Mary Anne Heino - President, Chief Executive Officer Jack Crowley - Chief Financial Officer Meara Murphy - Director Investor Relations and Corporate Communications.

Raj Denhoy - Jefferies Erin Wright - Credit Suisse Lei Huang - Wells Fargo.

Good afternoon ladies and gentlemen. I would like to welcome everyone to Lantheus Holdings First Quarter 2018 Earnings Conference Call. This is your operator for today's call. [Operator Instructions]. 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 completion of the call and will be archived for 30 days. I would now like to turn the call over to your host for today, Meara Murphy, Director Investor Relations and Corporate Communications..

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

Earlier this afternoon we issued a press release, which was also filed with the Securities and Exchange Commission under Form 8-K, reporting our first quarter results. You can find the release as well as the replay of this call in the Investor section of our website at lantheus.com.

Please note that the remarks we make today regarding future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors which we disclosed in more detail in the Risk Factors section of our annual report filed under Form 10-K with the SEC and available on our website.

We remind you that any forward-looking statements represent 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, except as otherwise required by applicable law.

Also, please note that on today’s call we will 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.

Reconciliations to GAAP metrics for EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, adjusted net income per diluted common share, and free cash flow are set forth in our earnings press release.

Of 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 overview of Q1 and Jack will follow with an overview of our financial performance, along with Q2 and full year guidance. Mary Anne will then provide updates regarding our corporate growth strategy and programs. After their prepared remarks, both Mary Anne and Jack will take questions.

With that, I will turn the call over to Mary Anne. .

one, enhance the growth trajectory and profitability of our core microbubble franchise; two, augment and invest in our pipeline with focus on emerging technologies; and three, pursue external opportunities that fit with our objectives to deliver sustainable growth and profitability.

I’ll provide an update on each area of our corporate growth strategy after Jack reviews our Q1 numbers in detail. Jack..

Thanks Mary Anne and good afternoon everyone. At the onset, let me remind you that the tables included in today's press release include a reconciliation of our GAAP results to the as adjusted non-GAAP performance I'll be covering with you today.

We are excited of course to have achieved the high end of our revenue guidance while exceeding guidance for adjusted EBITDA, which reflected fundamentally strong performance in Q1.

The outperformance of adjusted EBITDA stemmed from a combination of strong cost management and to a lesser extent timing of certain R&D a promotional expenses that we will incur during the remainder of 2018.

It is important to note that the timing of that spend will have no impact on our ability to achieve planned overall timelines of our clinical development programs.

Diving into the numbers and starting from the top-line, Lantheus delivered $82.6 million in worldwide revenues in the first quarter of 2018, an increase of 1.6% compared to the first quarter of 2017.

We continued our strong DEFINITY performance with worldwide revenues totaling $44.7 million for the quarter, an increase of 18.4% over last year as we continue to drive the appropriate use of contract in echo studies.

TechneLite revenue in the first quarter was $21.4 million, a decrease of 20% over the prior year, which as Mary Anne mentioned was primarily a result of the temporary disruption in Moly supply. Xenon revenue for the quarter was $7.9 million compared to $8.1 million in the first quarter of 2017.

Finally, revenue from our other product category was $8.7 million in the first quarter, compared to $8.8 million one year ago.

Moving below the revenue line, our first quarter 2018 gross profit margin excluding technology transfer activities which we refer to in our reconciliations as new manufacturing costs totaled 51.6%, an increase of 175 basis points on a year-over-year basis. This improvement reflects the increased contribution of DEFINITY to our total revenue mix.

Operating expenses were $27.2 million for the quarter, a decrease of $700,000 from Q1 of last year. Operating income for the first quarter was $15.1 million, an increase of $3.2 million on a year-over-year basis.

Adjusted operating income for the first quarter of 2018 decreased by $700,000 or 4% compared to the prior year period which included accelerated depreciation and debt refinancing and operating cost. The decrease also reflects the increased investment in our strategic programs.

Moving below operating income, first quarter interest expense totaled $4.1 million, a 25% improvement over the same period one year ago, reflecting the lower interest rate obtained through our 2017 refinancing activities.

Net income for the first quarter of 2018 was $8.2 million or $0.21 per diluted share compared to $4.1 million or $0.11 per diluted share for the first quarter of 2017. Adjusted net income for the first quarter of 2018 was relatively flat compared to the prior year period.

Moving on to our quarter end balance sheet, as of March 31, 2018 we had cash and cash equivalents totaling $73.7 million. Borrowing capacity under our revolving credit facility remained at $75 million making our total liquidity, including cash on hand $148.7 million.

This provides substantial support for our operating and investment needs and represents a 28% improvement compared with the same period one year ago.

First quarter 2018 operating cash flow totaled $700,000 in cash used compared to $5.5 million in cash generated for the first quarter of 2017 substantially driven by our purposeful inventory build of DEFINITY. Capital expenditures for the first quarter of 2018 were $2.1 million, compared to $4.9 million in the first quarter of 2017.

I’ll now turn to our guidance for both the coming quarter and the full year. For the second quarter of 2018 total revenue in the range of $85 million to $90 million and adjusted EBITDA in the range of $20 million to $23 million.

For the year we are maintaining our guidance for revenue in the range of $337 million to $342 million and for adjusted EBITDA in the range of $85 million to $90 million.

We are pleased with our performance with both revenue and adjusted EBITDA for the first quarter and we will continue to reevaluate our guidance as we monitor our positive operating trends. With that, I will turn the call back over to Mary Anne..

Thank you, Jack.

Let’s start by reviewing the progress under our three-pronged corporate growth strategy, which is focused on enhancing the growth trajectory and profitability of our core microbubble franchise, augmenting and investing in our pipeline and focus on emerging technologies and pursuing external opportunities that fit with our objective to deliver long term sustainable growth and profitability.

As the foundation of our core microbubble franchise, DEFINITY is the leading echo contrast agent worldwide. We have patents covering certain facets of DEFINITY through the year 2037, and our research development and patent work continues.

Moreover, the use of microbubbles in therapeutic and diagnostic applications is gaining more interest in the market and we believe it will emerge as a valuable platform for increased uses. With the expertise we have built in microbubble technology, our goal is to lead in these growing markets.

As shared previously, we believe a Left Ventricular Ejection Fraction or LVEF indication for DEFINITY would allow for even greater penetration in the echo market.

LVEF is an important measurement of heart function and it is used as a tool for clinicians to identify the presence of certain diseases and conditions that decrease the pumping efficiency of the heart.

We believe that DEFINITY enhanced echocardiography produces LVEF measurement that are superior to unenhanced echocardiography and if an LVEF indication is approved, the use of DEFINITY would expand to a large patient population that would benefit from more accurate measurements.

In terms of market size, we believe that a new LVEF indication for DEFINITY could approximately double the addressable echo patient population in which DEFINITY could be used. Approval would also provide DEFINITY with three years of marketing exclusivity for that indication.

We are working with FDA on a special protocol assessment or SPA for our LVEF trial design and anticipate completing that process in the first half of this year. We will then conduct two identical clinical trials, which together would have a total enrolment of about 300 patients. We will update you as our clinical trials progress.

Importantly an SPA represents the agencies preliminary agreements that are planned. Phase III design in appropriate to form the basis of an efficacy claim. It is a critical validating milestone and will provide regulatory clarity and enable us to submit a new drug application if the trials primary endpoint is achieved.

Additionally, we are leveraging our in-house expertise by building microbubble manufacturing capabilities at our campus in Billerica. This investment will help ensure reliable supply by creating supply chain redundancy, while at the same time improving our cost of goods sold and enhancing gross margin.

In terms of our PET product pipeline, we’ve completed the agreed upon technology transfer and other preparatory activities for the second Phase III trials for Flurpiridaz F 18, which is the focus of our collaboration and license agreement with GE Healthcare.

GE is executing the Phase III trial and has indicated that patient recruitment will begin in the first half of 2018. This perspective open label international multi-centered trail of Flurpiridaz F 18 for PET MPI will enroll up to 650 participants and has a target completion date in the second half of 2020.

The primary outcome measure for this trial is a diagnostic efficacy of Flurpiridaz F 18 MPI in the detection of significant coronary artery disease.

Secondary analysis will be performed in patients of special clinical interest, including woman and obese and diabetic patients where current SPECT MPI technologies have demonstrated limitations in their diagnostic performance. Next up is an update on our Phase III LMI 1195 program.

We believe 1195 our fluorine-18-based PET agent represents a first-in-class and useful diagnostic tool for a population of patients at risk for sudden cardiac death.

Nuclear imaging provides a unique tool capable of measuring changes at the molecular level, including cardiac functions of the norepinephrine transporter or NET, in a non-invasive and repeatable manner.

We developed 1195 to target the NET and we are encouraged by data obtained from collaborations with academic sensors which have allowed us to progress the 1195 program to this stage.

Internationally, our DEFINITY China program with Double-Crane continues to advance, with patient enrolment complete for the cardiac and pharmacokinetic studies and enrollment in the kidney and liver studies ongoing. We project submitting an application for an import drug license to the China FDA in the second half of 2018.

Addressing the third element of our revenue and profitability growth strategy, pursuit of external opportunities, we continue top line assessment of a large number of opportunities.

From a strategic standpoint we look for opportunities that fit within or complement our current capabilities and that would address significant unmet needs in market and patient settings in which we are already successful.

With that in mind, we continue to evaluate the broader imaging landscape and therapeutic adjacencies as key areas for potential expansion through M&A and in-licensing. From a financial perspective, we are mainly focused on assets that are or can soon be accretive to revenue and create the ability to improve our profit margins and cash flow.

We are open to a broad range of deal sizes and structures, with an eye towards strategic fit and assets that are already commercial or close to commercialization that will then be accretive to earnings within a short time horizon.

We expect to capitalize on our collective expertise and create positive synergies that will help to insure our commercial success.

In closing, as we implement our three pronged corporate growth strategy, we are focused on internal investments and acquisition and in-licensing opportunities that we believe in Lantheus hands, we’ll deliver excellent returns on our investments. With that, Jack and I are now available to take your questions.

Operator?.

Certainly [Operator Instructions]. Our first question comes from the line of Raj Denhoy from Jefferies. Your line is open. .

I wonder Mary Anne if I could ask you a question not about this quarter, about the messaging really on the fourth quarter call that caused a lot of kind of consonation in the stock and the sell-off.

I know the stock has recovered back, but I think maybe it’s worth revisiting some of the – and I think you reiterated a lot of this on the call today, but some of the spending plans and what the goal really is here for 2018 for the business.

You know I think the adjusted EBITDA as you described it is going to be down year-over-year as you are investing in the business.

But perhaps you could maybe just flush out a little bit about more about sort of thinking behind the strategy and ultimately where you think that will settle the business out?.

Happy to talk about that Raj. I do want to clarify though, the comments you made about adjusted EBITDA being down year-over-year. Well I recognize that’s true if you include the milestone payment mead to us by GE Healthcare in 2017.

I think it’s fair to subtract that from the year-over-year comparison and when you do that, essentially our EBITDA is tracking with our guidance to be equal to 2017, so just want to clarify that, that’s a start. .

Still flat. .

Yes, still flat, but Raj I would say and this is what we talked about in Q4 as well. That is a purposeful decision we’ve taken, because we are investing back in our business with some of the programs that I had spoken about.

And we think it’s the right time and we also think it’s the right investment, because we feel its services our future in a way that keeps us not only sustainable, but has us growing and offers us the ability to grow in future years and that’s been our decision, invest to grow and it starts in ’18.

You are right, I think there was some response to the stock after we offered that message, but as you say also we’ve seen the stock recovery and we hope that would be for the earnings that we recorded today and the progress we’ve made on our programs that people will continue to believe in the stock and what we are doing to run the company..

No, that’s fair, maybe just a couple of final points on that. I mean you did note that it was a good quarter and your adjusted EBITDA did come in better than you had guided and it sounded like Jack from some of comments that that’s just a spending.

A timing of investment phenomenon more than anything, but maybe you could help us understand about why this quarter was so much better again relative to the guidance and when that spending is going to start to kick in?.

Yeah, thanks Raj. Yeah that’s correct. I mean the comments I made was the combination of strong cost management, as well as some of the timing of the programs.

And as you can appreciate the timing of the clinical development programs, it’s hard to really pin down week to week and I think the important message I would reiterate is we do expect to see that cost flow though in ’18 and it has no impact on our expected timelines or our goals.

So I think the important message that I would ask folks to take away is that although the timing may have slipped from Q1 to a later quarter because it impacted the overall timeline of our programs. .

And it doesn’t represent all of the EBITDA, all the performance in Q1. As Jack said, there is a sizable chunk of that that is related directly to our efforts in management, more of cost management. .

Fair enough. Maybe just for my last question, I’ll jump back in queue. So you know it strikes me a lot of what you are doing this year from an investment standpoint is around the IP position for DEFINITY and you put up another very strong quarter in DEFINITY.

Maybe just some broad comments Mary Anne about where you think that stands? I mean one of the big questions is what happens when that IP starts to expire over the next couple of years. How exposed of a risk do you really view that business at this point and I’ll just leave it there and you can answer the question..

Sure. So Raj it is one of my primarily areas of attention that I personally attend to and there is several prongs to our strategy here.

First and foremost, we believe we have the right to protect the intellectual property that we’ve developed for DEFINITY and so we do have ongoing investments in work that we see as having been, especially recently very successful.

We had another Orange Book-listed patent awarded in October of 2017 and more recently we had another patent listed with the patent office.

It’s not an Orange Book-listed patent, but it is another patent that continues to define what we see as the unique specification of DEFINITY that are required to deliver the efficacy and the safety that we’ve been delivering for 17 years with this product and our efforts are not done that.

I think our decision to invest in an additional indication for DEFINITY is partly driven by our belief that we can rightly spend our product and we did get the product that continues to serve the market from a patient value perspective.

The LVEF indication will double the addressable patient population that we currently address with DEFINITY and we think it serves a very important value added diagnostic tool for the physicians who use it.

I’ll never say never, because I can’t, but you know our first patent is about to expire in mid 2019 and that’s a patent that is our method of use patent, Orange Book-listed.

As such that is a patent that currently were there used to be other filers, would require a paragraph for certification to us and I can say we have received no paragraph or certification..

Okay, that’s super helpful. Thank you..

You’re welcome..

Your next question comes from the line of Erin Wright from Credit Suisse. Your line is open..

Great, thanks so much. In terms of capital deployment, I guess can you speak to some of how you see the potential M&A opportunities coming about and what sort of size makes sense for you and what does the general pipeline just look like.

And on the in-licensing opportunities, like there’s any example even just anecdotally what that could potentially entail, that would be great. Thanks..

Erin, its Jack. Let me start out and kind of give you that overall view of the size and then I’ll ask Mary Anne to comment on anything additional.

So from the overall size perspective, you know as we talked about on a number of quarters, we really worked to put ourselves in a position that we feel from our existing balance sheet right now we’re in a strong position for a mid-sized acquisition. If you kind of think about our cash position, it’s been hovering in the mid-70’s.

The revolver that we haven’t touched has remained at about $75 million and then we are in a good leverage position. So as we look at our first acquisition, we recognize the criticalness of hitting a good one and making sure it makes sense and we can absorb it.

And so I think we would be looking at probably not a significantly large acquisition that would cause us to lever up immediately. That’s something that we can probably handle within our existing balance sheet with perhaps some expansion of our debt.

Having said that, we will again as Mary Anne said, we would never say never and we are carefully evaluating each and every opportunity that does present itself..

I’ll just add Erin, because you asked about any particular examples of things we’re interested in and there are several and we are looking at them.

Two areas really, one is we have a very well demonstrated history of success in being able to describe inter-hospital environments for patient care setting, unique patient ready dosing that aid either in diagnosis or sometimes in guiding interventions for that patient.

Right now we are focused in the echocardiography lab and the nuclear medicine imaging department, but there’s many other areas inside the hospital and in adjacent hospital settings such as hospital outpatient centers or surgery centers where those types of activities are also going on and we’re very interested in them because we have as I said, we kind of really understand how to settle with that environment and we have all of our learning from DEFINITY to replicate that would allow us to, we believe to be successful there.

That’s one are and that includes partly commercialized assets that are already out there. The other areas what I refer to is microbubble. If you look at the literature, what you see is that the use of microbubbles is expanding beyond simply as an imaging agent.

They have the capability to be carriers and to be interventional in and of themselves in certain medical settings.

And when you look at the possibilities of how they can be used and the folks who are looking at that, the DEFINITY bubble rises to the top as a proven bubble, not only by its size, but by its stability and by its kind of non-invasive ease of administration and so those are some partnering efforts that we’re looking at to ensure that we stay on the forefront of how microbubbles are being used.

That’s really all I could offer now, but I think it offers some clarity into the main areas of interest that we have..

That’s really helpful. And then lastly, just can you give us an update on the manufacturing initiatives. I guess what’s the next step there and what you need to do to sort of ramp up. Thanks..

So this is an onsite project. We’re using an existing building, so we don’t have actual ground breaking.

We’re going to do a fake groundbreaking with a pile of dirt, but it is a plan that has already been discussed with and presented to the FDA, so that we’re ensuring that we’re within all their guidances for what finished has to look like, and so it is a well thought out process to get it done on what done needs to look like.

That our fake groundbreaking is actually next week and then as we continue to bring in different assets and prepare the building when putting it in, you will see continued progress over the next 18 months or so and I’ll be happy to update on of course the obvious milestones..

That’s great, thank you..

You’re welcome..

[Operator Instructions] Your next question comes from the line of Lei Huang from Wells Fargo. Your line is open..

Thanks. Thanks for taking my question. This is Lei calling in for Larry. I just wanted to ask – to start, a couple of questions on the quarter. So in Q4 your revenue was affected modestly by hurricane Maria. I believe it was about $300,000 or so, did you see any of that reverse in Q1..

Hey Lei, it’s Jack, I’ll take that. I don’t know if I’d call it reversed, but I would say that from our quarterly build perspective we are back up and you know we never really had that much of an impact as you – I’m not sure we quoted that exact number, but it was a very minimal number in Q4 and we are now back and fully operational.

You know obviously the island still continues to get back to its full operations, but from our ability to supply the hospitals, we’ve been back and running since the probably end of last year..

Okay, and then in terms of selling days were there any differences between Q1 this year and Q1 17?.

In terms of – what Lei, I didn’t understand that word?.

The selling days, any differences in selling days?.

Selling days..

Oh! Selling days. Oh, I’m sorry Lei; I don’t have that in front of me.

Jack do you have that?.

I do and that answer is no, there is no difference in the change of Q1 last year over Q1 of this year. In Q4 of last year we did pick up a day sequentially, but not a day year-over-year..

Got it, thanks. And then just looking at your guidance, so Q1 revenue was up a little under 2%. Your Q2 revenue guidance obviously implies an acceleration closer to call it 4% or so I think at the mid-point. Your revenue guidance for the full year suggests growth somewhere in the 3% to 5% range I believe, excluding the GE payment last year.

So there is obviously this kind of revenue growth improving over the next three quarters to a certain extent.

Can you just talk about kind of what’s going to drive that improvement? It looks like your comps last year, they don’t really get any easier as the year goes on, so what’s driving that?.

I think its two kind of market issues or opportunities that I’ll speak to and then I’ll let Jack get finer on the actual dollars associated with them. But one is we continue to grow the DEFINITY market.

So that’s a product that you know you’ve seen the kind of growth that we posted year-over-year for the last several years and we tend to continue that growth with the investments that we make in appropriate medical use in contrast with echo, so that’s one area.

And the other area is we are continuously looking for ways to expand the revenue potential for our New Year product.

It’s not as evident or as available, because it is a fairly mature market and most sales are contracted, but we do take any opportunity we can to opportunistically supply customers with contracted levels of sales that are above their contracted minimum.

So I don’t know Jack, do you want to add on the dollars?.

Yeah, probably just more overall Lei, what I would remind you is just in Q1 we did see the impact of the Moly disruption, the Moly supply disruption. We talked about that both in the context of primarily landing in Q1 ‘18.

So as you look at the guidance and kind of the sequential build in ’18, I would attribute most of that lightness if you will in Q1 to the NTC and that has now returned to service you know we see that disruption behind us..

Got it, thanks.

And I’m sorry, have you quantified what was the impact of the Moly to the dollar amount or the growth rate impact?.

No, we have not. No we did not quantify. I think Jack offered some qualitative comments in our last call, but not quantity..

Yeah, I would say the only thing I’d add to that Lei is you think the kind of consensus that was developed by the analyst sources where we came in our guidance is probably $2 million or $3 million light. I am not saying that’s the number, but I am saying it’s an immaterial number to our overall revenue..

Got it. And then just my last question on the new indication, the EF indication for DEFINITY, you mentioned through your exclusivity, is it reasonable to assume that you are – you could be working on additional patent protection beyond that three year exclusivity or do you think that’s pretty much. .

So there are two different things Lei, the three years exclusivity is related to the indication itself, and so it just means that other products without that indication can’t market for that indication during the three year period, unless they do the clinical work themselves and are awarded the indication.

That patent protection protects all uses of DEFINITY for all indications and yes, we are absolutely still vested in and confident about the work we are doing of the patent stage related to DEFINITY. .

So there are additional patents you are working on specifically for the indication or you are you talking the general portfolio?.

Again, the patents go to the molecule the indication part. So the answer is yes to both, but they are separate. The marketing exclusivity only pertains to the specific indications..

Got it. Thanks very much. .

You’re welcome. .

There are no further questions at this time. I’ll turn the call back over to Meara Murphy. .

Thank you for joining us today. We’ll be presenting at the UBS Global Healthcare Conference later this month, the Jefferies Global Healthcare Conference in June and the CJS Securities Ideas Conference in July. With that, we will wrap-up today’s call. .

Thank you. .

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