Q4 2021 Lantheus Holdings Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to <unk> fourth quarter full year 2021 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.
This call is being recorded for replay purposes.
Replay of the webcast will be available in the investors section of the company's website approximately two hours. After the completion of the call and will be archived for 30 days.
I'll now turn the call over to your host for today's.
For today Mark <unk>.
<unk> senior director of Investor Relations Mark.
<unk>.
Thank you and good morning, welcome to Atlantis, This fourth quarter and full year 2021 financial results Conference call.
With me on todays call are Mary Anne Heino, our President and CEO , Bob Marshall, Our Chief Financial Officer, and Paul Blanchfield, Our Chief commercial officer.
<unk> will begin the call with introductory remarks, and then turn the call over to Paul to provide a commercial update.
Bob will cover our financial results and provide 2022 financial guidance and Marion will provide closing remarks, and then we will open the call for Q&A.
This morning, 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 2021 results.
You can find the release in the investors section of our website Atlantica is dot com.
For those of you not on the webcast you can find the slide presentation on the investors section of our website under the presentations tab.
Before we get started I would 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.
In particular at the hospital staffing levels and the impact of COVID-19 on our business results and outlook continues to be a best estimate based on currently available information.
Please note that we assume no obligation to update these forward looking statements, except as required by applicable law, even if actual results or future expectations change materially.
Please refer to our SEC filings for a detailed discussion of these risks and uncertainties.
Also discussions during this call will include certain non-GAAP financial measures.
Reconciliation of these measures to the most directly comparable GAAP financial measures is also included on.
On the investors section of our website.
With that it is my pleasure to now turn the call over to Maryann.
Thank you Mark and good morning to everyone joining us on today's call I Hope all of you are safe and healthy.
<unk> thousand 21 wasn't incredibly exciting and productive year for land as you can see from our fourth quarter and full year results, we significantly progressed, our strategy to accelerate growth and diversify our portfolio and position <unk> as a category leader in the markets in which we compete two.
<unk> 2021 was a year of significant achievement across our portfolio and I'll take a few minutes now to summarize our accomplishments.
In our prostate cancer franchise, we launched two products in 2021.
Polaris Sai, which received priority review designation in December 2020, and was approved by the FDA in May as the first commercially available <unk> targeted pet imaging agent for prostate cancer. As a reminder, <unk> is an F 18 labeled pet imaging agent that enables visualization of lymph node.
Bone and soft tissue metastasis to determine the presence or absence of recurrent <unk> metastatic PSA added prostate cancer.
We've been thrilled with the progress of Polaris <unk> launch and I'm excited to announce that fourth quarter sales exceeded $35 million during the quarter, we made outstanding progress across all our major business drivers supply contracting market access and customer adoption, we have significant momentum going into 2020.
Two with market access and customer demand continuing to be key drivers Paul will give you further details on the launch to date in a few minutes.
Along with our efforts to launch Polaris Sai. We've also partnered with several companies, including their regeneron and <unk> Biopharma to embed this is Pablo stat.
Imaging, which I will refer to as P yl into their prostate cancer therapeutic trials to assess <unk> expression. Similarly, we've incorporated <unk> into our own PSNH targeted therapeutic <unk> phase II trial of $2 95 to test for P. SMA avidity.
During 2021, we also announced a development and commercialization collaboration with reflects the on utilizing py al.
The collaboration is evaluating the use of <unk> to enable real time therapeutic guidance of biology guided radiotherapy with the goal of improving treatment options for prostate cancer patients.
Our second product in our <unk> targeted portfolio is Polaris by AI, which was cleared by the FDA just two months after Polaris <unk> approval.
<unk>.
<unk> is the first and only FDA cleared artificial intelligence enabled PSM a digital application that demonstrate demonstrates increased <unk>.
Efficiency and reproducibility of clinicians P. SMA Petitti image assessment, which we believe provides a distinct advantage for our prostate cancer franchise with FDA clearance. We are working to advance utility of AI enabled imaging diagnostics in prostate cancer.
Last month, we announced a collaboration with the prostate cancer clinical trial consortium or PCC Tc a premier Multicenter clinical research organization that specializes in cutting edge prostate cancer research.
Incentive this strategic collaboration is to integrate land pieces AI platform is it early phase <unk> studies to advance the discovery development and validation of novel AI enabled biomarkers.
For our Microbubble business in 2021 definitive sales continued to grow despite a year challenged by hospital staffing and other COVID-19 related issues, all during which we maintained our market leadership position.
In October 2021, we submitted a supplemental new drug application or <unk> for our on campus manufacturing facility for definitive, which we call Genesis and I am pleased to announce that we received FDA approval earlier this week.
This facility provides us with supply chain redundancy and the opportunity for margin expansion as we progressively include inventory from this manufacturing line into our supply chain.
In 2021, we successfully manufactured batches of defending our Genesis facility. So that the product will be ready for commercial sale. Upon FDA approval I'm pleased to announce that we have already begun shipping definitive framework Genesis manufacturing site to our customers.
Additionally earlier this month, we entered into a new manufacturing and supply agreement with our long standing definitive manufacturer JHS between our Genesis facility and our partner JHS. We believe we will have sufficient supply of definitive to meet our expected demand well into the future.
In 2021, we entered into another strategic collaboration for our Microbubble franchise.
This collaboration is with Allegheny Health network or a H N.
Hey, Chen is investigating our microbubble technology in combination with their ultrasound assisted gene therapy for the development of a treatment to zero stone, yet a chronic and debilitating condition with limited treatment options currently available for patients.
Turning to <unk> sales remained stable during 2021 as compared to the prior year.
We successfully navigated the negative impact of both the delta and on the infection rate spikes on supply chain logistics and continuously deliver our just in time generators to our customers throughout the year.
Etc. As a hospital based project product was impacted by staffing and other COVID-19 related challenges over the course of 2021 and this did negatively impact demand.
As such in 2021, we focused on building out our commercial and medical based field market model for etc, and introduced new marketing initiatives to increase awareness of pheochromocytoma and parrot Ganglioma for PPG L for referring physicians and does that youre as a treatment option for their patients.
We were pleased to see additional centers of excellence during the network of those centers offering et cetera treatment.
We believe when hospital conditions permit our team is well positioned to drive usage of his edra in PPG L patient.
Finally during 2021, we advanced our pipeline with prudent investments in March we announced that we acquired exclusive worldwide rights to develop manufacture and commercialize a novel imaging biomarker targeting fibroblast activation protein or fab.
We believe that is a promising target for cancer imaging and has broad potential to inform diagnosis and staging to guide patient selection for therapy and to monitor response to treatment across multiple tumor types.
We are pleased to partner with a very experienced team led by Dr. Alan Greene and Dr. John Babich, both proven experts in the development of Radiopharmaceuticals to move these agents into clinical trials.
We announced on our third quarter earnings call. The completion of an interim analysis of our ongoing phase III study of $2 95, RP SMA targeted therapeutics.
The independent data monitoring committee recommended the study continue without modification.
As a reminder, the Arrow study is a multicenter randomized open label controlled phase II clinical study evaluating the efficacy and safety of $2 95 in combination with <unk> compared.
Compared to <unk> alone in patients with metastatic castration resistant prostate cancer, who are paid the estimate added chemotherapy naive and have progressed on abiraterone.
As you can see over the course of 2021, we've made significant progress on our strategy to accelerate growth diversify our portfolio and position lenses as a category leader in the markets in which we compete in 2022, we are committed to continuing this same level of progress.
Now I'll turn the call over to Paul for a commercial update on our key products.
Thank you maryanne and good morning, everyone during.
During the fourth quarter, our commercial teams were productive and establishing Polaris side as the PMA pet imaging agent of choice for the U S prostate cancer community.
And growing definitive while maintaining our market leading position.
Starting with the <unk> launch as Maryann mentioned during our second full quarter since approval, we made significant progress across our major business drivers supply contracting market access and customer adoption.
This momentum has translated into fourth quarter sales of $36 million and full year sales of $44 million.
We expanded our pet manufacturing facility or Pms network from 18 to 21 activated sites.
In turn increased geographic coverage or the share of the U S population, we can reach through this network from two thirds to now approximately 80%.
We also invested in our capacity at existing Pms sites by adding additional synthesis boxes and securing additional time on cycle times.
While still selectively flying doses into certain markets, including Florida, Colorado, and Utah and advance of Pms activation in these remaining regions.
This facilitates patient access to clarify and it allows institutions to embed polar buy into their prostate cancer workflow.
Our broad manufacturing network and increased capacity, along with <unk> longer half life enables us to deliver doses to adjacent geographies.
Allowing us to efficiently and continually meet the needs of our customers and we think will prove a competitive advantage when competition becomes available.
In 2022, we will continue our efforts to increase <unk> supply through ongoing geographic expansion as well as increased capacity at existing sites.
Regarding market access specifically coverage coding and payment are pass through application to the centers for Medicare and Medicaid services or CMS was granted in November and went into effect January one 2022.
Transitional pass through payment status enables traditional Medicare to provide an incremental payment for pet Cte.
Done with polar bodies in the hospital outpatient setting.
As we mentioned last quarter, we received notification that our fixed fixed code, which enables streamlined billing also went into effect as of January one.
We believe the activation of pass through payment status and our hips picks code per clarify further facilitate patient access to our game changing P. SMA targeted imaging agent for prostate cancer.
We are also making progress in coverage of both indications with Medicare administrative contractors or macs, as well as with radiology benefit managers or rpms and traditional commercial payors.
As I shared last quarter. The majority of them that have either paid claims published guidance or have indicated they will cover polaris by usage and our approved indications.
In addition to major Rpms and a number of commercial payers have recently enacted policies to cover Polaris side in both recurrent and metastatic indications and we expect additional commercial payer policy reviews to take place in the coming months.
During the fourth quarter, we remain heavily focused on contracting and by year end, we had contracts in place with almost 90% of our targeted academic institutions in the U S treat prostate cancer.
As well as many community hospitals government facilities and freestanding imaging centers.
From a demand perspective, we are very pleased with the underlying trends in the range of ordering across our customer base with hospitals, comprising 63% of orders even prior to pass through initiation and independent imaging centers and government facilities, 27% and 10% respectively.
We are also encouraged by the rate of repeat demand increasing quarter over quarter with over 90% of customers having ordered multiple doses.
We are also excited to announce that we have partnered with life Sciences, a global medical device company in the prostate cancer space to have their dedicated U S urology and radiation oncology sales team support the promotion of Polaris Sai.
This partnership will fortify our existing promotional efforts as well as that of our Pms partners.
And enable us to build on our success and educating even more referring physicians on the availability and unique benefits of clarify.
We expect this partnership to be operational in April 2022.
As Maryann mentioned, we received FDA clearance for Polaris.
This past summer and launched the product at the annual meeting of the Radiological Society of North America, where our SMA at the end of November .
We believe clarify.
Provides a distinct advantage for Polaris Sai.
Clarify AI is designed to provide enhanced consistency and quantitative analysis and precise anatomical context and can enable quantitative reporting.
Collectively these benefits potentially contribute to increased greater efficiency and reproducibility of <unk> pet Cte image assessments.
Both our internal AI team and our partner sentiment have been working to introduce the software at key centers and began demonstrations with current clarify customers in December .
Finally, I want to provide you with an update on the total addressable market for <unk> pet imaging agents.
We currently believe the market potential could be up to 220000 annual scans an increase from the 170000 scans. We previously estimated.
These 220000 scan.
<unk> of approximately 90000 scans for men, who have intermediate unfavorable or high or very high risk of suspected metastases of prostate cancer.
And approximately 130000 stands for men with respect to recurrence.
We have revised our prior estimates based on clarifies broad label and CCM and <unk>.
Mmm guidelines as well as our refined understanding of how <unk> is being used in clinical practice.
This translates into a total addressable market for P estimate pet imaging agents of more than $900 million.
The market could be further expanded by additional scans coming from further use of the SMA pet imaging agents, if and when <unk> targeted therapeutic agents are approved.
Needless to say, we are excited about the launch and reception of Polaris <unk> to date and believe there is significant potential for us to grow the business and ensure Polaris <unk> remains the <unk> imaging agent of choice in the U S prostate cancer community.
Switching now to definitive the fourth quarter saw continued growth in year over year sales, even amidst the hospital staffing and COVID-19 related challenges.
The affinity has been impacted by hospital nursing and Sonographer shortages and we expect these headwinds to affect the first quarter of the year.
We also saw an increase in the portion of our promotional efforts done remotely.
Despite that we still maintain greater than 80% market share of the ultrasound enhancing agent market and grew our business, 19% per year and 6% in the fourth quarter.
As Maryann mentioned, we are committed to sustainable growth in existing and new markets for definitive.
During the fourth quarter, we shipped our first vials of definitive our team as well as our enhanced vial mix RFID, which is used to activate this entity doses with definitive <unk> customers now have the added choice of a room temperature formulation. In addition to our market leading refrigerated dips.
Cindy.
This enables those customers who prefer a non refrigerated product to be able to benefit from our definitive microbubble products.
As you can see we made significant progress in the launch of clarify and have continued to grow definitive and maintain our market leadership position.
I'll now turn the call over to Bob for a financial update.
Thank you Paul and good morning, everyone I will provide highlights of the fourth quarter and full year financials, focusing on adjusted results unless otherwise noted.
Turning now to the results revenue for the fourth quarter was $129 $6 million, an increase of 37, 6% over the prior year quarter. A comparison that includes our now divested Puerto Rico operation.
On a year to date basis revenue for the full year was $425 2 million an increase of 25, 3% on a similar comparison.
Beginning with precision diagnostics revenue of $87 million was <unk>, 8% higher for the prior year quarter sales of definitive net of rebates and allowances were $59 3 million or six 1% higher as compared to the prior year quarter.
We closed out 2021 with $232 8 million of net sales an increase of 18, 8% over the prior year.
<unk> net revenue was $22 million down one 5% from the prior year quarter due to an exited radio pharmacy contract, which occurred at the start of Q3 2021 offset in part by opportunistic generator sales to a key partner of $2 2 million.
During 2021 opportunistic generator sales contributed a total of $6 1 million of Technologic total $91 3 million, which was up seven 5% year over year.
Within other precision diagnostics denounce performance has continued at similar levels seen throughout 2021 and since the start of the pandemic.
Radiopharmaceutical oncology contributed $35 7 million of sales in the quarter up 3100% from the prior year quarter attributable to accelerating Polaris <unk> sales as noted by Paul earlier as.
As was the case in Q3 <unk> was down sequentially as usage remains more susceptible to.
Hospital access for both patients and sales representatives during heightened measures to control COVID-19 searches.
Lastly, strategic partnerships and other revenue was $6 8 million up 29% in the prior year quarter, driven primarily by the Relistor royalty stream.
Gross profit margin for the fourth quarter was 56, 5% an increase of 676 basis points over the fourth quarter of 2020 on a similar basis gross profit margin is slightly higher than forecasted for the quarter based on product mix with Polaris high volumes driving higher contribution offset by slightly lower.
Than expected contribution from <unk> and etcetera.
Operating expenses were 153 basis points favorable to prior year at 34, 8% of net revenue and within previously guided spending levels as I noted in the prior quarter, we intend to continue driving clarify sales with increasing effort around product awareness market access and contracting activities.
<unk> had activated pms as well as supporting definitive with a mix of in person and virtual sales and marketing activities.
R&D was higher on a dollar basis, but in line with prior year spending levels as a percentage of revenue reflecting costs associated with ongoing pipeline advancement.
G&A improved 270 basis points as a percentage of revenue in the quarter and was a key driver of overall leverage from operating expenses.
Operating profit for the quarter was $28 2 million or an increase of 122, 3% over the same period prior year.
Total adjustments in the quarter totaled $63 5 million of expense before taxes of this amount four point to an $8 $4 million of expenses associated with noncash stock and incentive plans and acquired intangible amortization respectively.
Also in the quarter, we recorded a $43 9 million net expense adjustment to contingent assets and liabilities, including the clarify CPR contingent liability. Additionally.
Additionally, the company recorded an expense of $5 4 million related to an acceleration of our asset retirement obligations due to a change in estimated useful life assumptions for certain of our manufacturing assets.
The remainder is related to acquisition integrated and other nonrecurring expenses are.
Our effective tax rate or ETR was 23, 5% in the quarter.
During the quarter, we released yet another portion of our uncertain tax position, our UTP provisions dating back to 2008 sale from BMS for which we are fully indemnified based on newly acquired information. The released flows through other income as an expense.
And through the tax provision as a benefit the net result.
Does not have an effect on net income, but does distort the underlying ETR for the period the full year ETR was 19, 8%.
The resulting reported net income in the fourth quarter was a loss of $40 2 million and a profit of $17 $2 million on an adjusted basis, an increase of 276.
Percent gap.
GAAP fully diluted earnings per share were a loss of <unk> 59, and a profit of <unk> 25 on an adjusted basis, an increase from the prior year, a 263, 5%.
On a full year basis GAAP fully diluted earnings per share were a loss of $1 <unk> and a profit of <unk> 49 on an adjusted basis, an increase of 4% over the prior year now.
Now turning to cash flow fourth quarter operating cash flow totaled $13 9 million as compared to <unk> 6 million in Q4 2020.
Capital expenditures totaled $4 5 million up <unk> 8 million from the prior year quarter free cash flow, which we define as operating cash flow less capital expenditures was $9 3 million an increase of $12 6 million from the prior year period. The main driver of the year over year variance is attributable to increased.
Stability unfavorable product mix and volume as well as increasing overall P&L leverage cash and cash equivalents net of restricted cash now stands at $98 $5 million. We continue to have access to our $200 million Undrawn bank revolver and are comfortable with our strong liquidity position.
Late in January we entered into a global settlement agreement with Novartis and its affiliates.
Settled certain intellectual property disputes. The settlement agreement includes among other things the dismissal of litigation in Germany related to <unk> 607.
<unk> targeted radiopharmaceutical compound under development by Novartis for the treatment of prostate cancer and the resolution of other certain.
Proceedings under the agreement, we will cross license certain patent rights to one another and Novartis will make a $24 million lump sum payment to us this item as outlined in our 10-K filed this morning. Additionally, this benefit has not been considered when either our full year, our first quarter 2022.
<unk>, which I will now turn to.
We expect growth to be driven by Polaris Sai supplemented by resilient growth profile from definitive within precision diagnostics.
We expect single.
Excuse me high single to low double digit growth from definitive for full year 2022, while <unk> will look much the same as 2021 after adjusting for the exited.
Customer contract as a reminder, that decision had a $10 million full year impact, which started in Q3 of last year.
Additionally, we don't typically forecast for opportunistic sales of <unk>, which had amounted to $6 1 million in 2021 base as I have already noted.
Radiopharmaceutical oncology was driven by a Polaris Sai and modestly by et cetera, or is that a forecast does assume however that COVID-19 variant impacts on hospitals lesson and sustained throughout 2022.
We forecast <unk> to be in a range of $300 million to $325 million for the full year.
Taken together with other revenue contributors, we estimate full year revenue to be a park and an approximate range of 685% to $710 million, an increase of approximately 60% and 65% over 2021.
For modeling purposes, both gross profit margin and operating expenses as a percentage of revenue to be several percentage points improved over Q4, 2021 metrics with favorable product mix and volume along with ongoing spend to capture and retain market share while investing in technology to drive efficiencies longer term.
Therefore for the full year, we expect fully diluted adjusted earnings per share to be in a range of $1 95 to $2 <unk>.
For the first quarter net revenue should be in a range of $160 million to $170 million.
As I have noted our guidance considers the Tien general impacts of COVID-19, notably on definitive etcetera and xenon.
Offset by ramping Polaris <unk> sales to assist with models the affinity.
<unk> flat to Q1 2021 due to the due.
Due to the aforementioned early quarter Covid impacts, while Polaris <unk> should be in the $70 million to $80 million range based on January trends.
Fully diluted adjusted earnings per share should be in a range of 45 to 50.
Lastly for modeling purposes, depreciation and amortization for the full year 2022 should be approximately $12 million and $37 million respectively.
Generally spread evenly throughout the year with that let me turn the call back over to Maryann. Thank.
Thank you Bob.
Closing 2021 was marked by the successful launch of Polaris Sai and another solid year of revenue and market leadership for definitive.
We diversified our revenue stream and ended the year with nearly $100 million in cash.
In 2021, we executed on our strategy to accelerate growth diversify our portfolio and position <unk> as a category leader in the markets we serve.
In 2022, we look to further establish clarify as the PSNH pet imaging agent of choice in the U S. Prostate cancer community maintain market leadership with our Microbubble franchise execute strategic transactions in line with our portfolio objectives and deliver on our financial objectives, which we believe will allow us to.
<unk> to deliver strong shareholder value.
Closing I would like to thank all land to get employees for their dedication and commitment to our patients and their unfailing passion to our purpose to find fight and follow disease. It is their commitment that continues to make what we achieve possible.
With that Bob Paul and I are now ready to take your questions. Operator. Please go ahead.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please stand by we compile the Q&A roster.
Our first question comes from Danielle <unk> from SBB Leerink. Your line is now open.
Hi, Good morning, guys. Thanks, so much for taking the question and well on the court hearing guidance that's amazing.
Just curious I appreciate you're increasing the Tam number one just what the go to market, if adding intermediate risk patients into the Tam changes that go to market strategy and sort of what's the confidence that you can capture those patients and also curious how youre thinking about penetration based on your guidance for Polaris.
And where that can ultimately go in and how quickly and then I have one follow up.
Sure Good morning Danielle.
I'm going to turn you over to Paul for that question and answer.
Thanks, so much Danielle so as I mentioned.
<unk>, obviously been looking at the total addressable market, we've upped our view of that market to 220000 scans.
On an annual basis.
We've upped that based on as I mentioned the label that we have for the risk of metastases prior to definitive therapy as well as guidelines for <unk> and <unk>.
Which have.
Combined with medical practice, expanding how physicians and payers are looking at the use of Polaris <unk> for the risk of metastases to not just very high but too high as well as intermediate.
And so from a good market model, we have always been viewed as looking at both the nuclear market as well as the referring physician market, meaning those that are actually doing the treating and the referring physicians that are writing the prescription and so it doesn't necessarily change our go to market model, but we will see that continued investment as and I highlighted.
Expanded partnership with <unk> Life Sciences, who will focus on in addition to our efforts as well as that of our Pms partners.
To promote clarify in the referring physician space and so it doesn't change our view of the market other than we believe it to be larger but our go to market model remains consistent and we remain incredibly focused on promoting <unk> to both the nuclear imaging positions as well as referring physicians and ensuring that our first and only <unk>.
Commercially available PSM, a pet imaging agent remains the product of choice.
With regards to <unk>.
Oh, sorry go ahead.
I said with regard to total addressable market, we obviously mentioned that its north of $900 million.
With the guidance that Bob preferred.
We can do the math on what penetration that would be today.
We continue to see growth into this market going forward.
Got it and I'm sorry to interrupt you. So just a follow up question on that and Thats related to competition and what Youre seeing there I mean, it seems a little silly to ask the question based on your guidance, but just any any early indications on how the competition is impacting your Polaris high adoption. Thank you so much.
Absolutely well today, we do remain the only commercially available PSM a pet imaging agent in the marketplace. We have contemplated competition. We are very well aware of competition that has been factored into our guidance, but currently we remain focused on maximizing the potential of polarity electrical today and in the future.
Through our promotional efforts through the launch of now our AI as we talked about in the fall and so that's been factored into our progress to date and two our guidance going forward, but we remain focused on ensuring that <unk> remains the best in class.
Preferred PSM that agent of choice.
Thank you.
And thank you and our next question comes from <unk>.
Jack winner from Jefferies. Your line is now open.
Hey, Thanks for taking the question and congrats on a blowout quarter here.
First on the Pms side cadence.
Through the quarter and then expectation.
Through 2022.
Do you expect to get.
As the year progresses, and then one just if you could give some color on margin benefits from Polaris and then also from.
Bringing manufacturing in house.
The spread between the two.
Zack good morning. Thanks for your questions I think on your question around Pms, we've kind of talked from the start of the launch that this is a continual build out that we will continue to focus on Paul referenced what progress we made through year end.
And as he also referenced we will continue to build out our pms network to satisfy our needs in the marketplace and that happens two ways. We look to continually add pms and then at the P&L that we're already using we add additional capacity by building an additional what we call synthesis boxes, which are literally the.
Factoring boxes in which clarify is made so it's a great way to add additional capacity, where you already are in addition to adding additional pms into our site as Paul mentioned in his comments, we're already covering approximately 90% of the U S. And you mentioned the couple of different geographic regions.
Where.
We are we are still flying doses into that we will additionally, recover or I'm, sorry, 80%, 80% I oversaw both they are a little bit they're correcting me in real time here.
And as we as we look out across the rest of 2022, we'll continue to take that number higher two to those areas that we can cover so it's a continual build out and we'll keep you updated across across a year I don't know Paul if you want to add any comments on that.
No I think it's a build out it's rolling out additional pms, but it's also expanding capacity at those as we highlighted so we're comfortable with our supply position, but continued to build that capacity as the person only commercially available.
Hey, Jim.
Yes, I apologize I think it was the contracting figure that was the 90% target that we had reached.
So <unk> with regard to gross margin contribution.
It is clearly being driven by a Polaris side, just to sort of recap a handful of the numbers that we had in the quarter gross margin was 56, 5% and we were at 52, 7% for the full year. So you can see.
That as Polaris Sai is ramping that clearly.
It is one of the single largest drivers in the quarter of that ramp which is also what informed our 2022 gross margin model now with regard to.
What drives the network continues to drive it I've always sort of mentioned it would come from a handful of things that would come from continued affinity growth. It would come from ramping Polaris <unk>, which clearly you can see we have good confidence.
I mean, as we look forward with.
With regard to our on campus manufacturing facility in terms of Genesis early days in terms of rolling out product it will be a contributor.
As we go further into the future. This is about dual supply. So we will be working inventory in and amongst the product that we have also getting from our partner in JHS. So.
That contribution will be a slower.
Contributor, but still will be there as we as we look to leverage that investment.
That's helpful and then one more just on a room temperature.
Going forward I guess.
2022, where do you expect the mix to be between the legacy product.
Our T version and is there any margin benefit to RT or ASP.
The increase to.
Archie versus the legacy product thanks for taking the question.
Hey, you're welcome Zac and.
We've never spoken to an intentional mix of the two products or trying to to create an intentional mix out in the marketplace. Our strategy with adding the two formulations has always been one of customer choice and offering customer choice because as the market leader. We feel that's important there is a competitive product out there that has a room temperature.
Formulation and so we brought <unk> to market to make sure that we could cover choice in the market. We also felt it was important because from again from a customer perspective in our partnerships and the partnership that we have.
In those cases the product is all is typically part of a complex product kit and we felt it was important to have a room temperature formulation available as part of a complex product kit, but we have never had as a strategy. It is part of our strategy to force product into the market and any percentage so youll never hear us.
Speaking to that and we don't also speak to any margin benefit or pricing difference between the two products. So that is not a strategy of ours either.
Understood. Thank you.
Yes.
And thank you.
And our next question comes from Larry Solow from CJS Securities. Your line is now open.
Great Awesome. Thank you very much congratulations really really strong start for clarifying.
Just a couple of follow ups on definitive it sounds like a little sluggishness.
Yes.
Pretty temporary closed and are related to staffing.
I think the staffing as soon as the Covid kind of really go crazy in the.
Early in the quarter, but it seems to have calmed down hopefully.
I think we could get a rebound in depending it doesn't sound like anything's changed for you or your longer term outlook still tickets.
Low double digit kind of grower.
Is that a fair statement.
Larry This is Bob good morning, Yes, our guidance does contemplate.
The definitive opportunity.
It's being what we've always expect it to be and this is why I would say that it's good.
Trying to give you a range that incorporates the early quarter Q1.
Kind of reads that spillover of what had been Delta and then omnicom.
And that didn't related impacts in the early part of the quarter and then as we would then see it then kind of.
Kind of recapture its trajectory into the in Q2 three four.
As we look forward. So no we still firmly believe in the opportunity there is definitive.
Market leader and we intend to continue to invest.
Two to drive that market share and protect it.
Right and on the.
Genesis Health product I think all along it was going to be able to dual source in the beginning or for a while.
And it sounds like a slow ramp at first but.
Over time do you expect this maybe not to be exclusive but do you expect maybe.
Maybe I don't know whats your sort of long term plan you eventually sort of bring most of it in house is that the goal or can you talk speak to that.
Well, Larry we're not providing specific mix if you will of how because again. This is also about protecting and dual sourcing.
A very important product to our portfolio. So yes, I mean, it's sort of.
Again early days with the product we have we have manufactured inventory on the shelf that we can start to integrate into the flow.
And we will we will.
Working emission kings and get get expertise behind it and.
The capacity opportunity with with that facility is significant so that we have the ability to.
To provide for our own total volume and growth, but at the same time I think it's also important from a bid.
Business continuity perspective to be able to continue to leverage the longstanding partnership that we've had and in wood.
I think that it will.
Will always be a mix.
Right, Okay, just a couple of clarify.
Real quick I know, you've never given actual unit price, but just from a high level.
Is your pricing sort of.
And the range, we thought it would be that.
The second question is just a technicality on the CPR on the contingent value rights I guess that the payments are done after the year does that come off on the P&L, how does that sort of accounted for.
So I'll start with the CVR and then.
Don't know if maybe policies or maryann you can take the price question, but with regard to the CVR. The way. They work just to remind people is that and it's based on.
Sales over $100 million in 2022 and over $150 million in 2023, and they are capped at 19, 9% of total consideration.
In the <unk> deal so as such our obligation is to accrue.
Based on a Monte Carlo simulation.
The potential liability that the company would have and so that obviously if you do that as you bring your forecast into those Monte Carlo analysis, which are done.
By third parties and we recorded that through the P&L. So you saw that come through the P&L in Q4.
In the GAAP P&L and of course, we evaluate those every single quarter and true them up from a from a from the perspective of.
Will they pay out and so you can see in the K. This morning, the total accumulated value thats there.
That will continue based on time value of money to to move and move around a little bit, but the cash payment itself, which then become it becomes a balance sheet item, where the contingent liability then becomes cash.
In what wins and likely be the.
First part of 2023, and 2024, respectively, depending on how the CVR is actually accrue.
And Larry as you know.
No.
Then our long standing policy in marine that we do not speak to pricing.
We'll tell you that as a matter of public record because we deal with Pms is an agency that the pricing of the product does get publicly reported through CMS on a trailing basis.
And so it does get publicly reported so I will say that the pricing of the products are the cros competitive products are fairly fairly similar.
Got it okay, great. Thank you very much.
Is it.
Yeah.
Yes.
Okay.
And thank you.
And I am showing no further questions I would now like to go ahead and close the call. This concludes today's conference call. Thank you for participating you may disconnect.
Okay.
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Yes.
Okay.
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