call for questions.

Operator?.

[Operator Instructions] And our first question comes from Larry Biegelsen with Wells Fargo. Your line is now open..

Good afternoon, guys. Thanks for taking the questions and congratulations on another good quarter. So let me start with the strength we saw with DEFINITY this quarter Mary Anne. So what's driving the acceleration there in the US, is it penetration is it share and price and what's the outlook for 2017? I have a couple follow ups..

No problem Larry and welcome to the call. Your questions are good one. And what I say in response is it's actually a little bit of all of that and just great execution from our sales team.

It's a market that has kind of unmet demand that we're still tapping into and we find that physicians are very responsive to our sales messages and you're seeing it in our result. So we look forward to continuing that type of performance..

So May Anne, one clarification on that. You said it's a little bit of all of that.

Its price was negative a few years ago is price neutral or positive at this point?.

So you're right, Larry. Especially I would say 2015 you heard us talking about using prices somewhat a competitive strategic lever in the marketplace and that dynamic will continue. I think that what I will share it's versus the percent drop we saw in 2015. We're probably seeing more of a stabilizing of what that percent drop looks like over time..

That's helpful. And then Jack, the gross margin was strong, I assume that was driven by DEFINITY and I think if I heard you correctly was about 48.9% in Q1. How sustainable is that? And I do have one more follow up..

Sure. Thanks Larry. Yes, you're right. I mean a lot of it was driven because as we moved it sales towards the higher margin DEFINITY product that certainly has a positive impact. The other item I mentioned which is also meaningful for us is the transition of Xenon production into our facility.

If you recall during the fourth quarter of last year, we transitioned Xenon sourcing from Nordion in Canada and as part of that activity, we brought a lot more of the inspection and finishing activities onto our Billerica campus. So we're also seeing some uptick from that.

Having said that, we had about really closer to 50% of gross margin when you exclude the technology transfer activities, I don't know if that's completely sustainable we do expect to see some transition of expenses from Q1 to Q2 which has kind of reflected in the guidance, but we are looking at the high forties as our target range for gross margin..

That's very helpful. And then lastly the GE press release stated that you guys have extended and expanded the current commercial agreement for TechneLite and Xenon. And Mary Anne I think you talked about some expanded sales there or I can't remember the exact term you used. What does that agreement mean for your business and I'll drop? Thank you..

So there are three products that are key to the agreement Larry.

TechnoLite, Xenon-133 and Gallium-67 and as I noted about the agreement not only is it longer now it goes out to 2020, but it also has committed long views for that are increased versus prior, the prior contracts for those products so it's really a win-win for us and we think it's a great relationship with GE..

Thanks for taking the questions guys..

Our next question comes from Erin Wright with Credit Suisse. Your line is now open..

Great, thanks.

You [indiscernible] some investment opportunities in your press release as well in your prepared remarks what does that necessarily entail and can you provide some greater details on your priorities from an investment standpoint and broadly maybe an update on your capital deployment, I guess or capital structure optimization kind of going forward and what sort of flexibility generally you have now?.

I'll speak to some of the opportunities then I'll turn over to Jack for a capital structure Erin.

I think the way that we look at ourselves now is as a company we've gotten to a point where we've been able to build a level of stability and liquidity that really now put us on the offensive for looking out around the landscape whether it be in our nuclear business or in our echo business to build out those franchises.

They are very different, our echo business is a growth business there is a lot of untapped demand there and there is a lot of ways to spread out both vertically and horizontally there.

Our nuclear business is more of a mature business, and so as we look at opportunities there we look at more tuck-in opportunities that generally either expands our portfolio offering or it makes expanded use of the facilities that we have on our campus for manufacturing.

I'm not ready at this point to share specifics with you, I will say tease you in my remarks that as we move into the rest of the year, you will hear me speaking more specifically about taking action on some of those opportunities.

Jack?.

Thanks Mary Anne. So yes, as we look at our capital structure and the flexibility under that, we're really excited obviously about the refinancing activities in Q1 to get a much better interest rate and to do an additional pay down of debt. We feel we are in a really good position from a leverage ratio perspective now.

In terms of the additional flexibility, I think that swapping out of an asset backed loan with a revolving cash flow not only did we increase the capacity of $50 million under the asset backed loan to $75 million under the revolving cash flow.

But there's a lot more flexibility on the cash flow which is not restricted by the limiting amount of assets that get calculated. So we feel we have a lot more flexibility to be able to react to any opportunistic investments that Mary Anne spoke about..

Excellent, thanks.

And then can you speak to some of the opportunities for DEFINITY in international markets and what geographies you would highlight as more meaningful drivers grew over the next 3 to 5 years?.

Sure. So Erin you may not be aware, because of when you joined coverage on us. But DEFINITY was approved initially in Europe, when the asset belonged to Bristol-Myers Squibb and it had what's called common apples ruble in the EU which includes 22 countries.

Those approvals went dormant when Lantheus was formed because Lantheus did not have a commercial footprint in Europe. That's why you hear us talking about the re-introduction of DEFINITY into European market.

And as you saw me, we've already entered back into some of the larger markets and I would specifically cite the UK, obviously the other G5 type market are attractive to us as well as some of the Asia-Pac market.

We have a partnership underway for China which is with a partner named Double-Crane which is still in the regulatory process of application approval and our partner Double-Crane is handling [indiscernible] but we certainly see that as a very large market for the future..

Great. Thank you so much..

Our next question comes from Anthony Petrone with Jefferies. Your line is now open..

Anthony?.

If your phone is on mute, please un-mute it..

Hi good afternoon and congratulations on the start to the year. I apologize I was muted. Maybe a couple on radiopharmacy, and I'll jump over to Flurpiridaz. But maybe just an update on timing for Cardinal and Triad it looks like that can be, those two contracts could be a 2017event.

And then maybe just anything on the pricing discussion whether it be GE, Cardinal and Triad on the radiophama side and then I'll follow up with f 18..

Sure. So as we disclosed, we have four major contracted customers that some would govern the nuclear pharmacy space and we have contacted all four of them. The contracts that you are referring to ask me was Cardinal and with Triad isotopes, do kind of close out or kind of end at the end of this year.

Having said that I would tell you we're in constant communication and conversation about how to take our relationship forward and certainly part of that discussion of price volume discussions that look at what are the commitments of the customers for -- volume to us and for having offered, I will say higher volume there are certainly price concessions that we will consider.

I will note that the discussions we have now about price volume are different than those that you heard talk about at the end '15 when we launched our nuclear product contracting strategy that was more specifically related to us.

As we looked out at the market and we looked out at the very high likelihood which did happen, and being our competitor coming into the market we had a very concerted effort at that time to shore up our contract and make sure that they are committed volume for Xenon.

These are more now I would say renegotiation and extension of existing contacts with partners and I would certainly hope to announce some to you for the end of ‘70..

That's helpful. And just one last one on radio which would be the competitive dynamics now that Mallinckrodt has closed on the sale of those assets to IBA is there anything.

Notably different market places with the transfer of that asset?.

I would not say there is yet Anthony and I am not surprised because they would have inherited with that transaction the contract that was in place. The one note I will make is that the companies have renamed themselves. The joint company now that includes the assets from Mallinckrodt as well as the assets from IBA are now closed [ph].

My true kind of trend hearing – we keep this open and I don't talk about my competitors. I would prefer they not talk about me, I'm happy to refer to them as you say, as you see that piece of information about the meaning. But I never try to guess more especially publicly comment on this strategy..

Great; then the last one just on GE and flurpiridaz.

Is there anything just in terms of timing on the tech transfer that you can just share and perhaps timing on when we will learn more about the clinical pathway that GE may embark on for flurpiridaz 18?.

We are now deep into the process with the signing of the final -- the finalized signing of the collaboration agreement kind of the doors are open for knowledge transfer and we are actively working to take all the knowledge that we have held here about the molecule about that studies done to date and transfer that over to our partners at GE.

They as we mentioned, they are now in charge of and responsible for the regulatory path to commercialization to approval and commercialization. We're still in the early days here, otherwise I would say we're on time for how we thought the partnership would roll out and we've great confident in GE to drive the process forward.

They obviously have by their size and by the popularity of the products that they offer they have an ongoing relationship with the FDA and we are confident that they will pick that up and run smoothly with that..

That's helpful, thank you..

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..