Q4 2020 Lantheus Holdings Inc Earnings Call
Good afternoon, ladies and gentlemen, welcome to <unk> holdings fourth quarter, and full year 'twenty and 'twenty financial results 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. On this call is being recorded for replay purposes and replay up there.
And that gas will be available and investors section of the company's Smith.
And at least two hours after the completion and optical and it will be archived for 30 days I'll now turn the call me to your host for today marching on senior director of Investor Relations Mike.
Thank you and good afternoon.
Welcome to Atlantis Holdings fourth quarter, and full year 2020 financial results Conference call with me on todays call are Mary Anne Heino, and our President and CEO and Bob Marshall, Our Chief Financial Officer.
Maryann will begin with some introductory remarks, and a business update and then Bob will cover our financial results.
And we'll conclude the call with closing remarks, and then we will open the call for Q&A.
This afternoon, we issued a press release, which was furnished to the Securities and Exchange Commission under form 8-K reporting our fourth quarter and full year 2000, and 'twenty results.
You can find the release and the investors section of our website Atlanta is dot com for those of you not on the webcast you can find the slide presentation and the investors section of our website under the presentations tab.
But before we get started I'd like to remind you that our comments. During this call will include forward looking statements actual results may differ materially from those indicated by forward looking statements due to a variety of risks and uncertainties and particular the continuing impact.
Of COVID-19 on our business results and outlook is the best estimate based on the information available as of today's date. Please note that we assume no obligation to update these forward looking statements, except as required by applicable law, even if actual results or future expectations change materially.
Please refer to our SEC filings for a detailed discussion of these risks and uncertainties.
And also discussions during this call. This call will include certain non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures and is also included and the investors section of our website.
With that it's my pleasure to now turn the call over to Mary Ann and good.
Good afternoon.
Hope this fine to each of you and your families are safe and well as you listen to this call as.
As we continue to navigate through what we all hope it's the ladder and last part of the COVID-19 pandemic, we remain committed to the health and safety of our employees patients and other partners and the health care community.
In 2020, we successfully and safely brought our business to a very challenging year against the backdrop of the global pandemic.
And you'd have to daily and seamlessly to the reality of new workplace behaviors for our manufacturing quality and distribution teams.
<unk> work for the balance of our employees and navigating complex supply chains and at times unpredictable product demand.
Even with these operating challenges, we successfully closed a number of strategic transactions and partnerships, most notably the merger with <unk>, which we believe will drive sustainable growth into the future.
We integrated <unk> talented employees and exciting product portfolio into our own with no business disruption.
Lastly, we also secured several important regulatory approvals, even as the majority of our team worked remotely.
Looking forward in 2021, we recognize the pandemic will continue to have an impact on hospital access and patients' willingness to seek care. During the first part of this year. We're encouraged by the availability of new vaccines and hopeful that administration of these vaccines to not only vulnerable populations and frontline.
And workers, but to the general population in 'twenty and 'twenty, one will restore true normalcy to our lives and confidence and access in all parts of the health care system. We are also encouraged by the trends. We are currently seeing and hospital traffic data and falling case and hospitalization rates.
Today, I will update you on our progress within our prostate cancer portfolio, our key commercial franchises as well as with our pharma services and corporate development group.
I'll begin with T y L. The lead product in our prostate cancer portfolio.
'twenty, one will be and exciting year for land, yes, what's the potential FDA approval of <unk> and our commercial launch we had the opportunity to positively impact the lives of U S prostate cancer patients, while driving sustainable revenue growth and margin expansion for Lantus.
The FDA accepted on new drug application for Py L. A prostate specific membrane antigen or P. S and a targeted pet imaging agent for prostate cancer and assigned priority review to the NDA with an action date of May 28 2021.
The priority review designation shortens the Fda's review to six months from the time of NDA acceptance down from the standard Purdue at the time, we do time of 10 months D.
The FDA also indicated that it is not currently planning to hold an advisory committee meeting to discuss the application.
And if approved we believe T Y L will be the first commercially available at 18 labeled P. SMA targeted pet diagnostic agent.
R. P Y O N D E and supported by data from two company sponsored Phase III studies Osprey and Condor, both designed to establish the safety and diagnostic performance a P y L imaging across the prostate cancer disease continuum.
We believe the collective results from these two studies demonstrate the ability of T y L to reliably detect and localized disease and enable more appropriate patient management.
Across these studies T Y L has also shown and attractive safety profile.
T Y L has been administered and approximately 3500 subjects globally inclusive of our two companies sponsored studies and multiple investigator sponsored studies.
Prostate cancer is the second most common form of cancer affecting and in the United States currently and estimated one and eat and then will be diagnosed with prostate cancer and his lifetime. We believe there is significant unmet need for a reliable targeted imaging agent in prostate cancer, particularly in the high risk.
Current or metastatic population.
And preparation for our P Y a launch we are building out our commercial and medical teams.
We are also working with the pet and manufacturing facility or P. M. S. Channel. So we can reach our goal of broad availability of <unk> to the U S market place soon after launch.
In addition, we are working with pet imaging centers, where those products are used as well as with the urologist radiation oncologist and medical oncologists, who order these products and patient advocacy groups to build awareness of P. S and eat pet imaging generally.
We are fully committed to the potential of P y L to transform the lives of prostate cancer patients and our team is working diligently to make this happen.
Turning now to our commercial portfolio I'll give an update on our key commercial products.
In mid November the F. D. A approved our supplemental new drug application or S. N D E for definitive RT, that's pictured here on the right expanding our Microbubble franchise offering to include a room temperature formulation.
Infinity, our T joins defending our market leading product that our customers and patients have trusted to enhance suboptimal echocardiograms for nearly 20 years.
Because it doesn't require refrigeration definitive our tea is an elegant solution for inclusion and multi aluminum product kits that are partners and others are developing for indications and applications outside of Echocardiographer, Inc.
You've heard me speak of our collaboration with Sarah Best Cartera and Insightec. These companies are evaluating new indications and applications and retinal vein occlusion and Glioblastoma and these.
These are complex product applications, including multiple components and our room temperature formulation, microbubble and vial mix will be and important part of their overall product offering.
I will also note, having a room temperature microbubble recognizes the increasing need for portability today and the deliberately delivery of health care services, well image enhancing agents have traditionally been reserved for us and an ultrasound on Echocardiographer lab setting new applications are being explored and emergency settings.
<unk> is currently part of ongoing research for acute treatment for stroke and myocardial infarction.
And what instances and which intervention with the patient begin strength transportation to a treatment center.
We continue also to invest and the intellectual property supporting definitive definitive or T. Now has five Orange book listed patents, including composition of matter patent, which expires in 'twenty and 35.
I will offer a brief note about affinity procedural volume trends in the fourth quarter.
And while definitive results in October and November were in line with our expectations. We did see some volume decline associated with the resurgence of COVID-19 in late December and non urgent echocardiographer procedural volumes declined and I will speak specifically to the trends, we are seeing with definitive and growth over prior periods.
Our sales team continued to work largely remotely during this period to drive awareness of the appropriate use of the affinity and suboptimal echocardiograms and actively engaging with our customers. However, doing so predominantly using virtual tools.
Finally, I'll offer an update on our project to build and in house manufacturing facility Fritz affinity and similar sterile vial products.
We have completed important steps that's finalized our preparation for the FDA submission of our S. N D. A with the completion of our manufacturing qualification batches. This work moves us closer to FDA approval, which we still continue to expect later this year.
Moving now to our Radiopharmaceuticals portfolio, our technologic business performed well during the quarter supported in part by sales of generators to our international partner and still on a temporary basis throughout the quarter. We continued to successfully navigate a complex moly supply chain for all three of our global suppliers.
And our manufacturing and logistics team did a fantastic job dealing with changing flight logistics to ensure that we receive supply so that in turn our customers and their patients were minimally impacted.
Contributions from the acquired preventive portfolio continued to benefit our overall growth and margin profile of note or is that your sales grew significantly in 2020 over the prior year. Despite ongoing hospital access limitation for our representatives were encouraged by the continued utilization of et cetera, and believe me.
Get opportunity exist for the only FDA approved therapy for pheochromocytoma and Paragon glioma.
And late March we will be hosting and oral presentation at the end of 'twenty 'twenty, one annual meeting by Dr. Humanness of M. D. Anderson, who will discuss biomarker tumor response in patients who received his address.
To ensure we continually improve our iodine based manufacturing reliability and capacity for et cetera, we implemented and iodine manufacturing efficiency plan in the fourth quarter of 'twenty and 'twenty.
And that's an important and go for us as our phase II pipeline assay for prostate cancer, 10, 95, which I will speak to more later is also an iodine based product.
Now I'd like to discuss progress and our pharma services business.
Pharma services and a relatively new business that we've created to drive revenue through partnerships using our expertise with radio ligand.
And oncology drug development, we partner with companies to provide imaging biomarkers for inclusion in your clinical trials. These biomarkers can be potentially used for optimizing paint and selection or monitoring therapy.
Response, and clinical trials, which can reduce development risks potentially reduced expense shortened development timelines and potentially strength in the overall clinical results.
And we benefit from these partnerships with a revenue stream and access to the data generated by our product, which could be valuable to development and commercialization strategies elsewhere in our portfolio.
In early December we entered into a strategic collaboration with point file format to use P Y L to determine P. S. Avidity drink patient selection in place Biopharma and phase III clinical trial studying metastatic castration resistant prostate cancer.
The inclusion of P y L and point Biopharm and phase III trial reinforces our belief and the potential utility of T y L. Not just a necessity metastatic disease, but also and selecting the most appropriate patients for P S and meet targeted therapy.
In the third quarter, I have announced clinical supply agreements with both Regeneron and bear who will include T y L and their clinical trials in prostate cancer. We believe these agreements are illustrative.
Of the value and pharmaceutical companies see and P y L. As a next generation diagnostic imaging agent Atlantis as a partner.
Another development and our pharma services business occurred in late January with the filing of a drug master file with the FDA for N and O. One of PD, one and that's one imaging biomarker and we announced we will begin making the biomarker available the academic centers and pharmaceutical companies for use and immuno.
Apologies or Io clinical trials in 'twenty and 'twenty one day.
This is a PD L. One biomarker, we in license from Nano Mab technologies limited and May 2019.
Evaluation of patients for Io therapy is a key challenge for companies developing new therapeutics and we are pleased to take an important step forward and providing novel clinical research too with the potential to optimize selection of Io therapy.
Lastly, I'll update on M&A activity in early December we entered into an agreement to sell our Puerto Rico Radio Pharmacy N P N F to form a logic.
This transaction simplifies our distribution model and Puerto Rico and allows us to use the proceeds to invest and our core businesses and product pipeline.
Lindsay isn't pharmacologic entered into a long term supply agreement under which Lengthiest will continue to supply form logic with land pieces profit products from a logic is and importantly, these customer and the U S radio pharmacy market and this transaction extends our strategic relationship with them. The transaction closed at the end of January and Bob.
I'll provide the financial details.
Moving on to our research and development pipeline.
In October 'twenty and 'twenty.
We resumed patient enrollment and our phase two arrow trial.
Yes.
Yeah.
And 95 is orange I'm on 31 P. S. Meet these targeted product candidate for the treatment of metastatic castrate resistant prostate cancer with act and study sites and the U S and Canada in February we presented a trial and progress abstract at the American Society of clinical oncology genitourinary cancers virtual meeting or <unk>.
Highlighting the Arrow trial, we're pleased to have this study underway again.
With that I'll now conclude my update on key commercial and strategic programs and turn the call over to Bob Bob. Thank you Mary Anne and good afternoon, everyone and we'll focus my discussion on adjusted results unless otherwise noted revenue for the fourth quarter was $94 $2 million and increase of five 4% from the prior year quarter.
And a decrease of 0.8% organically on a year to date basis revenue was $339 4 million and decrease of two 3% largely due to the effects of the COVID-19 pandemic on customer demand, partially offset with the project's portfolio contributing and it's late in the second quarter sales.
Sales of affinity and the fourth quarter was $60 7 million or two 3% higher as compared to the prior year quarter and nine 6% higher sequentially over the third quarter 2020.
Any sustained volume strength during the quarter until mid December as Maryann described earlier.
<unk> revenue was $22 7 million up 10, 4% from the prior year quarter.
And like grew five 8%.
Sequentially, but experienced a similar dynamic is the affinity and the latter half of December.
As Mary Anne noted the company recorded opportunistic generator sales in the quarter to and so mitigating some of the impact of COVID-19 related issues other nuclear including.
Our newly acquired assets increased 15% to $16 million rebates and allowances totaled $5 3 million.
Gross profit margin for the fourth quarter was 49, 8% a decrease of 123 basis points from the fourth quarter of 2019.
Positive contribution from higher net sales of definitive and the addition of the <unk> commercial portfolio was offset by the unfavorable contribution from lower xenon revenues due to our relatively fixed cost of raw materials as well as period Tech transfer expenses relating to our in house manufacturing initiative in Billerica and process improvements and.
Our Somerset facility.
Operating expenses were 36, 3% of net revenue and sequentially lower by $1 million versus Q3, noting of course that the third quarter included approximately $3 million NDA filing fee for P. While.
But both sales and marketing and R&D reflect investments prepare for the launch of P. While as well as the resumption of 10 95 patient enrollment during the quarter.
G&A was essentially flat as compared to Q3, 'twenty and 'twenty would achieve synergy savings embedded op.
Operating profit for the quarter was $12 $7 million or a decrease of 37, 2% from the same period prior year year to date operating profit was $49 million down 35.4% adjust.
Adjustments and the quarter totaled $12 9 million before taxes of this amount $3 6 million is associated with non cash stock and incentive plans.
$4 7 million related to acquired intangible amortization.
And a reduction of $2 8 million related to net changes in fair value associated with contingent consideration.
And as well as the P Y L related contingent value rights or C D ours and.
An additional $4 $7 million is tied to ongoing integration efforts and onetime expenses related to the <unk> acquisition and synergy capture.
Lastly, we recorded $2 7 million of I E R and D impairment relating to you said your lifecycle management program. During the quarter. This is due to near term re phasing of certain R&D spend to 10, 95, which had reduced enrollment during 2020 relative to prior expectations due to COVID-19.
<unk> from our residual lifecycle management initiatives during the next nine to 12 months, we remain committed to advancing opportunities with exaggerate and maximizing the value of this important asset.
Our effective tax rate was 54, 3% and the quarter Yeah elevated rate is driven by fixed interest accrual associated with our uncertain tax positions for which we are indemnified. When these accruals are taken together with certain levels of profitability and other discrete items. The result impact the underlying effective tax rate.
The resulting reported net income for the fourth quarter was a loss of $3 4 billion and a net profit of $4 $6 million on a adjusted basis, a decrease of 66, 3% compared to the prior year period year to date and reported net income was a loss of $13 5 million and a net profit of $25 eight.
On an adjusted basis, a decrease of 45, 1% compared to the prior year period.
GAAP basic and fully diluted earnings per share and the fourth quarter were a loss of five cents and a profit of seven on an adjusted basis year to date GAAP basic and fully diluted earnings per share were a loss of 25 cents and a profit of 47 on an adjusted basis now.
Now turning to cash flow.
Fourth quarter operating cash flow was a zero point $6 million as compared to $22 4 million and Q4 2019 capital expenditures totaled $3 8 million 1 million less and the prior year quarter free cash flow, which we define as operating cash flow less capital expenditures was a use of $3 2 million.
A decrease of $20 nine from the prior year period.
Net income variances as well as net working capital differences were the main drivers of the decrease in the quarter and.
Importantly, we continue to focus our efforts on driving diligent working capital management, and making prudent investments to deliver sustainable long.
Longer term growth cash and cash equivalents net of restricted cash now stand at $79 $6 million. We continue to have access to our Undrawn bank revolver and are comfortable with our strong liquidity position.
Now turning to 'twenty 'twenty, one we believe that the latest resurgence of COVID-19, and the resulting impact on hospital traffic and patient behavior could create lingering revenue pressure in Q1 and less so in Q2, we would expect this impacted diminish as vaccines are distributed more broadly.
And as such we would expect revenue and Q1 to be and a range of $85 million to $89 million and adjusted diluted earnings per share to be on a loss ranging from minus three.
To flat.
Accelerated and investment and P. While commercial readiness will impact near term profitability. However, with both a recovering based business as well as py on commercialization assuming approval consistent with priority review timing, we project accelerating profitability and cash free cash flow generation and the second half of the year and we think about the full.
A year, assuming broad vaccination adoption and P. While approval as of the Paducah date near the end of Q2, we see full year revenue and 385 to 400 million range with adjusted fully diluted earnings per share and a range of 34 to 39 cents both targets considering the sale of our Puerto Rico assets to that and as <unk>.
Mary Anne stated, we closed the sale of our Puerto Rico operations on January 29, 2021 for comparative purposes. During 2020, the Puerto Rico business generated net revenue of $10 $7 million, one eight of net income and.
Both GAAP fully diluted EPS and adjusted EPS of three cents keeping in mind that the 'twenty and 'twenty result reflects headwinds stemming from the COVID-19 pandemic looking ahead to 2021 for purposes of just and financial models to account for the sale of the Puerto Rico operations in 'twenty and 'twenty. One you should remove net revenue of approximately 11 million.
And $3 million and net income.
And GAAP fully diluted EPS and adjusted EPS of four cents from your models.
These results are netted for the supply agreement, we have put in place with our new owners of the operation. Additionally.
Additionally for the longer term, we have generally modeled growth and the low single digits each year for the Puerto Rico business, you can find a copy of the 'twenty and 'twenty P&L on our website and the investors section and under supplemental financial information.
Lastly, fully diluted weighted average shares outstanding should be in a range of 69 to 70 million shares for the full year and depreciation and amortization are expected to be approximately 15% and 25 million respectively for 'twenty and 'twenty, one with that let me turn the call back over to Mary Anne.
Thank you Bob.
I would like to close by saying how proud I am of the team that came together in 'twenty and 'twenty that we now call Lantus we.
We faced many challenges, but never lost sight of our mission for patients and for each other I am so grateful to the employees that routinely staffed our manufacturing sites and the other employees, who ensure that was safe for them to do so as well as the employees, who so seamlessly transition length is two and efficient virtual company.
'twenty 'twenty, one promises to be and exciting year as we look to the approval and launch of <unk> near the end of Q2 opportunities across our commercial and farm and services businesses for growth and the continued advancement of our pipeline as always the commitment remains to accomplish all this with good judgment on investment.
I look forward to updating you on our progress with that Bob and I are now ready to take your questions. Operator. Please go ahead.
Ladies and gentlemen, if you have a question at this time, please press star and spend and number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue.
On the turnkey and then Thats star one to ask a question.
Your first question comes trimmed and lineup and can you pick food and we get price your lines now.
Hello Anthony.
Hi, Thanks, Zack on for Andy can you just walk through how a few io potentially shift the landscape on prostate screening and any initial indication for monitoring and patients after surgery or radiation.
I'm sorry can you repeat that question on and it was a little broken up.
Apologies for that can you walk through how P. While potentially shift the landscape for prostate cancer screening.
And so let me speak to what the indications will potentially be there too on populations of patients that were studied in the osprey and Condor trials and it's not yet clear to us which will receive approval for but I can speak to which populations with studied the two populations are called initial staging.
And these are patients who have already been diagnosed conclusively with prostate cancer in what's called the prostate bed. So it's either officially you know it's it's.
It's officially and I would say that the prostate gland and then it's usually theres localized lesions right outside the bed and then there's the other patient populations with Coke biochemical resistant and these are patients who have recurred after complete removal of the prostate gland and so it means that that that was not in fact curative for the patient that had already been metastasis.
And of the patients. So you use the word screening is somewhat confusing because you usually you're screening patients for prevention purposes, and both cases. These are patients who had been diagnosed with cancer and there's typically in our prostate cancers journey I'm there.
And is a mapping that's done across the entire journey and there's points and kind when it piece is more likely to receive a what will be a P. While imaging scan and we usually and referred to it as the what's called this again initial staging or B C or a biochemical resistance. Those are the points in time I can tell you from a popular.
Cash and size, we estimate that the biochemical resistance or B C. Our patient population is roughly on 135000 men or patients on an annual basis and the initial stage and population and it is roughly estimated to be about 40000 patients.
Thanks, that's helpful and.
And then.
I guess two questions can you do you think that if you will.
And so visually displays Psa testing.
And well yeah.
Now, it's a little bit of apples and oranges, there because PSA testing and serologic testing, which is blood testing.
And one is not mutually exclusive of the other they can be used for different purposes, and we track a gentlemen, a PSA rising widget. The serologic tests can also be used for to track a gentleman and for what it would be extensive disease or significance of disease, which might be a call to action for different treatments, whereas it.
Image, we'd be used to detect exactly where the where cancer is in a gentleman's body, so and the two and not mutually disc loose exclusive on.
Understood, Thanks, and I'll hop back in queue.
Yeah.
Your next question comes from the line Erin Wright with Credit Suisse. Your line's now open.
How should we think about just any and and the cadence of growth throughout the year, just with the procedure volumes that you've seen I know theres a lot of variables out there, but I'm curious, what you're seeing kind of quarter to date, and and and invoices that eight tenants generally speaking and your guidance in terms of definitive.
And well, we do not offer product specific guidance affords affinity you did hear me speak too volume and volume for Echocardiograms and I wouldn't it will be obviously publishing our K, but and I invite you to read that but we do track the number of Echocardiograms that are performed on an annual basis.
The larger market trend.
The affinity of course is used and a subset of those echocardiograms and those those are the suboptimal echocardiograms, which are not what we have called diagnostic research and without the addition of and image enhancing agent. We certainly in for the year 'twenty and 'twenty, we saw a decrease and the total number of Echocardiograms that were performed in the United States.
And the the logic is is fairly easy to explain a mini echocardiograms are done on a voluntary or I would almost day up on prophylactic basis and that they're done as part of annual checkups or initial core do you cardiology screening for folks who need to reach a certain age or having a certain level I would say.
Physical done and the tendency in the pandemic setting and the United States and 2020 was to offset those types of exams people, we're not seeking physicals dams people, we're not seeking routine exams and so the echocardiograms that would've gone along with them. We're not done similar to what was happening with elective.
Procedures are elective surgeries and many times as a sign of kind of good preoperative work for those types of procedures, a patient who has any type of cardiac history might have and echocardiogram done what was not being done with along with the electric procedures, where the work ups with it and so in 'twenty and 'twenty, one what we very much have.
To see which comes along with my comments around return to normalcy is returned to the full delivery of health care in the United States and part of this quite honestly comes with return of confidence of patients in accessing health care. You know there is a very much I think and twin.
A confidence issue and in Ah patients confidence and entering a hospital fear of infection or fear of exposure and we very much hope that with routine delivery of vaccination.
And with the build of herd immunity that there'll be the restoration of confidence among the general patient and the general population around accessing health care in the hospital setting many of our procedures.
<unk> and our nuclear procedures are done in hospital outpatient settings, and the departments that are part of a kind of a hospital system and so we predict that will happen and when Bob and I spoke to our guidance and as you heard me speaking with my comment our guidance and our assumptions are based on the assumption that that does occur.
There is good orderly vaccine rollout.
And that there is a return to normalcy of health care delivery.
And let me address that.
<unk>.
You know what are the keys and I know you didn't ask this question and precisely but you know the keys of the 'twenty one guidance on.
People need to adjust their models for the Puerto Rico sale, so that first and foremost, but as Mary and saying you know with broad vaccine distribution and my prepared comments as well as the full year range that we provided.
It calls for what would be that and robust second half growth I mean, it would start in Q2, given the weak Q2 from a due to COVID-19 and in 'twenty and 'twenty, but.
But we would certainly expect that that that accelerating I noted it would be and the base business as.
As well as of the.
Initial commercialization of P y L, but it's.
And the big drivers are going to be the key drivers that have been with the company for years and and we actually see we track and as I'm sure. Many on the call do we track case rates, we track hospital traffic, we track of course, our own product trends and we're already seeing as we noted throughout last year very different geographic trends around the country that.
To do with either restoration, and where would you say you know increased hospital traffic and that been matched to other trends for us and it's there we're very hopeful signs that we're seeing.
Okay, Great that's really helpful and.
And on T y.
Can you remind ethylene and one P. M. P Y out on your view on what's going to meaningfully contribute to top line growth and and and your thoughts given the approval timeline now and you and your thoughts also on reimbursement dynamic.
And <unk> and did you break out the rest of the Virginia.
And I'd be curious what the contributions were there and the quarter. Thanks.
So we did not and Bob can speak more specifically to what gets how it gets broken out and how it gets reported from meaningful perspective, I'll I'll speak to on the reimbursement and the coverage process because I think that's something.
Something that kind of lends clarity to it with the would've pet based diagnostic profit product for you.
Apply for what's called pass through and that those pass through applications are accepted and then process by CMS on a quarterly basis and so your application must be in by the first date of a quarter and then it's process within that quarter by CNS and then your listed and your coverage and the coverage amount becomes available as.
The first day to day next quarter. So if you allow that are produced the date now is may 28.
On the there is a process that's completed and the application that requires some administrative steps it would be hard pressed to to have that application completed to have it and by the June 1st data for all intents and purposes, we're assuming that our application goes in on the September 1st day, which means that we would have to pass through.
In place by Jan one of 'twenty 'twenty, two that does not mean that there is not coverage for your product price. After approval until then because remember I'm only speaking to CNS commercial coverage is exists at launch because that's an effort that you can undertake are proactively with commercial payers prior to that.
But the Medicare the process for Medicare coverage, there and there is also a one off process for Medicare coverage that you can do it fairly labor intensive, but you can do prior to the app the actual pass through on approval, but for all intents and purposes. The we're looking at for two reasons, one pass through and then as a.
So referenced broad availability through the P. M. F channel that is also a process that builds we you offer it with your NDA application you submit with your NDA application and limited number of P. And that's worked for concurrent approval with your N D. E. And then as you come out with approval. It is a constant and build out up at that.
Adding additional P and that's with our goal is to have broad availability throughout the United States essentially coverage within I'd say six months after launch.
And then your question about the contribution from projects in the quarter.
I had noted that the growth rate was five 4% and organically minus 0.8 per cent that math is about five and a half million dollars of contribution.
Okay. Okay.
Okay.
And anything pending.
To help us directionally here or how we should be thinking about EBITDA for the year are that operating margin target and are like tax rate or any metrics kind of below the line to help us get there. Thanks.
So yes.
So again as you think through the year and how we've you know how it kind of maps out from a revenue and cadence and talking about the second half in terms of acceleration.
The keys to think upfront is sort of a tale of two halves. If you will keeping in mind that as you think about 2021.
And going to be putting back some of the COVID-19 savings initiatives that we had put in place in 'twenty, one excuse me in 2020, and Q2 and some of those savings initiatives actually.
And on into you know the balance of the year.
And so those get added back and then of course, you get the the project's base business net of synergies into.
Into the first half of this year. So as you think and then of course, the balance is going to be.
The investments that we've talked about in terms of commercial readiness for Py L, which involves both sales teams as well as you know as we talked about market access and and analytics and back office, but also getting the pms qualification and and.
And set up and of course, you know and.
And M S L or medical sales liaison.
Also show up and.
On the R&D line, you take all those things together and you're sort of looking at sort of a sort of a $42 million on quarter kind of spend and but that back half of the year gets leveraged quite nicely.
With with the like as I described earlier.
Robust.
Growth rates and the second half of the year. So of that two one thing I would just sort of stepping back up the P&L a little bit and when do you think about gross margins you know, particularly as I look at models.
There are certain factors in gross margin and 2021 that will have a beneficial and.
Impacts as we go through the year, one you have improving.
Mix first and foremost and with the pandemic abating you also have.
As we go forward and time some of our custom logistics costs.
Around bringing moly to the United States.
Some of those costs go down and because we were having lengthened.
Flights and so forth and that we would have less non bond decay costs.
And as well as.
Tech transfer costs with Genesis as we bring that to conclusion and in fact, we will have you know batches being produced during the year ahead of what we would hope to be approval of the facility, but that would absorb.
Labor and overhead costs. So we would expect to see gross margins improving over and above what we have seen more recently and we'd probably start sort of where we are at.
Coming out of Q4, but we would see that increasing and accelerating and you know for each quarter from there on and I hope that's helpful.
And it sounds very helpful. Thank you.
Yeah.
Your next question comes from the line, Larry Solow with CJS Securities. Your line is now open.
Hi, its actually on lead you go there for Larry Good afternoon.
Good evening and good afternoon.
So Bob I.
I guess, there was a ton of numbers thrown around around projects and I just want to make sure I have this right did you disclose how much revenue you expect from py out in 'twenty.
'twenty 'twenty, one as it relates to the guidance range.
We didn't and.
We don't give product level guidance.
But if you if you just look at models that did people have and adjusting for.
Puerto Rico, and you will see that things seem to be fairly well contemplated Ah.
By those who have to put together models and made them available publicly.
Gotcha, I guess, where I'm going is given there's a binary event coming and you know may or June knowing what's in the guidance versus what is not I'm, just kind of spelled out and maybe just helpful to have out there as guideposts for people as these events occur.
Don't know if there's anything you can say beyond what you said and I. Appreciate you don't give them the product level guidance.
Yeah.
As we get through the year, we will we will evaluate you know how to you know.
Look on a quarter by quarter basis.
But you know right now you're right and as a binary event, but at the same time that that event will occur closer to the end of the second quarter. So I think that will make sure that that people are well informed on our thinking at that juncture and I.
And I'd say, we I think from our comments and should be obvious that we are our sense is that it is that day.
The binary on this point, we are positively assumptive on it correct.
Got it no that makes perfect sense, and then just switching gears to the definitive product Maryann you gave us a bunch of color around the additional opportunities for definitive and now that we have this archie approval in place can you talk about sort of a plans and timeline for launch and then you know as <unk>.
Follow up maybe talk about how much of the RT volumes you would expect to go towards you know cannibalization of existing product versus truly new opportunities and how much you could see that adding to growth.
And you know over the next several years.
So I would not how do you think with our current customer set which is let's call. It the echocardiographer market in predominantly in the U S I would not and.
Think of it as cannibalization because our strategy is to make the product offering available to our customers. We are is as we know and and as I alluded to the market leading product we continue to hold over 80% share in the U S. Echocardiographer image enhancing our market and so our goal there was to cover the market there.
Our and there were three currently approved a price. So I guess now there's there's four [laughter] and there is another room temperature formulation available with the well now with the approval of definitive R. T and our customers have from us alone the availability to either of the should that be their choice. The available. If you have a room temperature or refrigerated products.
So we are not actively trying to cannibalize our own product with that but having said that if for any of our customers. Their preference is to have now use the room temperature formulation, we will actively make that available to them and I will note and case. It wasn't clear. We're also with the with this approval we are also well.
We'll be launching what we call dial makes too we're being too. This is a biomass unit again proprietary to only lengthiest products, which can recognize and differentiate between definitive and definitive R. A T.
And so since then the vials will require slightly different activation times and and shake speeds. It has the intelligence to recognize either vial and and and activate it appropriately and at the Sunshine and will not activate any other type of a vial. So that also gives our customers the flexibility they need to choose which product.
Want to use and have only need one piece of equipment to do so.
Great. That's on that sounds very good that's all I have thanks very much you're very welcome.
Again, ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone youth next question can spend on a name.
Lineup, we tried new winner with SBB Leerink your lifestyle.
Hi, this is and on for rich.
Just a quick question from Us and I was just wondering if you.
And maybe talk about the photonics deal and how you're progressing along and the synergy targets that you guys have laid out.
Well I'll speak to the deal and thoughts and get to the numbers. We are thrilled with how the deal as you say is working out you know the from whether it were looking at the employees are were looking at you know in retrospect, what the assets where.
It's it's from a rationale perspective, it's everything we propose it to be before we before we propose it to our board and we're from an integration target perspective, we are on our integration targets. We closed the deal last year later than we had hoped to there was there was some delay that was related to I would say the board process that and <unk>.
But for having closed the deal the only target that we were even slightly up on was the actual filing of the tea, while NDA, which we were very transparent about last year and filing and approximately one month late otherwise we'd been on time.
And on time and I'll, let Bob speak to budget, so to speak with these synergy targets. Yeah. So as a reminder, the synergy target that we had outlined when we first talked about the deal was $20 million.
Captured by 2022.
Which was sort of within a 24 month window of of of ownership I'm happy to say that you know as we exited 2020, we were on a run rate that that Inc.
Meet that goal and and exceeds it and.
Slightly but we have exceeded that goal.
And have been able to leverage those savings in terms of making sure that we have a robust commercial presence ahead of the P. While opportunity, which we think.
No further leverages, our P&L and as we go into the you know into the coming years and that's net that's not only just from a you know.
Opex as a percentage of of revenue declines.
Declining, but also gross margin expansion opportunity that goes with it. So it's a fantastic opportunity that the teams have embraced and and they have delivered on.
Through the diligence of our.
Project management office, and and as well as the different teams and and again like I said, we it affords us the ability to invest in and those savings will become more evident as you look into the.
The second half and this year as I noted last last year.
And in July.
And I'll, just add and I, probably will continue to say hats off to what is now the entire Atlantis employee base. They accomplish this virtually with with very little time to prepare and and certainly not our preference that we we did that berkley as well and C. P. While NDA submission and everything else can be accomplished and in 'twenty.
20.
Great and and then just switching to the Fannie quickly I think you had mentioned that there was maybe some expansion into emergency situations like stroke and.
Is this included in the Tam and if not how holiday and your opportunity.
So please allow me to clarify perhaps I wasn't clear I was referencing on ongoing study in Brazil that would be the reference I was using I was I was offering insight into the possibilities for imaging enhancing agents, but my specific example, I was referring to a study that's underway and Brazil weird affinity is being study.
And for use in stroke and there isn't another study underway for use in myocardial infarction, but neither of those are currently in the indication and the current approved indications for the affinity and the U S market and neither of course are included and any revenue assumptions for definitive.
Okay. Thanks, so much.
We show no further question at this time, ladies and gentlemen, and thank you for participating in today's conference. This concludes the program you may disconnect and have a wonderful day.
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