Lantheus
Annual Report 2011

Plain-text annual report

Use these links to rapidly review the documentTABLE OF CONTENTS Item 15. Exhibits and Financial Statement SchedulesTable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-KCommission File Number 333-169785LANTHEUS MEDICAL IMAGING, INC.(Exact name of registrant as specified in its charter)Delaware(State of incorporation) 51-0396366(IRS Employer Identification No.)331 Treble Cove Road, North Billerica,MA(Address of principal executive offices) 01862(Zip Code)(978) 671-8001(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No (Mark One)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the fiscal year ended December 31, 2011o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the transition period from to  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes  No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). Yes  No o Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or anyamendment to this form 10-K o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes o No  The registrant is a privately-held corporation, and accordingly, as of June 30, 2011, there is no public market for its common stock. The registranthad one thousand shares of common stock, $0.01 par value per share, issued and outstanding as of March 30, 2012. Large accelerated filer o Accelerated filer o Non-accelerated filer (Do not check if asmaller reporting company) Smaller reporting company oTable of ContentsTABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 30 Item 1B. Unresolved Staff Comments 52 Item 2. Properties 52 Item 3. Legal Proceedings 53 Item 4. Mine Safety Disclosures 53 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 54 Item 6. Selected Financial Data 54 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8. Financial Statements and Supplementary Data 85 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 128 Item 9A. Controls and Procedures 128 Item 9B. Other Information 128 PART III Item 10. Directors, Executive Officers and Corporate Governance 129 Item 11. Executive Compensation 132 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 150 Item 13. Certain Relationships and Related Transactions, and Director Independence 150 Item 14. Principal Accountant Fees and Services 152 PART IV Item 15. Exhibits and Financial Statement Schedules 153 Table of ContentsPART ICautionary Note Regarding Forward-Looking Statements Some of the statements contained in this annual report are forward-looking statements. Such forward-looking statements are subject to risks anduncertainties, including, in particular, statements about our plans, strategies, prospects and industry estimates. These statements identify prospectiveinformation and include words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "should," "predicts," "hopes" andsimilar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding: (i) our liquidity, includingour belief that our existing cash, cash equivalents and anticipated revenues are sufficient to fund our existing operating expenses, capital expendituresand liquidity requirements for at least the next twelve months; (ii) our outlook and expectations including, without limitation, in connection withcontinued market expansion and penetration for our commercial products, including DEFINITY, Ablavar and TechneLite; (iii) expected new productlaunch dates and market exclusivity periods; and (iv) outlook and expectations related to supply challenges following the Ben Venue Laboratories, Inc.,or BVL, shutdown. The foregoing is not an exclusive list of all forward-looking statements we make. Forward-looking statements are based on ourcurrent expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate tothe future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differmaterially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances offuture performance. The matters referred to in the forward-looking statements contained in this annual report may not in fact occur. We caution youtherefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those inthe forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and thefollowing:•our dependence upon third parties for the manufacture and supply of a substantial portion of our products, including our currentdependence on BVL, as the sole source manufacturer for DEFINITY and Neurolite and as our primary manufacturer for Cardioliteproducts; •risks associated with BVL's manufacturing of our products and the regulatory requirements related thereto; •risks associated with the technology transfer programs to secure production of our BVL-manufactured products from alternate contractmanufacturer sites; •our dependence on a limited number of third-party suppliers and the instability of global molybdenum-99 ("Moly") supply; •a sustained decrease in TechneLite generator demand following the end of the global Moly shortage; •our dependence on key customers, primarily Cardinal Health, Inc., or Cardinal, United Pharmacy Partners, Inc., or UPPI, and GEHealthcare, for our nuclear imaging products; •our inability to compete effectively; •ongoing generic competition to Cardiolite products; •our dependence upon third-party healthcare payors and the uncertainty of third-party coverage and reimbursement rates; •uncertainties regarding the impact of U.S. healthcare reform on our business, including related reimbursements of our products;1Table of Contents•our being subject to extensive government regulation and our potential inability to comply with such regulations; •the extensive costs, time and uncertainty associated with new product development, including further product development incooperation with a development partner or partners; •liability associated with our marketing and sales practices; •the occurrence of side effects with our products; •our inability to introduce new products and adapt to an evolving technology and diagnostic landscape, such as the much slower thananticipated market acceptance of Ablavar; •our exposure to product liability claims and environmental liability, including with respect to our recent recall of Cardiolite and Neurolitelots; •our inability to protect our intellectual property and the risk of claims that we have infringed on the intellectual property of others; •risks associated with the current economic environment, including the U.S. credit markets; •risks associated with our international operations; •our inability to adequately protect our technology infrastructure; •our inability to hire or retain skilled employees and the loss of any of our key personnel; •costs and other risks associated with the Sarbanes-Oxley Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of2010; •risks related to our outstanding indebtedness and our ability to satisfy such obligations, including in the event BVL is unable to provideus adequate product supply; and •other factors that are described in "Risk Factors," beginning on page 30. Any forward-looking statement made by us in this annual report speaks only as of the date on which it is made. Factors or events that could causeour actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publiclyupdate any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.Trademarks We own or have the rights to various trademarks, service marks and trade names, including, among others, the following: DEFINITY®,Ablavar®, TechneLite®, Cardiolite®, Neurolite®, Vialmix® and Lantheus Medical Imaging® referred to in this annual report. Solely for convenience,we refer to trademarks, service marks and trade names in this annual report without the TM, SM and ® symbols. Such references are not intended toindicate, in any way, that we will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks, service marks and tradenames. Each trademark, trade name or service mark of any other company appearing in this annual report, such as Myoview® and Optison® are, to ourknowledge, owned by such other company.2Table of ContentsItem 1. Business Unless the context requires otherwise, references to the "Company," "Lantheus," "LMI," "our company," "we," "us" and "our" refer to LantheusMedical Imaging, Inc. and its direct and indirect subsidiaries, references to "Lantheus Intermediate" refer to only Lantheus MI Intermediate, Inc., theparent of Lantheus, references to "Holdings" refer only to Lantheus MI Holdings, Inc., the parent of Lantheus Intermediate.Overview We are a global leader in developing, manufacturing and distributing innovative diagnostic medical imaging agents and products that assistclinicians in the diagnosis of cardiovascular diseases such as coronary artery disease, congestive heart failure and stroke, peripheral vascular disease andother diseases. Our current marketed products are used by nuclear physicians, cardiologists, radiologists, internal medicine physicians, technologists andsonographers working in a variety of clinical settings. We sell our products to radiopharmacies, hospitals, clinics, group practices, integrated deliverynetworks, group purchasing organizations and, in certain circumstances, wholesalers. In addition to our marketed products, we have three products inclinical and pre-clinical development including our lead Phase 3 product, flurpiridaz F 18, a myocardial perfusion imaging agent, or MPI, 18FLMI1195, a cardiac neuronal imaging agent, and BMS 753951 for the identification of vascular plaque. We expect on going investment in our clinicalprograms and research and development to remain an important component of our business strategy. We market our products globally and have operations in the United States, Puerto Rico, Canada and Australia and distribution relationships inEurope, Asia Pacific and Latin America.Our Products Our products assist clinicians in the diagnosis of cardiovascular and other diseases. We believe our imaging agents provide physicians withimproved diagnostic information that enables them to better identify and characterize—or rule out—disease, potentially achieve improved patientoutcomes, reduce patient risk and contain overall costs across the healthcare system.DEFINITY DEFINITY is an ultrasound contrast imaging agent delivered intravenously and indicated for use in patients with suboptimal echocardiograms.Numerous patient conditions can decrease the quality of images of the left ventricle, the primary pumping chamber of the heart. Of the nearly 27 millionechocardiograms performed each year in the United States, it is estimated that 20%, or approximately five million echocardiograms, produce suboptimalimages. The use of DEFINITY during echocardiography allows physicians to significantly improve their assessment of the function of the left ventricle. DEFINITY is a clear, colorless, sterile liquid, which upon activation by Vialmix, a medical device specifically designed for DEFINITY, becomes ahomogenous, opaque, milky white injectable suspension of perflutren-containing lipid microspheres. After activation and intravenous injection,DEFINITY improves the ultrasound delineation of the left ventricular endocardial border, or innermost layer of tissue that lines the chamber of the leftventricle. Better visualization of the ventricle wall allows clinicians to see wall motion abnormalities, namely that the heart muscle is not expanding andcontracting in a normal, consistent and predictable way. This allows clinicians to make more informed decisions about disease status. DEFINITY offersflexible dosing and administration through an IV bolus injection or continuous IV infusion. We believe DEFINITY's synthetic lipid-cased coating3Table of Contentsgives the compound a distinct competitive advantage because it provides a strong ultrasound signal without using human albumin. Since the launch of the product in 2001, DEFINITY has been used in imaging procedures in over 3.5 million patients throughout the world. In2011, DEFINITY was the leading ultrasound imaging agent used by echocardiologists, used in approximately two percent of all echocardiogramsperformed in the United States. DEFINITY primarily competes with Optison, a GE Healthcare product, as well as other imaging modalities. In October 2007, the U.S. Food and Drug Administration, or the FDA, requested that all of the manufacturers of ultrasound contrast agents,including DEFINITY, add a boxed warning to their products to notify physicians and patients about potentially serious safety concerns or risks posedby the products. See "Item 1A—Risk Factors—Ultrasound contrast agents may cause side effects which could limit our ability to sell DEFINITY." DEFINITY has historically been manufactured exclusively at BVL. We have initiated technology transfer activities with Jubilant HollisterStierLLC, or JHS, for the manufacture of DEFINITY at the JHS facility in Spokane, WA. See "—Raw Materials and Supply Relationships—Ben VenueLaboratories, Inc. and Technology Transfer." DEFINITY is currently patent protected in the United States until 2021 and in numerous foreign jurisdictions with protection until 2019.DEFINITY generated revenue of $68.5 million for the year ended December 31, 2011, and $60.0 million for the year ended December 31, 2010.DEFINITY represented approximately 19%, 17% and 12% of our total revenues in 2011, 2010 and 2009, respectively.TechneLite TechneLite is a self-contained system or generator of Technetium, a radioactive isotope or radioisotope, used by radiopharmacies to preparevarious nuclear imaging agents. The TechneLite generator is a little larger than a coffee can in size and the self-contained system houses a vertical glasscolumn at its core that contains fission-produced Moly. Moly is a radioisotope that is produced in research reactors by bombarding uranium-235 withneutrons. Moly has a 66 hour half-life and degrades into, among other things, Technetium, a radioisotope with a much shorter half-life of only sixhours. During our manufacturing process, Moly is added to the column within the generator where it is adsorbed onto alumina powder. The column issterilized, enclosed in a lead shield and further sealed in a cylindrical plastic container, which is then shipped to our radiopharmacy customers. Becauseof the 66 hour half-life of Moly, radiopharmacies typically purchase TechneLite generators on a weekly basis. Technetium is the medical isotope that is attached to the chemical composition of Cardiolite and a number of other radiopharmaceuticals during theradiolabeling process. To radiolabel Technetium-based radiopharmaceuticals, a vial of sterile saline and a vacuum vial are each affixed to the top of aTechneLite generator. The sterile saline is pulled through the generator where it attracts Technetium resulting from the degrading of Moly within thegenerator column. The Technetium-containing radioactive saline is then pulled into the vacuum vial and combined by a radiopharmacist with theapplicable imaging agent, and individual patient-specific radiolabeled imaging agent doses are then prepared. When administered, the imaging agentbinds to specific tissues and organs for a period of time, illustrating the functional health of the imaged tissues. Our ability to produce and marketTechneLite is highly dependent on our supply of Moly. See "—Raw Materials and Supply Relationships—Molybdenum-99." TechneLite is produced in thirteen size variations and is currently marketed in North America, Europe, Australia and Latin America, largely toradiopharmacies that prepare unit doses of radiopharmaceutical imaging agents and ship these directly to hospitals. We have supply arrangements4Table of Contentswith significant radiopharmacy chains, including Cardinal, UPPI and GE Healthcare. In the United States, TechneLite is estimated to have about 45% ofthe market share of this segment and primarily competes with Technetium-based generators produced by the Mallinckrodt division of Covidien, PLC.,or Covidien. In the United States, TechneLite has an economic advantage in shipping over internationally produced competitive products due to the hightransport costs of these products and the short half-life of Moly and Technetium. Although TechneLite has no current patent protection, given the significant know-how and trade secrets associated with the methods ofmanufacturing and assembling the TechneLite generator, we believe we have a substantial amount of valuable and defensible proprietary intellectualproperty associated with the product. In addition, we are pursuing patent protection in the United States and other countries on component technology,which, if granted, will expire in 2029. TechneLite generated revenue of $131.2 million for the year ended December 31, 2011 and $122.0 million for theyear ended December 31, 2010. TechneLite represented approximately 37%, 34% and 31% of total revenues in 2011, 2010 and 2009, respectively.Cardiolite Cardiolite, also known by its generic name sestamibi, is a Technetium-based radiopharmaceutical imaging agent used in myocardial perfusionimaging, or MPI, procedures to detect coronary artery disease using single-photon emission computed tomography, or SPECT. An MPI test is anoninvasive exam used to assess blood flow to the muscle of the heart. Prior to the exam, Cardiolite, sold as a vial of lyophilized powder, is chemicallycombined with radioactive saline from a Technetium-based generator, like TechneLite, and prepared for intravenous injection. Upon injection, Cardioliteenters the blood stream and is taken up by the heart muscle cells that receive sufficient blood flow, while the heart is imaged by a SPECT camera thatdetects the gamma rays released by Technetium attached to the Cardiolite. The resulting images provide clinicians with a 3-D map of where the bloodflow to the heart is adequate. This product is primarily used for detecting coronary artery disease. MPI tests with Cardiolite provide clinicians withimportant diagnostic information pertaining to risk of adverse patient outcomes, such as heart attack and unexpected death caused by loss of heartfunction. Cardiolite was approved by the FDA in 1990 and its market exclusivity expired in July 2008. With the advent of generic competition in September2008, we have faced significant pricing pressure on Cardiolite. Prior to our BVL-related supply challenges, we believe our share declined fromapproximately one-half to approximately one-third of the MPI segment. During 2011, we have seen our share of the MPI segment decline to just overone-fourth. See "—Raw Materials and Supply Relationships—Ben Venue Laboratories, Inc. and Technology Transfer." We believe we have been ableto retain substantial segment share because of strong brand awareness and loyalty within the cardiology community, as well as our relationships withkey distribution partners. As part of our strategy to compete in this segment, we also sell Cardiolite in the form of a generic sestamibi at a slightly lowerprice to branded Cardiolite while at the same time continuing to sell branded Cardiolite throughout the MPI segment. We believe this strategy of sellingbranded as well as generic sestamibi allows us to maintain total segment share by having multiple sestamibi offerings that are attractive in terms of brandas well as price. Our ability to market Cardiolite products is highly dependent on our supply of Moly. See "—Raw Materials and Supply Relationships—Molybdenum-99." Cardiolite is currently marketed in North America, Europe, Latin America, Asia Pacific and Australia and generic sestamibi is currently marketedin the United States. Since the launch of Cardiolite in 1991, Cardiolite products have been used to image nearly 50 million patients in the United States.Cardiolite products generated revenue of $65.3 million for the year ended December 31,5Table of Contents2011, and $77.4 million for the year ended December 31, 2010. Cardiolite represented approximately 18%, 22% and 33% of total revenues in 2011,2010 and 2009, respectively.Other Marketed Products In addition to the products listed above, our other products are important imaging agents in specific segments, which provide a stable base ofrecurring revenue. Most of these products have a favorable industry position as a result of our substantial infrastructure investment, our specializedworkforce, our technical know-how and our established industry position and customer relationships.•Xenon Xe 133 Gas, is a radiopharmaceutical inhaled gas used to assess pulmonary function and evaluate blood flow, particularly in thebrain. Xenon is manufactured by a third party and packaged in-house. In 2011 and 2010, Xenon Xe 133 Gas represented approximately8% and 6%, respectively, of our total revenues. •Neurolite, is an injectable radiopharmaceutical imaging agent used with SPECT technology to identify the location of strokes in patientswho have already suffered from a stroke. We launched Neurolite in 1995. In 2011 and 2010, Neurolite represented approximately 3%and 5%, respectively, of our total revenues. •Thallium Tl 201, is an injectable radiopharmaceutical imaging agent used in MPI studies using a gamma camera for the diagnosis andlocalization of myocardial infarction, or MI. Thallium does not need to be chemically combined with Technetium. We have marketedThallium since 1977 and manufacture it in-house using cyclotrons. In 2011 and 2010, Thallium represented approximately 2% and 5%,respectively, of our total revenues. •Gallium Ga67, is an injectable radiopharmaceutical imaging agent used in demonstrating the presence of Hodgkin's disease, lymphomasand bronchogenic carcinomas. We manufacture Gallium in-house using cyclotrons. In both 2011 and 2010, Gallium representedapproximately 2% of our total revenues. •Samarium 153, is a radioisotope used to prepare Quadramet, an injectable radiopharmaceutical used to treat severe bone pain associatedwith certain kinds of cancer. We receive Samarium from a third party and finish and package it in-house for a different third party. Inboth 2011 and 2010, Samarium represented approximately 2% of our total revenues. •Ablavar, is a gadolinium-based contrast agent and the first and only contrast agent approved for use in magnetic resonance angiography,or MRA, in the United States. We launched Ablavar in January 2010. In 2011, Ablavar represented 0.5% of our total revenues. For revenue and other financial information for our U.S. and International segments, see Note 18, "Segment Information" to our consolidatedfinancial statements.Our Competitive Strengths We believe that our business model provides us with a strong platform to reach our strategic goal of providing cost effective, beneficial diagnosticmedical imaging agents and products to clinicians to enable them to either identify and characterize—or rule out—disease and thus improve patient care.We believe our competitive strengths include:Established Leader with Strong Brand and Leading Market Position within the Diagnostic Medical Imaging Industry We are a global leader in the diagnostic medical imaging industry with over fifty years of commercial experience. We believe our innovative andmarket leading products have provided us with strong brand recognition among customers, opinion leaders, professional societies and the physician6Table of Contentscommunity. Our key brands include: Cardiolite, the single largest revenue generating imaging agent with over $4 billion in cumulative sales, which wedeveloped and launched in 1991; DEFINITY, the leading cardiac echocardiogram contrast imaging agent based on revenue and usage; and, TechneLite,our Technetium-based generator used by radiopharmacies to radiolabel our Cardiolite products and other Technetium-based imaging agents that are usedin combination with nuclear imaging technologies. We believe that our primary focus on the cardiovascular segment allows us to leverage ourdevelopment and commercialization expertise as well as our strong distribution network.Leading Development and Commercialization Capabilities We believe we are recognized throughout the industry for the development and commercialization of innovative diagnostic imaging agents. Wewere the first to commercialize a number of imaging agents and products in various modalities, including Thallium-201, the first MPI agent that welaunched in 1977, as well as Cardiolite and TechneLite, both leading products in our industry. We believe that our expertise, particularly in the utilizationof radioisotopes, will enable us to continue our track record of successfully developing and launching both next-generation and first-in-class products.Our dedication to continued development efforts is evidenced by our pipeline consisting of three new product candidates. We believe that each of theseproduct candidates represents a large market opportunity and has the potential to significantly enhance current imaging modalities and to fulfill currentlyunmet diagnostic medical imaging needs. Our lead product candidate, flurpiridaz F 18, is currently in Phase 3 clinical development, which clinical trialenrollment commenced in June 2011. We also have a cardiac neuronal imaging agent that has completed a Phase 1 study and a vascular remodelingimaging agent that is in late-stage preclinical development. For the years ended December 31, 2011, 2010 and 2009, we invested $40.9 million,$45.1 million and $44.6 million, respectively, in research and development.Strong and Established Distribution Network and Direct Sales Force We have a strong global distribution network including long-term relationships with Cardinal and UPPI, who together distributed an estimated75% of SPECT doses sold by radiopharmacies in the United States in the first half of 2011. In the United States, we have contracts with Cardinal andUPPI for the distribution of Cardiolite and TechneLite and with GE Healthcare for the distribution of TechneLite. For our contrast agents, DEFINITYand Ablavar, we have a direct sales force of approximately 85 people in the United States that calls on prescribers as well as group purchasingorganizations and integrated delivery networks. We believe that this sales force will also be the basis of our sales force that will market and sell futureimaging agents. Internationally, we utilize independent distributor relationships in Europe, Asia and Latin America to distribute our nuclear imaging andcontrast agent products. In March 2012, we entered into a new distribution arrangement for DEFINITY in China, Hong Kong S.A.R. andMacau S.A.R. with China Resources Double-Crane Pharmaceutical Co., Ltd. ("Double-Crane"), a leading pharmaceutical company located in Beijing.We believe that the Chinese market has strong growth potential for the use of contrast in echocardiography. In July 2010, we announced a newdistribution arrangement for DEFINITY in India, another market which we believe eventually will have strong growth potential for the use of contrastin echocardiography. In Canada, we own five radiopharmacies and have our own sales force, which allows us to perform the marketing, distributionand sale of our nuclear products. Similarly, in both Australia and Puerto Rico, we operate two radiopharmacies each and have our own sales force.Complex Manufacturing Capabilities and Regulatory Capabilities We believe that our expertise in the design, development and validation of complex manufacturing systems and processes that many of ourradiopharmaceutical products require due to their limited half-lives, as well as our track record of just-in-time manufacturing, has enabled us to become aleader in the diagnostic medical imaging industry. We maintain manufacturing operations at our North7Table of ContentsBillerica, Massachusetts facility, where we manufacture TechneLite on a highly-automated production line. We also manufacture Thallium and Galliumat this site using our cyclotron technology. In addition to our in-house manufacturing capabilities, a substantial portion of our products, includingDEFINITY, Cardiolite and Neurolite, are manufactured by third-party suppliers, and in certain instances, we rely on sole source manufacturing. Inorder to ensure the quality of the products that are manufactured by third parties, all raw materials are sent to our Billerica facility and tested by us priorto use. Furthermore, the final product is sent back to us for final quality control testing prior to shipment. We operate in a highly regulated environmentwith multiple governing agencies and organizations. We believe our experience in complying with the stringent regulatory requirements for the handlingof nuclear materials creates a significant competitive advantage. Our highly experienced workforce provides us the technical expertise to manufactureand distribute radioactive products both safely and reliably.Diversified and Global Moly Supply Chain We have a diversified and balanced global Moly supply chain, including processing facilities in Canada, South Africa, Belgium and Australia, fedby seven separate research reactors. We believe our position as a leading purchaser of Moly enables us to maintain strong relationships with multiplesuppliers of this raw material, thus minimizing the risk of supply disruption.Strong Historical Financial Profile The strength of our product portfolio, as evidenced by our leading position across most diagnostic modalities in which we participate, hascontributed to our strong historical financial performance. Historically, we have been able to generate significant free cash flow, which has been drivenprimarily by our favorable operating margins, minimal maintenance capital expenditure and working capital requirements. Our cash flow fromoperations enabled us to continue to expand our product portfolio and the continued advancement of our clinical and preclinical development program.We have historically and will continue to rely on our arrangements with leading distributors of radiopharmaceuticals for sales of ourradiopharmaceutical products, providing availability for funding of other future growth initiatives.Stable, Experienced Management Team Our senior management team has an average of over 20 years of healthcare industry experience and consists of industry leaders with significantexpertise in product development and commercialization. Our management team is led by Don Kiepert, President and Chief Executive Officer, who hasmore than 35 years of healthcare industry experience. We believe that the strength of our management team demonstrates our expertise within thediagnostic medical imaging industry and our ability to operate in a highly regulated environment.Research and Development; Product Pipeline For the years ended December 31, 2011, 2010 and 2009, we invested $40.9 million, $45.1 million and $44.6 million, respectively, in research anddevelopment to provide our R&D organization with the resources to continue discovering and developing new diagnostic medical imaging agents. Wemaintain full R&D capabilities from discovery through clinical development, including Phase 4 post-marketing studies. In addition, our research anddevelopment team includes our medical affairs and medical information functions, which educate physicians on the scientific aspects of our commercialproducts and the approved indications, labeling and the costs of monitoring adverse events. We have developed a strong product pipeline of threeproducts which were discovered and developed in-house and are protected by patents and patent applications we own in the United States andnumerous foreign jurisdictions.8Table of ContentsFlurpiridaz F 18—PET Perfusion Agent—Myocardial Perfusion We are developing flurpiridaz F 18, a radiopharmaceutical imaging agent radiolabeled with fluorine-18, which we believe has the potential tobecome a leading next-generation MPI agent to work with positron emission tomography, or PET, technology. Today, most MPI procedures useSPECT technology with gamma cameras. Although this imaging provides substantial clinical value, there is growing interest in the medical communityto utilize technology such as PET that can provide meaningful advantages. PET is an imaging technology that when used in combination with anappropriate radiopharmaceutical imaging agent can provide important insights into physiologic and metabolic processes in the body and be useful inevaluating a variety of conditions including neurological disease, heart disease and cancer. PET imaging has demonstrated broad utility for diagnosis,prognosis, disease staging and therapeutic response. Images generated with PET technology typically exhibit very high image resolution because ofsubstantially higher signal to noise efficiency, a measure of the efficiency by which energy can be captured to create an image. Although SPECT imaging used in conjunction with a radiopharmaceutical imaging agent, such as Cardiolite, is most commonly used for MPIstudies, PET imaging has gained considerable support in the field of cardiovascular imaging as it offers many advantages to SPECT imaging. Theseadvantages include: higher image quality, quantitative heart muscle blood flow information, improved diagnostic accuracy, accurate risk stratificationand reduced patient radiation exposure. The use of PET technology in MPI tests represents a broad emerging application for a technology morecommonly associated with oncology and neurology. We believe flurpiridaz F 18 has significant potential as we anticipate that the adoption of PETtechnology in MPI tests will increase significantly in the future.Flurpiridaz F 18 Clinical Overview We submitted an Investigational New Drug Application, or IND, for flurpiridaz F 18 to the FDA in August 2006. Our clinical program to date hasconsisted of three Phase 1 studies and a Phase 2 clinical trial, conducted from 2007 to 2010, involving 208 subjects who received PET MPI performedwith flurpiridaz F 18.Flurpiridaz F 18 Phase 2 Trial We evaluated flurpiridaz F 18 in a Phase 2 trial consisting of 176 subjects from 21 centers. These subjects underwent rest and stress flurpiridazF 18 and SPECT MPI, both of which were evaluated for safety. 86 subjects underwent coronary angiography, the current standard clinical method fordiagnosing coronary artery disease. Coronary angiography is an invasive procedure using fluoroscopy performed in a cardiac catheterization lab whilethe subject is under mild sedation. These 86 subjects formed the population for evaluating diagnostic performance. PET MPI was performed withflurpiridaz F 18 at rest and at stress utilizing pharmacological coronary vasodilation or treadmill exercise. Unlike currently available PET imaging agentsfor MPI with half lives measured in seconds, flurpiridaz F 18 can be used in conjunction with treadmill exercise given its substantially longer 110minute half-life. The Phase 2 trial results showed the following:•a significantly higher percentage of images were rated as either excellent or good quality with PET imaging, compared to SPECTimaging for stress images (98.8% vs. 84.9%, p<0.01) and rest images (95.3% vs. 69.8%, p<0.01); •diagnostic certainty of interpretation, the percentage of cases with definitely abnormal or definitely normal interpretation, wassignificantly higher for flurpiridaz F 18 compared to SPECT (90.7% vs. 75.6%, p<0.01); •the area under the ROC curve (the relative operating characteristic curve comparing the true positive rate to the false positive rate forcoronary artery disease diagnosis) was significantly9Table of Contentshigher for flurpiridaz F 18 than SPECT (0.82±0.05 vs. 0.70±0.05, p<0.05), indicating higher diagnostic performance;•sensitivity with flurpiridaz F 18 imaging was significantly higher than SPECT (78.8% vs. 61.5%, p=0.02); •although a trend toward higher specificity was noted, due to the limited number of patients, the study was not statistically powered toconclusively demonstrate this advantage; and •no drug-related serious adverse events were observed. The results of the Phase 2 trial demonstrated that PET MPI with flurpiridaz F 18 provided superior image quality, diagnostic certainty anddiagnostic performance for detecting coronary artery disease compared to SPECT MPI, the current standard for the non-invasive detection of coronaryartery disease. The data also demonstrated a positive safety profile for PET imaging with flurpiridaz F 18.Flurpiridaz F 18 Phase 3 Trial In March 2011, we received Special Protocol Assessment approval from the FDA for our first of two clinical trials in our Phase 3 clinical programfor flurpiridaz F 18. The Phase 3 program includes two open-label, multicenter trials to assess the diagnostic efficacy, both sensitivity and specificity, offlurpiridaz F 18 PET MPI, compared with SPECT MPI in the detection of significant coronary artery disease. The trials will enroll a total ofapproximately 1,350 subjects at approximately 100 sites globally. Coronary angiography will be the truth standard for all subjects. The clinicaldevelopment program includes hypotheses for superiority for sensitivity and non-inferiority for specificity with an adequate sample size to demonstratesuperior specificity if present. An interim analysis will take place upon 50 percent enrollment of the first trial. We enrolled our first subjects in the firstof two Phase 3 trials in June 2011.(18)F LMI1195—Cardiac Neuronal Activity Imaging Agent We are developing 18F LMI1195, also an internally discovered small molecule, designed to go to cardiac sympathetic neurons, the nerves whichregulate the heart. Sympathetic nerve activation increases the heart rate, constricts blood vessels and raises blood pressure by releasing aneurotransmitter called norepinephrine throughout the heart. Changes in the cardiac sympathetic nervous system have been related to the potential forheart failure progression and susceptibility to sometimes fatal arrhythmias. Heart failure is a major public health problem in North America, associated with high morbidity and mortality, frequent hospitalizations and amajor cost burden on the community. In the U.S. alone, there are over 5 million patients living with heart failure, and over a half million new diagnoseseach year. Mortality for this condition is around 8-12% annually. Expensive therapies for heart failure are often utilized without effective predictors ofpatient response. Costly device therapies (for example, implantable cardiac defibrillators, or ICDs, and cardiac resynchronization therapy, or CRT) areoften used, although they sometimes do not provide any benefits or are activated in only a minority of recipients. Conversely, heart failure clinicalpractice guidelines currently preclude the use of device therapy in many patients who might benefit. Thus, a key opportunity is to better match patients totreatment based on the identification of the underlying molecular status of disease progression. 18F LMI1195 is taken up by the transporter that regulates norepinephrine released by the sympathetic nervous system at multiple nerve endings ofthe heart. We believe that PET imaging of 18F LMI1195 may help clinicians to evaluate the status of the cardiac sympathetic nervous system in heartfailure patients and guide drug therapy or the usefulness of anti-arrhythmia devices such as ICDs.10Table of Contents In several clinical studies, the use of ICDs in heart failure patients have demonstrated a decreased risk of sudden cardiac death, which claims asmany as 450,000 lives every year in the United States. According to the American Heart Association, patients who have suffered a heart attack have afour to six times higher risk of sudden cardiac death, while chronic heart failure patients have a six to nine times higher risk of sudden cardiac death.Approximately fourteen ICD implants are needed over a five-year period to save one life and the use of ICDs, costing between approximately $50,000and $100,000 per procedure, are expensive. As a result, we believe patients and the healthcare system would both benefit from the ability to moreaccurately identify patients who would benefit from an ICD placement. We have completed a Phase 1 study of 18F LMI1195 using PET imaging. Twelve normal subjects were injected intravenously with approximately6 millicuries of LMI1195, imaged sequentially for a period of approximately 5 hours and monitored closely to observe any potential adverse events.Excellent quality images were obtained and the radiation dose to the subjects was found to be well within acceptable limits. Blood radioactivity clearedquickly and lung activity was low throughout the study. The agent appeared to have a favorable safety profile.BMS 753951—Vascular Remodeling We are developing BMS 753951, an internally discovered gadolinium-based magnetic resonance imaging, or MRI, contrast agent targeted toelastin in the arterial walls and atherosclerotic plaque. We believe that this agent will allow non-invasive assessment of plaque location, burden, type ofarterial wall remodeling and therefore the potential for a vascular event, which, in turn, could lead to heart attack or stroke. Elastin has a key role in the structure of the arterial wall and in biological signaling functions. Several pathological stimuli may be responsible fortriggering elastogenesis in atherosclerosis, leading to a marked increase in elastin content during plaque development. In addition to the increase inelastin seen in autopsy samples from patients with carotid atherosclerosis, there is also an increase of elastin in aortic aneurysm samples. As a result, anelastin-specific imaging agent may facilitate noninvasive detection of remodeling of the arterial walls. Arterial plaque rupture is a leading cause of heart attack and stroke. In 2002, approximately 865,000 people in the United States had a new orrecurrent MI and 179,514 died of the event. The majority of these events occurred in individuals older than 35 years of age, an age range thatapproximately totaled 140 million people in 2002. Of the individuals who died of heart attacks, more than 50% had not had a previous history of heartdisease. This indicates that the health care community is not currently identifying and treating individuals at risk of MI. Similarly, there areapproximately 500,000 new and 200,000 recurrent strokes each year, which resulted in 162,672 deaths in 2002, the most recent year for which data isavailable. Again, we believe there is a substantial opportunity to better identify individuals at risk of having such an event. The major risk factors foratherosclerosis, including systemic hypertension, diabetes, cigarette smoking, family history and hypercholesterolemia, have contributed to thecontinued burden of coronary artery disease. The majority of the assessments of atherosclerosis are currently obtained using angiography or MPI. We believe that MRI technology using BMS753951 provides the opportunity to identify the presence and characteristics of atherosclerosis and to prescribe treatments to prevent or minimize therisks of cardiovascular events. In our preclinical work, we have identified a series of low molecular weight molecules that bind to elastin and final optimization is ongoing. Ourlead molecule, BMS 753951, has been used to demonstrate utility in a number of different animal models.11Table of ContentsPossible Partnering We are currently considering seeking one or more development and commercialization partners to assist us with our lead clinical candidate. Wemay also consider partnering or outlicensing earlier stage clinical candidates in the future.Distribution, Marketing and Sales We distribute our nuclear imaging products in the United States and internationally through radiopharmacies, distributor relationships and ourdirect sales force. In the United States, these agents are primarily distributed through radiopharmacies, the majority of which are controlled by orassociated with Cardinal, UPPI, Triad Isotopes, Inc., or Triad, and GE Healthcare. In the United States, we sell our contrast agents, DEFINITY andAblavar, through our direct sales force of approximately 85 representatives. In addition, we own radiopharmacies and sell directly to end users in Canada, Puerto Rico and Australia. In the rest of the world, includingEurope, Asia Pacific and Latin America, we utilize distributor relationships to market, distribute and sell our products. In March 2012, we entered into anew distribution arrangement for DEFINITY in China, Hong Kong S.A.R. and Macau S.A.R. with Double-Crane. We believe that the Chinese markethas strong growth potential for the use of contrast in echocardiography. In July 2010, we announced a new distribution arrangement for DEFINITY inIndia, another market which we believe eventually has strong growth potential for the use of contrast in echocardiography. Cardinal maintains approximately 156 radiopharmacies that are typically located in large, densely populated urban areas. We estimate thatCardinal's radiopharmacies distributed approximately 47% of the aggregate U.S. SPECT doses sold in the first half of 2011. We currently have twoagreements with Cardinal, one for the distribution of Cardiolite and the other for the distribution of TechneLite generators. The agreements containprovisions allowing for early termination by either party. Specifically, the Cardiolite agreement allows for termination upon the occurrence of specifiedevents, including a material breach of a material provision of the agreement by either party, Cardinal's termination of its business operations in thenuclear medicine industry, Cardinal's failure to submit required reports, Cardinal's failure to follow trademark usage guidelines and force majeureevents. The TechneLite agreement allows for termination upon the occurrence of specified events, including a material breach of a provision of theagreement by either party and force majeure events. The TechneLite and Cardiolite agreements both expire on December 31, 2012. UPPI is a cooperative purchasing group of over 84 independently owned or smaller chains radiopharmacies located in the United States. UPPI'spharmacies are typically broadly geographically dispersed, with some urban presence and a substantial number of pharmacies located in suburban andrural areas of the country. We estimate that these independent radiopharmacies plus an additional 23 unofficial independent radiopharmacies, distributedover one-quarter of the aggregate U.S. SPECT doses sold in 2011. We currently have an agreement with UPPI for the distribution of both Cardioliteand TechneLite products to pharmacies or families of pharmacies within the UPPI cooperative purchasing group. The agreement contains specifiedpricing levels based upon specified purchase amounts for UPPI. We are entitled to terminate the UPPI agreement upon 60 days written notice. TheUPPI agreement expires on December 31, 2013. In August 2011, Triad, a chain of 64 radiopharmacies that is a member of UPPI, announced its separation from the cooperative purchasing group.Following Triad's separation from UPPI, our agreement with them has continued on substantially the same terms as those contained in the UPPIagreement.12Table of Contents GE Healthcare maintains 31 radiopharmacies that purchase our TechneLite generators. These radiopharmacies primarily distribute GE Healthcare'sMyoview, a Technetium-labeled MPI agent. We estimate that GE Healthcare distributed approximately 11% of the aggregate U.S. SPECT doses sold inthe first half of 2011. We currently have one agreement with GE Healthcare for the distribution of TechneLite and other products. The agreementprovides that GE Healthcare will purchase TechneLite generators as well as certain other products in the United States or Canada from us. Theagreement also allows for termination upon the occurrence of specified events, including a material breach by either party, bankruptcy by either partyand force majeure events. The original agreement would have expired on December 31, 2014. On March 19, 2012, we entered into an amendment toour agreement with GE Healthcare that extends the term of the agreement until December 31, 2017 and reduces GE Healthcare's annual purchaserequirements over the extended term such that we will still have a substantial majority of GE Healthcare's TechneLite generator business. Theamendment is not expected to materially impact our results of operations. Our agreement may be terminated by either party on (i) three years' writtennotice relating to TechneLite prior to December 31, 2013, (ii) two years' written notice relating to TechneLite on and after December 31, 2013 and(iii) six months' written notice relating to the other products. Our agreement also allows for termination upon the occurrence of specified eventsincluding a material breach by either party, bankruptcy by either party and force majeure events. In addition to the distribution arrangements for our radiopharmaceutical products described above, we also sell our radiopharmaceutical productsdirectly to hospitals and clinics that maintain in-house radiopharmaceutical capabilities and operations, although this is a small percentage of overall salesbecause the majority of hospitals and clinics do not maintain these in-house capabilities. For our contrast agents, DEFINITY and Ablavar, in the UnitedStates we have a direct sales force of approximately 85 representatives that calls on prescribers as well as group purchasing organizations and integrateddelivery networks. We believe that this sales force will also be the basis of our sales force that will market and sell future imaging agents. For the yearended December 31, 2011, sales by our direct sales force represented approximately 19% of our total revenues. We own five radiopharmacies in Canada and two radiopharmacies in each of Australia and Puerto Rico. We also maintain our own direct salesforces in these markets so we can control the marketing, distribution and sale of our imaging agents in these regions. In the rest of the world, we rely on distributors to market, distribute and sell our products, either on a country-by-country basis or on a multi-country regional basis.Customers For the year ended December 31, 2011, our largest customers were Cardinal, GE Healthcare, UPPI and Triad, accounting for approximately 27%,11%, 8%, and 5%, respectively, of our global net sales.Competition We compete primarily on the ability of our products to capture market share. We believe that our key product characteristics such as provenefficacy, reliability and safety coupled with our core competencies such as our efficient manufacturing processes, established distribution network, fieldsales organization and customer service, are important factors that distinguish us from our competitors. The market for diagnostic medical imaging agents is highly competitive and continually evolving. Our principal competitors in existing diagnosticmodalities include large, global companies that are more diversified than we are and have substantial financial, manufacturing, sales and marketing,distribution and other resources, such as Covidien, GE Healthcare, Ion Beam Applications, Bayer, Bracco Diagnostics Inc., or Bracco, and DRAXISSpecialty Pharmaceuticals Inc. (an affiliate of JHS),13Table of Contentsor Draxis, as well as other competitors. We cannot anticipate their competitive actions, such as price reductions on products that are comparable to ourown, development of new products that are more cost-effective or have superior performance than our current products, and the introduction of genericversions when our proprietary products lose their patent protection. Our current or future products could be rendered obsolete or uneconomical as aresult of this competition. Generic competition has eroded our share for Cardiolite, beginning in September 2008 when the first generic product was launched. We arecurrently aware of four separate third-party generic offerings of sestamibi. We also sell our own generic version of sestamibi. Prior to our BVL-relatedsupply challenges, we believe our share declined from approximately one-half to approximately one-third of the MPI segment. During 2011, we haveseen our share of the MPI segment decline to just over one-quarter. See "Item 1A—Risk Factors—Our dependence upon third parties for themanufacture and supply of a substantial portion of our products could prevent us from delivering our products to our customers in the requiredquantities, within the required timeframe, or at all, which could result in order cancellations and decreased revenues" and "Item 1A—Risk Factors—Generic competition has eroded our share of the MPI segment for Cardiolite products and will likely continue to do so."Raw Materials and Supply Relationships We rely on certain raw materials and supplies to create our products. Due to the specialized nature of our products and the limited supply of rawmaterials in the market, we have several relationships with key suppliers. While all of our raw materials are important to our products, our most widelyused raw material is Moly. For the year ended December 31, 2011, our largest suppliers of all of our raw materials and supplies were Nordion andMallinckrodt, accounting for approximately 26% and 11% of our total purchases, respectively.Molybdenum-99 TechneLite and Cardiolite both are dependent on Moly, the radioisotope which is produced by bombarding Uranium-235 with neutrons in researchreactors. Moly is the most common radioisotope used for medical diagnostic imaging purposes. With a 66 hour half-life, Moly degrades intoTechnetium, another radioisotope with a half-life of six hours that is the isotope that is attached to the chemical composition of Cardiolite and a numberof other radiopharmaceuticals during the radiolabeling process. There are nine major medical isotope reactors located around the world which produce significant amounts of Moly:•NRU, owned and operated by Atomic Energy of Canada Limited, or AECL, a Crown corporation of the Government of Canada, locatedin Chalk River, Ontario; •High Flux Reactor, or HFR, located in The Netherlands; •BR2 located in Belgium; •OSIRIS located in France; •SAFARI located in South Africa; •OPAL located in Australia; •LVR-10 located in the Czech Republic; •MARIA located in Poland; and •RA-8 located in Argentina.14Table of Contents Moly produced at these reactors is then finished at one of six processing sites:•Nordion, formerly known as MDS Nordion, in Canada; •Covidien in The Netherlands; •NTP Radioisotopes, or NTP, in South Africa; •Institute for Radioelements, or IRE, in Belgium; •ANSTO in Australia; and •CNEA in Argentina. Finished Moly is then sold to Technetium generator manufacturers, including us. These reactors are taken off-line for short periods of time forperiodic refueling and routine inspection and maintenance. For example, the NRU reactor was off-line for four weeks starting in May 2011 for routineinspection and maintenance. However, reactors are less frequently taken off-line for longer durations. From May 2009 until August 2010, the NRUreactor was taken off-line due to a heavy water leak in the reactor vessel and subsequent extended repairs. See "Item 7—Management's Discussion andAnalysis of Financial Condition and Results of Operations" for a discussion of the impact that this global shortage had on our business. Historically, our largest supplier of Moly has been Nordion, which relies on the NRU reactor for its supply of Moly. Our agreement with Nordioncontains minimum purchase requirements. The agreement allows for termination upon the occurrence of certain events, including failure by us topurchase a minimum amount of Moly per week, failure to comply with material obligations by either party, bankruptcy of either party or force majeureevents. The agreement expires on December 31, 2013. Our agreement with NTP includes their consortium partner, IRE, together with, more recently, ANSTO. The agreement contains minimumpurchase requirements and allows for termination upon the occurrence of certain events, including failure by NTP to provide our required amount ofMoly, material breach of any provision by either party, bankruptcy by either party and force majeure events. Additionally, we have the ability toterminate the agreement with six months written notice prior to the expiration of the term of the agreement. The agreement expires on December 31,2013. We are also pursuing additional sources of Moly from potential new producers around the world to further augment our current supply. Inaddition, we are exploring a number of alternative projects that seek to produce Moly with existing or new reactors or technologies.Other Materials We have additional supply arrangements for active pharmaceutical ingredients, or APIs, excipients, packaging materials and other materials andcomponents, none of which are exclusive, but a number of which are sole source, and all of which we believe are either in good standing or easilyreplaceable without any material disruption to our business.Manufacturing We maintain manufacturing operations at our North Billerica, Massachusetts facility, where we manufacture TechneLite on a highly-automatedproduction line. We also manufacture Thallium and Gallium at this site using our cyclotron technology. In addition to our in-house manufacturingcapabilities, a substantial portion of our products are manufactured by third-party suppliers, and in certain instances, we rely on sole sourcemanufacturing. To ensure the quality of the products that are manufactured by third parties, all raw materials are sent to our North Billerica facilitywhere they are tested by us prior to use. Furthermore, the final product is sent back to us for final quality control15Table of Contentstesting prior to shipment. We have expertise in the design, development and validation of complex manufacturing systems and processes, and our strongexecution and quality control culture supports our just-in-time manufacturing model at our North Billerica facility.Ben Venue Laboratories, Inc. and Technology Transfer We currently rely on BVL as our sole source manufacturer for DEFINITY and Neurolite and as our primary manufacturer for our Cardioliteproduct supply. All of our products are manufactured by BVL within the South Complex of its Bedford, Ohio facility (the "South Complex"). In July2010, BVL temporarily shut down the South Complex to upgrade the facility to meet certain regulatory requirements. In anticipation of this shutdown, BVL manufactured for us additional inventory of these products to meet our expected needs during the shutdownperiod, which was originally anticipated to end in March 2011. After a series of unexpected delays, BVL recently communicated to its customers, including us, that its restart activities in the South Complex werecontinuing and that in cooperation with the FDA, BVL planned to perform additional quality testing and analysis to remediate on-going particulateissues. We can give no assurances as to when BVL will finally resume full production of our products or whether BVL will be able to successfullymanufacture and distribute product thereafter. See "Item 1A—Risk Factors—Our dependence upon third parties for the manufacture and supply of asubstantial portion of our products could prevent us from delivering our products to our customers in the required quantities, within the requiredtimeframe, or at all, which could result in order cancellations and decreased revenues." In addition, in August 2011, BVL announced that it will be transitioning out of the contract manufacturing business over the next few years.Because of BVL's ongoing regulatory issues and our mutual desire to enter into a new contractual relationship to replace the original arrangement, weand BVL have: (i) terminated the original manufacturing agreement (the "2008 Agreement") and entered into a Settlement and Mutual ReleaseAgreement (the "Settlement Agreement"); (ii) entered into a Transition Services Agreement (the "Transition Services Agreement"), under which BVLwill manufacture for us an initial supply of Definity, Cardiolite, Neurolite, and certain TechneLite accessories; and (iii) entered into a Manufacturing andService Contract (the "Manufacturing and Service Contract") under which BVL will manufacture for us supplies of Definity, Cardiolite, Neurolite, andcertain TechneLite accessories following the initial supply provided under the Transition Services Agreement through 2013. The 2008 Agreement hadan initial term of five years.•In the Settlement Agreement, we and BVL agreed to a broad mutual waiver and release for all matters that occurred prior to the date ofthe Settlement Agreement, a covenant not to sue and a settlement payment to us in the amount of $30,000,000. •Under the Transition Services Agreement, BVL will manufacture for us an initial supply of Definity, Cardiolite, Neurolite and certainTechneLite accessories, and will make weekly payments to us, up to an aggregate of $5,000,000, based on the timing of BVL's deliveryof the initial supply of our products. The agreement allows for unilateral termination by BVL in the event that regulatory action preventsmanufacturing our products for at least nine months during the term of the agreement. The agreement also allows for termination uponthe occurrence of specified events, including material breach by either party, bankruptcy by either party, force majeure events or sale,wind-down or cessation of business by BVL, and absent negligence or willful misconduct our sole remedy is the balance of the$5,000,000 net yet paid as liquidated damages. The agreement will expire upon the earlier of (a) the release of the final batch of productaccepted by us pursuant to the terms of the Transition Services Agreement or (b) December 31, 2013.16Table of Contents•Under the Manufacturing and Service Contract, BVL will manufacture for us supplies of Definity, Cardiolite, Neurolite and certainTechneLite accessories following the initial supply provided under the Transition Services Agreement. The agreement allows forunilateral termination by BVL in the event that regulatory action prevents manufacturing for the full term of the agreement. Theagreement also allows for termination upon the occurrence of specified events, including material breach or bankruptcy by either party,or force majeure events or sale, wind-down or cessation of business by BVL. The agreement expires on December 31, 2013. In connection with these transition plans, we are also expediting a number of technology transfer programs to secure and qualify production of ourBVL-manufactured products from alternate contract manufacturer sites.•DEFINITY—we entered into a Manufacturing and Supply Agreement, effective as of February 1, 2012, with JHS, for the manufactureof DEFINITY. Under the agreement, JHS has agreed to manufacture DEFINITY for an initial term of five years. We have the right toextend the agreement for an additional five-year period, with automatic renewals for additional one year periods thereafter. Theagreement allows for termination upon the occurrence of certain events such as a material breach or default by either party, or bankruptcyby either party. The agreement also requires us to place orders for a minimum percentage of our requirements for DEFINITY with JHS.We are also seeking to secure additional contract manufacturers for DEFINITY. •Cardiolite—we currently have a secondary manufacturer for a portion of our Cardiolite supply. We are also seeking to secure additionalcontract manufacturers for Cardiolite. •Neurolite—we are currently working to replace BVL as the manufacturer of Neurolite with one or more alternate contract manufacturers. Notwithstanding our efforts to expedite these technology transfer programs, based on our current projections, we believe that we will have limitedCardiolite product supply from our alternate supplier during 2012 and sufficient DEFINITY inventory until early in the second quarter of 2012. Theinventory of Neurolite previously supplied to us by BVL has now been exhausted. We are pursuing new manufacturing relationships to establish andsecure additional long-term or alternative suppliers of Cardiolite, Neurolite and DEFINITY as described above, but it is uncertain of the timing as towhen these arrangements could provide meaningful quantities of product. In addition, if BVL is not able to provide us adequate product supply for afurther prolonged period of time, we will need to continue to implement additional expense reduction and operating and strategic initiatives. See "Item1A—Risk Factors—Our dependence upon third parties for the manufacture and supply of a substantial portion of our products could prevent us fromdelivering our products to our customers in the required quantities, within the required timeframe, or at all, which could result in order cancellations anddecreased revenues" and "Risk Factors—Challenges with product quality or product performance, including defects, caused by us or our supplierscould result in a decrease in customers and sales, unexpected expenses and loss of market share."Covidien We rely on sole source manufacturing for Ablavar at Covidien. The agreement requires us to purchase a minimum amount of Ablavar and can beamended or terminated by mutual written agreement at any time. See "Item 1A—Risk Factors—Our business depends on our ability to introduce newproducts and adapt to a changing technology and diagnostic landscape". The agreement also allows for termination upon the occurrence of certain eventssuch as a material breach or default by either party, or bankruptcy by either party. In October 2011, we entered into an amendment to extend the term ofthe agreement from September 30, 2012 until September 30, 2014, reduce the amount of API we are obligated to purchase over the term of theagreement, and increase the amount of finished17Table of Contentsdrug product we are obligated to purchase over the term of the agreement. At December 31, 2011 the remaining purchase commitment under theamended agreement was approximately $11.1 million.PET Manufacturing Facilities For flurpiridaz F 18, we will have to implement a new manufacturing model where we provide the chemical ingredients of the imaging agent toPET radiopharmacies that have fluorine-18 radioisotope-producing cyclotrons on premises. The ingredients will be combined with fluorine-18manufactured in these radiopharmacies in specially designed chemistry synthesis boxes to generate the final radiopharmaceutical imaging agent,flurpiridaz F 18. Radiopharmacists will be able to prepare and dispense patient-specific doses from the final product. However, because each of thesePET radiopharmacies will be deemed by the FDA to be a separate manufacturing site for flurpiridaz F 18, each will have to be included in our NewDrug Application, or NDA, and subsequent FDA filings. As a result, we will have quality and oversight responsibility for these PET radiopharmacies,unlike the current relationship we have with our nuclear imaging agent distributors that operate radiopharmacies. Such responsibilities will require us tocommit additional financial and human resources, and will potentially expose us to additional liability. We are currently in the process of evaluating theoperational and economic implications of this new manufacturing model and have initiated discussions with multiple possible PET manufacturingpartners to assist us in the manufacturing and distribution of flurpiridaz F 18.Research and Development We are committed to investing in the field of diagnostic imaging and developing the next generation of imaging agents to advance patient care. Inaddition to our full development capabilities, including Phase 4 post-marketing studies, our development team has medical affairs and medicalinformation functions, which educate physicians on the scientific aspects of our commercial products and the approved indications, labeling and thecosts of monitoring adverse events to enhance the effectiveness of our product launches. For the years ended December 31, 2011, 2010 and 2009, we invested $40.9 million, $45.1 million and $44.6 million, respectively, in research anddevelopment to provide our organization with the resources to continue developing new diagnostic medical imaging agents.Intellectual Property Patents, trademarks and other intellectual property rights are very important to our business. We also rely on trade secrets, manufacturing know-how, technological innovations and licensing agreements to maintain and improve our competitive position. We review third-party proprietary rights,including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-partyproprietary rights, identify licensing opportunities and monitor the intellectual property owned by others. Our ability to enforce and protect ourintellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture marketposition in such countries by utilizing technologies that are similar to those developed or licensed by us. Competitors also may harm our sales bydesigning products that mirror the capabilities of our products or technology without infringing our intellectual property rights. If we do not obtainsufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, our competitiveness could beimpaired, which would limit our growth and future revenue.18Table of ContentsTrademarks, Service Marks and Trade Names We own various trademarks, service marks and trade names, including DEFINITY, Cardiolite, TechneLite, Ablavar, Neurolite and LantheusMedical Imaging. We have registered these six trademarks, as well as others, in the United States and numerous foreign jurisdictions.Patents We actively seek to protect the proprietary technology that we consider important to our business, including chemical species, compositions andformulations, their methods of use and processes for their manufacture, as new intellectual property is developed. In addition to seeking patentprotection in the United States, we file patent applications in numerous foreign countries in order to further protect the inventions that we considerimportant to the development of our foreign business. We also rely upon trade secrets and contracts to protect our proprietary information. As ofFebruary 29, 2012, our patent portfolio included a total of 48 issued U.S. patents, 265 issued foreign patents, 16 pending patent applications in theUnited States and 109 pending foreign applications including claims covering the composition of matter and methods of use for all of our preclinical andclinical stage candidates. Our patents cover many of our commercial products, and our patent protection is generally in the United States, Canada, Mexico, most of WesternEurope and Scandinavia (including Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Italy, Luxembourg, Netherlands, Norway,Spain, Switzerland and Sweden), and markets in Asia (including China, Hong Kong, Japan, Singapore and South Korea) and Latin America (includingArgentina and Brazil). For DEFINITY, we hold a number of different compositions of matter, use, formulation and manufacturing patents, with U.S.patent protection until 2021 and patent or regulatory extension protection in Canada, Europe and parts of Asia until 2019. For Ablavar, we hold anumber of different compositions of matter, use, formulation and manufacturing patents, with the last U.S. patent not expiring until 2020 withregulatory extension. Cardiolite is no longer covered by patent protection in either the United States or the rest of the world, and Neurolite has limitedpatent protection in the United States until 2012. Although TechneLite has no current patent protection, given the significant know-how and tradesecrets associated with the methods of manufacturing and assembling the TechneLite generator, we believe we have a substantial amount of valuableand defensible proprietary intellectual property associated with the product. In addition, we are pursuing specific patent protection in the United Statesand other countries on component technology, which, if granted, will expire in 2029. Thallium, Gallium and Xenon are all generic radiopharmaceuticals.We have patents and patent applications in numerous jurisdictions covering composition, use, formulation and manufacturing of flurpiridaz F 18, one ofwhich, if granted, will expire in 2031 and a composition patent in the United States expiring in 2026 in the absence of any regulatory extension and weare currently prosecuting patent applications which, if granted would extend the patent life for this product until 2033 in the absence of regulatoryextension. We also have patent applications in numerous jurisdictions covering composition, use, and synthesis of our cardiac neuronal imaging agentcandidate, some of which, if granted, will expire in 2027 and some in 2031 in the absence of any patent term adjustment or regulatory extensions.Additionally, we have patent applications in numerous jurisdictions covering composition, use and synthesis of our vascular remodeling compound,some of which if granted, will expire in 2029 and some in 2030 in the absence of any patent term adjustment or regulatory extensions. In addition to patents, we rely where necessary upon unpatented trade secrets and know-how, proprietary information, and continuingtechnological innovation to develop and maintain our competitive position. For example, although TechneLite does not have numerous patentsprotecting it, given the significant know-how and trade secrets associated with the methods of manufacturing and assembling the TechneLite generator,we believe we have a substantial amount of valuable and defensible proprietary intellectual property associated with this product. We seek to protect ourproprietary information, in part, using confidentiality agreements with our collaborators, employees,19Table of Contentsconsultants and other third parties and invention assignment agreements with our employees. These confidentiality agreements may not preventunauthorized disclosure of trade secrets and other proprietary information, and we cannot assure you that an employee or an outside party will not makean unauthorized disclosure of our trade secrets, other technical know-how or proprietary information. We may not have adequate remedies for anyunauthorized disclosure. This might happen intentionally or inadvertently. It is possible that a competitor will make use of such information, and that ourcompetitive position will be compromised, in spite of any legal action we might take against persons making such unauthorized disclosures. In addition,our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our collaborators, employees andconsultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how andinventions. In addition, we license a limited number of third-party technologies and other intellectual property rights that are incorporated into some elementsof our drug discovery and development efforts. These licenses are not material to our business, and the technologies can be obtained from multiplesources. We are currently party to separate royalty-free, non-exclusive, cross-licenses with each of Bracco, GE Healthcare and Imcor PharmaceuticalCompany which give us freedom to operate in connection with contrast-enhanced ultrasound imaging technology. We also in-license certain freedom tooperate rights for Ablavar from, among others, Bayer.Regulatory MattersFood and Drug Laws The development, manufacture, sale and distribution of our products are subject to comprehensive governmental regulation both within and outsidethe United States. A number of factors substantially increase the time, difficulty and costs incurred in obtaining and maintaining the approval to marketnewly developed and existing products. These factors include governmental regulation, such as detailed inspection of and controls over research andlaboratory procedures, clinical investigations, manufacturing, narcotic licensing, marketing, sampling, distribution, import and export, record keepingand storage and disposal practices, together with various post-marketing requirements. Governmental regulatory actions can result in the seizure orrecall of products, suspension or revocation of the authority necessary for their production and sale as well as other civil or criminal sanctions. Our activities in the development, manufacture, packaging or repackaging of our pharmaceutical and medical device products subjects us to a widevariety of laws and regulations. We are required to register for permits and/or licenses with, seek approvals from and comply with operating andsecurity standards of the FDA, the U.S. Nuclear Regulatory Commission ("NRC"), the U.S. Department of Health and Human Services ("HHS"),Health Canada, the European Medicines Agency ("EMA"), and various state and provincial boards of pharmacy, state and provincial controlledsubstance agencies, state and provincial health departments and/or comparable state and provincial agencies as well as foreign agencies, and certainaccrediting bodies depending upon the type of operations and location of product distribution, manufacturing and sale. The FDA and various state regulatory authorities regulate the research, testing, manufacture, safety, labeling, storage, recordkeeping, premarketapproval, marketing, advertising and promotion, import and export and sales and distribution of pharmaceutical products in the United States. Prior tomarketing a pharmaceutical product, we must first receive FDA approval. Specifically, in the United States, the FDA regulates drugs under the FederalFood, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, and implementing regulations. The process of obtaining regulatoryapprovals and compliance with appropriate federal, state, local, and foreign statutes and regulations require the20Table of Contentsexpenditure of substantial time and financial resources. The process required by the FDA before a drug product may be marketed in the United Statesgenerally involves the following:•completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices regulations; •submission to the FDA of an IND which must become effective before human clinical studies may begin; •performance of adequate and well-controlled human clinical studies according to Good Clinical Practices and other requirements, toestablish the safety and efficacy of the proposed drug product for its intended use; •submission to the FDA of a New Drug Application, or NDA, for a new drug; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug product is produced to assesscompliance with current Good Manufacturing Practices, or cGMP, regulations; and •FDA review and approval of the NDA. The testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain that any approvals for ourproduct candidates will be granted on a timely basis, if at all. Once a pharmaceutical product candidate is identified for development, it enters thepreclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity, formulation, and stability, as well as animalstudies to assess its potential safety and efficacy. This testing culminates in the submission of the IND to the FDA. Once the IND becomes effective,the clinical trial program may begin. Human clinical studies are typically conducted in three sequential phases that may overlap or be combined: Phase 1. The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism,distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be tooinherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. Phase 2. Involves studies in a limited patient population to identify possible adverse effects and safety risks, to evaluate preliminarily theefficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule. Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to collect sufficient safety and effectiveness data to support the NDA forFDA approval. Sponsors may request a special protocol assessment from the FDA. The FDA's special protocol assessment process creates a written agreementbetween the sponsoring company and the FDA regarding the clinical trial design and other clinical trial issues that can be used to support approval of acandidate product. The special protocol assessment is intended to provide assurance that if the agreed-upon clinical trial protocols are followed and thetrial endpoints are achieved, the data may serve as the primary basis for an efficacy claim in support of an NDA. However, the special protocolassessment agreement is not a guarantee of an approval of a product or any permissible claims about the product. In particular, the special protocolassessment is not binding on the FDA if public health concerns become evident that are unrecognized at the time that the special protocol assessmentagreement is entered into, other new scientific concerns regarding product safety or efficacy arise, or if the sponsor company fails to comply with theagreed upon trial protocols.21Table of Contents Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and safety reports must be submitted tothe FDA and the investigators for serious and unexpected adverse events. Submissions must also be made to inform the FDA of certain changes to theclinical trial protocol. Federal law also requires the sponsor to register the trials on public databases when they are initiated, and to disclose the results ofthe trials on public databases upon completion. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, ifat all. The FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjectsor patients are being exposed to an unacceptable health risk. Similarly, an institutional review board, or IRB, can suspend or terminate approval of aclinical study at its institution if the clinical study is not being conducted in accordance with the IRB's requirements or if the drug product has beenassociated with unexpected serious harm to patients. Failure to register a trial or disclose study results within the required time periods could result inpenalties, including civil monetary penalties. Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about thechemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance withcGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among otherthings, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final product. Additionally, appropriatepackaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptabledeterioration over its shelf life. The results of product development, preclinical studies, and clinical studies, along with descriptions of the manufacturing process, analytical testsconducted on the drug product, proposed labeling, and other relevant information, are submitted to the FDA as part of an NDA for a new drug,requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee. A waiver of such fee may beobtained under certain limited circumstances. The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if theapplicable regulatory criteria are not satisfied. The FDA has substantial discretion in the product approval process, and it is impossible to predict withany certainty whether and when the FDA will grant marketing approval. The FDA may on occasion require the sponsor of an NDA to conductadditional clinical studies or to provide other scientific or technical information about the product, and these additional requirements may lead tounanticipated delay or expense. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy thecriteria for approval. Data obtained from clinical studies are not always conclusive, and the FDA may interpret data differently than we interpret thesame data. If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings orprecautions be included in the product labeling. In addition, the FDA may require Phase 4 testing which involves clinical studies designed to furtherassess a drug product's safety and effectiveness after NDA approval. The FDA also may impose risk evaluation mitigation strategies, or REMS, on aproduct if the FDA believes there is a reason to monitor the safety of the drug in the marketplace. REMS are a regulatory tool that the FDA appliesbased on a case-by-case assessment as to whether a REMS is needed. While the FDA has not used its REMS enforcement authority for every productapproval, it has exercised this authority on a regular basis, and it is anticipated the agency will continue to do so going forward. REMS could addtraining requirements for healthcare professionals, safety communications efforts, and limits on channels of distribution, among other things. Thesponsor would be required to evaluate and monitor the various REMS activities and adjust them if need be.22Table of ContentsWhether a REMS would be imposed on any of our products and any resulting financial impact is uncertain at this time. Any drug products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, productsampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion andadvertising requirements. The FDA strictly regulates labeling, advertising, promotion, and other types of information on products that are placed on themarket. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label and promotional claimsmust be appropriately balanced with important safety information and otherwise be adequately substantiated. Further, manufacturers of drugs mustcontinue to comply with cGMP requirements, which are extensive and require considerable time, resources, and ongoing investment to ensurecompliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented, and other types ofchanges to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval. Drug product manufacturers and other entities involved in the manufacturing and distribution of approved drugs products are required to registertheir establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain otheragencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including theproduction, processing, sterilization, packaging, labeling, storage and shipment of the drug product. Manufacturers must establish validated systems toensure that products meet specifications and regulatory standards, and test each product batch or lot prior to its release. In addition, in February 2012,the FDA announced that on June 12, 2012, it will begin to require that the manufacturers of commercial PET products, including radiopharmacies,hospitals and academic medical centers, either submit an NDA or Abbreviated New Drug Application, or ANDA, in order to produce PET drugs forclinical use, or produce the drugs under an IND. FDA also intends to release in the near future two draft guidances for PET drug producers thatdescribe the NDA process and set forth a description of FDA regulation of PET products. The FDA also regulates the preclinical and clinical testing, design, manufacture, safety, efficacy, labeling, storage, record keeping, sales anddistribution, postmarket adverse event reporting, import/export and advertising and promotion of any medical devices that we distribute pursuant to theFDCA and FDA's implementing regulations. The Federal Trade Commission shares jurisdiction with the FDA over the promotion and advertising ofcertain medical devices. The FDA can also impose restrictions on the sale, distribution or use of devices at the time of their clearance or approval, orsubsequent to marketing. Currently, two medical devices, both of which are manufactured by third parties who hold the product clearances, compriseonly a small portion of our total revenue. The FDA may withdraw a pharmaceutical or medical device product approval if compliance with regulatory standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on theproduct or even complete withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements mayresult in administrative or judicial actions, such as fines, warning letters, holds on clinical studies, product recalls or seizures, product detention orrefusal to permit the import or export of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing,injunctions, or civil or criminal penalties. Because our operations include nuclear pharmacies and related businesses, such as cyclotron facilities used to produce PET products used indiagnostic medical imaging, we are subject to regulation by the NRC or the departments of health of each state in which we operate and the23Table of Contentsapplicable state boards of pharmacy. In addition, the FDA is also involved in the regulation of cyclotron facilities where PET products are produced andcompliance with cGMP requirements and United States Pharmacopeia (USP) requirements for PET drug compounding. Drug laws also are in effect in many of the non-U.S. markets in which we conduct business. These laws range from comprehensive drug approvalrequirements to requests for product data or certifications. In addition, inspection of and controls over manufacturing, as well as monitoring of adverseevents, are components of most of these regulatory systems. Most of our business is subject to varying degrees of governmental regulation in thecountries in which we operate, and the general trend is toward increasingly stringent regulation. The exercise of broad regulatory powers by the FDAcontinues to result in increases in the amount of testing and documentation required for approval or clearance of new drugs and devices, all of whichadd to the expense of product introduction. Similar trends also are evident in major non-U.S. markets, including Canada, the European Union, Australiaand Japan. To assess and facilitate compliance with applicable FDA, NRC and other state, federal and foreign regulatory requirements, we regularly reviewour quality systems to assess their effectiveness and identify areas for improvement. As part of our quality review, we perform assessments of oursuppliers of the raw materials that are incorporated into products and conduct quality management reviews designed to inform management of keyissues that may affect the quality of our products. From time to time, we may determine that products we manufactured or marketed do not meet ourspecifications, published standards, such as those issued by the International Standards Organization, or regulatory requirements. When a quality orregulatory issue is identified, we investigate the issue and take appropriate corrective action, such as withdrawal of the product from the market,correction of the product at the customer location, notice to the customer of revised labeling and other actions.Drug Price Competition and Patent Term Restoration Act of 1984 The Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, provides for: (1) restoration of a portionof a product's patent term that was lost during clinical development and application review by the FDA; (2) statutory protection, known as exclusivity,against the FDA's acceptance or approval of certain competitor applications; and (3) the legal basis for the approval of ANDAs. Patent term extension can compensate for time lost during product development and the regulatory review process by returning up to five years ofpatent life for a patent that covers a new product or its use. This period is generally one-half the time between the effective date of an IND and thesubmission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Patent term extensions,however, are subject to a maximum extension of five years, and the patent term extension cannot extend the remaining term of a patent beyond a total of14 years. The application for patent term extension is subject to approval by the U.S. Patent and Trademark Office in conjunction with the FDA. The Hatch-Waxman Act also provides for a period of statutory protection for new drugs that receive NDA approval from the FDA. If the FDAapproves a new drug NDA as a new chemical entity, meaning that the FDA has not previously approved any other new drug containing the same activeentity, then the Hatch-Waxman Act prohibits an abbreviated application by a generic competitor, with some exceptions, for a period of five years fromthe date of approval of the NDA. The Hatch-Waxman Act will not prevent the filing or approval of a full NDA, as opposed to an abbreviatedapplication, for any drug, but the competitor would be required to conduct its own clinical trials, and any use of the drug for which marketing approvalis sought could not violate another NDA holder's patent claims. If FDA approves an NDA for a new drug containing an active ingredient that waspreviously approved by the FDA, but the NDA is for a drug that includes new clinical data to support an innovation over the24Table of Contentspreviously approved drug, then the Hatch-Waxman statutory exclusivity period is only three years from the date of the NDA approval that covers theinnovation. Thus, the three year exclusivity does not prohibit the FDA, with limited exceptions, from approving generic drugs containing the sameactive ingredient but without the new innovation. The Hatch-Waxman Act also permits the FDA to approve ANDAs for generic versions of drugs assuming the approval would not violate anotherNDA holder's patent claims. The ANDA process provides that an ANDA applicant needs only to submit data demonstrating that its product isbioequivalent to the innovator product as well as relevant chemistry, manufacturing and product data. The Hatch-Waxman Act also instituted a third typeof drug application that requires the same information as a NDA, including full reports of clinical and preclinical studies, except that some of theinformation from the reports required for marketing approval comes from studies which the applicant does not own or have a legal right of reference.This type of application, a 505(b)(2) NDA, permits a manufacturer to obtain marketing approval for a drug without needing to conduct or obtain a rightof reference for all of the required studies. If a competitor submits an ANDA or 505(b)(2) NDA for a compound or use of any compound covered by another NDA holder's patent claims,the Hatch-Waxman Act requires, in some circumstances, the applicant to notify the patent owner and the holder of the approved NDA of the factual andlegal basis of the applicant's opinion that the patent is not valid or will not be infringed. Upon receipt of this notice, the patent owner and the NDAholder have 45 days to bring a patent infringement suit in federal district court and obtain a 30-month stay against the company seeking to reference theNDA. The NDA holder could still file a patent suit after the 45 days, but if they miss the 45-day deadline, they would not have the benefit of the 30-month stay. Alternatively, after this 45-day period, the applicant may file a declaratory judgment action, seeking a determination that the patent is invalidor will not be infringed. The discovery, trial and appeals process in such suits can take several years. If such a suit is commenced, the Hatch-WaxmanAct provides a 30-month stay on the approval of the competitor's ANDA or 505(b)(2) NDA. If the litigation is resolved in favor of the competitor orthe challenged patent expires during the 30-month period, unless otherwise extended by court order, the stay is lifted and the FDA may approve theapplication.Healthcare Reform Act In March 2010, the President signed one of the most significant healthcare reform measures in decades. The Healthcare Reform Act substantiallychanges the way in which healthcare will be financed by both governmental and private insurers and has a significant impact on the pharmaceuticalindustry. The Healthcare Reform Act contains a number of provisions that affect coverage and reimbursement of drug products and the medical imagingprocedures in which our drug products are used. Key provisions, implemented in 2010 and after, include the following:•establishing a presumed utilization rate of 75% for imaging equipment in the physician office and free-standing imaging facility settingfor dates of service on or after January 1, 2011, which presumed utilization rate affects the Medicare per procedure medical imagingreimbursement; •increasing of the minimum rebate percentange of the average manufacturer price for Medicaid rebates payable by manufacturers ofbrand-name drugs (such as us) from 15.1% to 23.1%; •extending Medicaid rebates payable by manufacturers of brand-name drugs to drugs paid by Medicaid managed care organizations; •imposing a non-deductible annual fee on pharmaceutical manufacturers or importers who sell brand name prescription drugs to specifiedfederal government programs; and •imposing a non-deductible excise tax on medical devices effective in 2013.25Table of Contents The Healthcare Reform Act also establishes an Independent Payment Advisory Board, or IPAB, to reduce the per capita rate of growth inMedicare spending. Beginning in 2014, the IPAB is mandated to propose changes in Medicare payments if it is determined that the rate of growth ofMedicare expenditures exceeds target growth rates or the projected percentage increase for the medical expenditures portion of the Consumer PriceIndex is greater than the projected percentage increase in the Consumer Price Index for all items. A proposal made by the IPAB must be implementedby the Centers for Medicare and Medicaid Services, or CMS, unless Congress adopts a proposal that achieves the necessary savings. IPAB proposalsmay impact payments for physician and free-standing imaging services beginning in 2015 and for hospital services beginning in 2020. The Healthcare Reform Act also amended the federal self-referral laws, requiring referring physicians to inform patients under certaincircumstances that the patients may obtain services, including MRI, computed tomography, PET, and certain other diagnostic imaging services, from aprovider other than that physician, his or her group practice, another physician in his or her group practice, or another individual under directsupervision of the physician or another physician in the group practice. The referring physician must provide each patient with a written list of othersuppliers who furnish such services in the area in which the patient resides. Effective January 1, 2011, this new information provision could have theeffect of shifting where certain diagnostic medical imaging procedures are performed. The Healthcare Reform Act has been subject to judicial challenge and the Supreme Court will consider certain challenges in the first half of 2012.Healthcare Fraud and Abuse Laws We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claimslaws. The Medicare and Medicaid Patient Protection Act of 1987, as amended, or Federal Anti-Kickback Statute, prohibits persons from knowingly andwillfully soliciting, offering, receiving or providing essentially anything of value, directly or indirectly, in order to generate business, including thepurchase or prescription of a drug, that is reimbursable by federal health care programs such as Medicare or Medicaid. The scope of the Federal Anti-Kickback Statute is broad. Regulatory "safe harbors" protect certain arrangements within the scope of the statute that meet the specific requirements ofthe safe harbor. Arrangements outside of the safe harbor may be subject to scrutiny by government enforcement agencies and prosecuted if thearrangement is considered abusive. Many states have adopted laws similar to the Federal Anti-Kickback Statute. The scope of these state prohibitionsvary and may prohibit proposed or actual financial interactions involving business reimbursed under private health insurance as well as undergovernment health care programs. At the federal and state level, there may not be regulations, guidance or court decisions that apply the laws toparticular industry practices. There is therefore a possibility that our practices might be challenged under the anti-kickback laws. Federal and state false claims laws generally prohibit anyone from knowingly and willingly presenting claims for payment to third party payors(including Medicare and Medicaid) or causing such claims to be presented when the claims involve reimbursed drugs or services that are false orfraudulent, items or services not provided as claimed, or medically unnecessary items or services. The Federal Civil False Claims Act, or False ClaimsAct, applies to false claims involving federal healthcare programs and permits a private individual acting as a "whistleblower" to bring actions on behalfof the federal government alleging violations of the False Claims Act and to share in any monetary recovery. State false claims acts may apply where aclaim is submitted to any third party payor (whether private health insurance or a government health care program). Government enforcement agenciesand private whistleblowers have asserted liability under false claims acts for claims submitted involving inadequate care, kickbacks, improper promotionof off-label uses (i.e., uses not expressly approved by the FDA in a drug's label), reporting of drug prices to federal agencies and misrepresentations ofservices rendered.26Table of ContentsThe Healthcare Reform Act revised the False Claims Act to provide that a claim arising from a violation of the Federal Anti-Kickback Statute constitutesa false or fraudulent claim for purposes of the False Claims Act. Our future activities relating to the reporting of discount and rebate information andother information affecting federal, state and third-party reimbursement of our products and to the sale and marketing of our products may be subject toscrutiny under these laws. Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices ofpharmaceutical manufacturers. The laws and regulations generally limit financial interactions between manufacturers and health care providers or requiredisclosure to the government and public of such interactions. The laws include federal "sunshine" provisions enacted in 2010 as part of the HealthcareReform Act. The sunshine provisions apply to pharmaceutical manufacturers with products reimbursed under certain government programs and requirethose manufacturers to disclose annually to the federal government (for re-disclosure to the public) certain payments made to physicians and certainother healthcare practitioners or to teaching hospitals; investment interests held by physicians and their immediate family members; or drug samplesprovided to healthcare practitioners. The first report for samples is due in 2012 while the first report for financial interactions and ownership interests isdue in 2013. State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Many of these laws andregulations contain ambiguous requirements. Given the lack of clarity in laws and their implementation, our reporting actions could be subject to thepenalty provisions of the pertinent federal and state laws and regulations. Federal and state authorities are paying increased attention to enforcement of fraud and abuse laws within the pharmaceutical industry and privateindividuals have been active in alleging violations of the laws and bringing suits on behalf of the government under the False Claims Act. We are unableto predict whether we would be subject to actions under fraud and abuse laws or the impact of such actions. If we were subject to allegationsconcerning, or were convicted of violating, these laws, our business could be harmed. Violations of federal and state laws related to fraud and abuse arepunishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in healthcare programs such asMedicare and Medicaid. Even the costs of defending such claims could adversely affect our financial performance. Violations of international fraud andabuse laws could result in similar penalties, including exclusion from participation in health programs outside the United States.Other Healthcare Laws Our operations may be affected by the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations,which established uniform standards for certain "covered entities" (healthcare providers, health plans and healthcare clearinghouses) governing theconduct of certain electronic healthcare transactions and protecting the security and privacy of protected health information. The American Recovery andReinvestment Act of 2009, commonly referred to as the economic stimulus package, included the Health Information Technology for Economic andClinical Health Act, or HITECH, which became effective on February 17, 2010 and expands HIPAA's privacy and security standards. Among otherthings, HITECH makes certain HIPAA privacy and security standards directly applicable to "business associates", independent contractors of coveredentities that receive or obtain protected health information in connection with providing a service on their behalf. HITECH also increased the civil andcriminal penalties that may be imposed and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts toenforce the federal HIPAA laws and seek attorney fees and costs associated with pursuing federal civil actions. Although we believe that we are neithera "covered entity" nor a "business associate" under the new legislation, we cannot assure you that regulatory authorities would agree with27Table of Contentsour assessment. In addition, HIPAA and HITECH may affect our interactions with customers who are covered entities or their business associates.Laws Relating to Foreign Trade We are subject to various federal and foreign laws that govern our international business practices with respect to payments to governmentofficials. Those laws include the U.S. Foreign Corrupt Practices Act, or FCPA, which prohibits U.S. companies and their representatives from paying,offering to pay, promising, or authorizing the payment of anything of value to any foreign government official, government staff member, politicalparty, or political candidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a person workingin an official capacity. In many countries, the health care professionals we regularly interact with may meet the FCPA's definition of a foreigngovernment official. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect their transactionsand to devise and maintain an adequate system of internal accounting controls. Those laws also include the U.K. Bribery Act 2010, or Bribery Act, which became effective on July 1, 2011. The Bribery Act proscribes givingand receiving bribes in the public and private sectors, bribing a foreign public official, and failing to have adequate procedures to prevent employees andother agents from giving bribes. U.S. companies that conduct business in the United Kingdom generally will be subject to the Bribery Act. Penaltiesunder the Bribery Act include potentially unlimited fines for companies and criminal sanctions for corporate officers under certain circumstances. Our policies mandate compliance with these anti-bribery laws. Our operations reach many parts of the world that have experienced governmentalcorruption to some degree, and in certain circumstances strict compliance with anti-bribery laws may conflict with local customs and practices. Despiteour training and compliance programs, our internal control policies and procedures may not always protect us from reckless or criminal acts committedby our employees or agents.Health and Safety Laws We are also subject to various federal, state and local laws, regulations and recommendations, both in the United States and abroad, relating to safeworking conditions, laboratory and manufacturing practices and the use, transportation and disposal of hazardous or potentially hazardous substances.Environmental Matters We are subject to various federal, state and local laws and regulations relating to the protection of the environment, human health and safety in theUnited States and in other jurisdictions in which we operate. Our operations, like those of other medical product companies, involve the transport, use,handling, storage, exposure to and disposal of materials and wastes regulated under environmental laws, including hazardous and radioactive materialsand wastes. We cannot assure you that we have been or will be in compliance with environmental and health and safety laws at all times. If we violatethese laws and regulations, we could be fined, criminally charged or otherwise sanctioned by regulators. We believe that our operations currentlycomply in all material respects with applicable environmental laws and regulations. Certain environmental laws and regulations assess liability on current or previous owners or operators of real property for the cost of investigation,removal or remediation of hazardous materials or wastes at such formerly owned or operated properties or at third-party properties at which they havedisposed of hazardous materials or wastes. In addition to cleanup actions brought by governmental authorities, private parties could bring personalinjury, property damage or other claims due to the presence of, or exposure to, hazardous materials or wastes. We currently are not party to any claimsor any obligations to investigate or remediate contamination at any of our facilities.28Table of Contents We are required to maintain a number of environmental permits and nuclear licenses for our North Billerica facility, which is our primarymanufacturing, packaging and distribution facility. In particular, we must maintain a nuclear byproducts materials license issued by the Commonwealthof Massachusetts. This license requires that we provide financial assurance demonstrating our ability to cover the cost of decommissioning anddecontaminating, or D&D, the Billerica site at the end of its use as a nuclear facility. We currently estimate the D&D cost at the Billerica site to beapproximately $22.6 million. As of December 31, 2011, we have liability balance associated with the asset retirement obligations of approximately$4.9 million and recorded expense of $0.5 million and $0.4 million in the years ending December 31, 2011 and 2010, respectively. We currentlyprovide this financial assurance in the form of surety bonds. We generally contract with third parties for the disposal of wastes generated by ouroperations. Prior to disposal, we store any low level radioactive waste at our facilities until the materials are no longer considered radioactive, as allowedby our licenses and permits. Environmental laws and regulations are complex, change frequently and have become more stringent over time. While we have budgeted for futurecapital and operating expenditures to maintain compliance with these laws and regulations, we cannot assure you that our costs of complying withcurrent or future environmental protection, health and safety laws and regulations will not exceed our estimates or adversely affect our results ofoperations and financial condition. Further, we cannot assure you that we will not be subject to additional environmental claims for personal injury orcleanup in the future based on our past, present or future business activities. While it is not feasible to predict the future costs of ongoing environmentalcompliance, it is reasonably probable that there will be a need for future provisions for environmental costs that, in management's opinion, are not likelyto have a material effect on our financial condition, but could be material to the results of operations in any one accounting period.Employees As of December 31, 2011, we had 611 employees, of which 482 were located in the United States and 129 were located internationally, andapproximately 56 contractors. None of our employees are represented by a collective bargaining unit, and we believe that our relationship with ouremployees is excellent.Corporate History Founded in 1956 as New England Nuclear Corporation, we were purchased by E. I. du Pont de Nemours and Company in 1981. Bristol-MyersSquibb Company, or BMS, subsequently acquired the diagnostic medical imaging business as part of its acquisition of DuPont Pharmaceuticals in2001. Avista Capital Partners, L.P. and its affiliates, or collectively, Avista, acquired the medical imaging business from BMS in January 2008.Our Sponsor Avista is a leading private equity firm with offices in New York, NY, Houston, TX and London, UK. Founded in 2005 as a spin-out from theformer DLJ Merchant Banking Partners, or DLJMB, franchise, Avista's strategy is to make controlling or influential minority investments primarily ingrowth-oriented energy, healthcare, media, consumer and industrial companies. Through its team of seasoned investment professionals and industryexperts, Avista seeks to partner with exceptional management teams to invest in and add value to well-positioned businesses.29Table of ContentsItem 1A. Risk Factors You should carefully consider the following risks. These risks could materially affect our business, results of operations or financial condition,cause the trading price of our outstanding notes to decline materially or cause our actual results to differ materially from those expected or thoseexpressed in any forward-looking statements made by us or on our behalf. These risks are not exclusive, and additional risks to which we are subjectinclude, but are not limited to, other risks and uncertainties that are not currently known to us or that we currently deem to be immaterial, the factorsmentioned under "Cautionary Note Regarding Forward-Looking Statements" and the risks of our businesses described elsewhere in this annualreport.Our dependence upon third parties for the manufacture and supply of a substantial portion of our products could prevent us from delivering ourproducts to our customers in the required quantities, within the required timeframe, or at all, which could result in order cancellations anddecreased revenues. We obtain a substantial portion of our products from third party suppliers. We currently rely on BVL as our sole source manufacturer forDEFINITY and Neurolite and as our primary manufacturer for our Cardiolite product supply. We also rely on Covidien's Mallinckrodt business unit asour sole manufacturer for Ablavar. In August 2011, BVL announced that it will be transitioning out of the contract manufacturing business over thenext few years. We have an alternate manufacturer for a limited supply of Cardiolite and we are actively working on an expedited program to qualifyJHS as a new manufacturer of DEFINITY. We are also advancing a number of technology transfer programs to ensure the expedited transfer of all ourBVL produced products, including Cardiolite, Neurolite, and DEFINITY, to alternate contract manufacturers. In addition, for reasons of qualityassurance or cost effectiveness, we purchase certain components and raw materials from sole suppliers. Because we do not control the actual productionof many of the products we sell, we may be subject to delays caused by interruption in production based on conditions outside of our control. At ourNorth Billerica, Massachusetts facility, we manufacture TechneLite on a relatively new, highly automated production line, as well as Thallium andGallium using our older cyclotron technology. If we or one of our manufacturing partners experiences an event, including a labor dispute, naturaldisaster, fire, power outage, security problem, failure to meet regulatory requirements, product quality issue, technology transfer issue or other issue, wemay be unable to manufacture the relevant products at previous levels or on the forecasted schedule, if at all. Due to the stringent regulations andrequirements of the governing regulatory authorities regarding the manufacture of our products, we may not be able to quickly restart manufacturing at athird party or our own facility or establish additional or replacement sources for certain products, components or materials. In July 2010, BVL temporarily shutdown the South Complex, which is the facility where BVL manufactures products for a number of customers,including us, in order to upgrade the facility to meet certain regulatory requirements. BVL had previously planned for the shutdown of the SouthComplex to run through March 2011 and to resume production of our products in April 2011. In anticipation of the shutdown, BVL manufactured forus additional inventory of these products to meet our expected needs during this period. After a series of unexpected delays, BVL recentlycommunicated to its customers, including us, that its restart activities in the South Complex were continuing and that in cooperation with the FDA, BVLplanned to perform additional quality testing and analysis to remediate on-going particulate issues. We can give no assurances as to when BVL willfinally resume full production of our products or whether BVL will be able to successfully manufacture and distribute product thereafter. Even if BVLis able to satisfy the FDA with its regulatory compliance, it is possible that in certain countries regulatory authorities may prohibit us from marketingproducts manufactured by BVL. While we have a limited number of other suppliers, if our inability to distribute products manufactured by BVL isprolonged further, we may be unable to sell our products in amounts comparable to periods prior to the shutdown. Based on our current projections, webelieve that we will30Table of Contentshave limited Cardiolite supply from our alternate supplier during 2012 and sufficient DEFINITY inventory only until early in the second quarter of2012. Consequently, we may receive no supply of DEFINITY until the technology transfer is complete and JHS commences supply. We are workingto complete the technology transfer as quickly as possible, however we can give no assurance as to when the technology transfer will be completed andwe will actually receive supply of DEFINITY. A prolonged shortage could have a material adverse effect on our business, results of operations,financial condition, and cash flows. Because of BVL's ongoing regulatory issues and our mutual desire to enter into a new contractual relationship to replace the original arrangement,we terminated the 2008 Agreement, entered into a Settlement Agreement, agreed to receive initial supplies from BVL pursuant to the Transition ServicesAgreement, and entered into a longer term arrangement pursuant to a Manufacturing Services Agreement. For more detail on the arrangement, see"Item 1. Business—Ben Venue Laboratories, Inc. and Technology Transfer." Despite this new contractual relationship, BVL can terminate (i) the newTransition Services Agreement in the event that regulatory action prevents manufacturing our products for at least nine months during the term of theagreement and upon the occurrence of certain specified events, including material breach by us, bankruptcy, force majeure events and BVL's sale, wind-down or cessation of business and (ii) the new Manufacturing and Service Contract, in the event that regulatory action prevents manufacturing for thefull term of the agreement and upon the occurrence of specified events, including material breach by us, bankruptcy, force majeure events and BVL'ssale, wind-down or cessation of business. If we do not receive adequate product supply for a further prolonged period of time, we will need to implement additional expense reduction andoperating and strategic initiatives. If we are not successful in those initiatives, we could, at some time in the future, be in non-compliance with one ormore of the financial ratio covenants in our revolving credit facility, or the Facility, or be unable to make interest payments on the Notes (as definedbelow). See "Item 1A—Risk Factors—We may not be able to generate sufficient cash flow to meet our debt service obligations." In addition to our existing manufacturing relationships, we are also pursuing the new manufacturing relationships described above to establish andsecure additional or alternative suppliers for DEFINITY, Cardiolite and Neurolite. We cannot assure you, however, that these activities, will besuccessful, or that before such alternate manufacturers or sources of product are fully functional and qualified that we will be able to avoid or mitigateinterim supply shortages. In addition, we cannot assure you that our existing suppliers or any new suppliers can adequately maintain either theirfinancial health or regulatory compliance to allow continued production and supply. A reduction or interruption in manufacturing, or an inability tosecure alternative sources of raw materials or components, could eventually have a material adverse effect on our business, results of operations,financial condition and cash flows.Challenges with product quality or product performance, including defects, caused by us or our suppliers could result in a decrease in customersand sales, unexpected expenses and loss of market share. The manufacture of our products is highly exacting and complex and must meet stringent quality requirements, due in part to strict regulatoryrequirements, including the FDA's cGMPs. Problems may arise during manufacturing for a variety of reasons including equipment malfunction, failureto follow specific protocols and procedures, defective raw materials and environmental factors. Additionally, manufacturing flaws, component failures,design defects, off-label uses or inadequate disclosure of product-related information could result in an unsafe condition or the injury or death of apatient. Such events could lead to a recall of, or issuance of a safety alert relating to, our products. We also may undertake voluntarily to recall productsor temporarily shutdown production lines based on internal safety and quality monitoring and testing data.31Table of Contents Quality, regulatory, and recall challenges could cause us to incur significant costs, including costs to replace products, lost revenue, damage tocustomer relationships, time and expense spent investigating the cause and costs of any possible settlements or judgments related thereto and potentiallycause similar losses with respect to other products. Such challenges could also divert the attention of our management and employees from productdevelopment efforts. If we deliver products with defects, or if there is a perception that our products or the processes related thereto contain errors ordefects, we could incur additional recall and product liability costs, and our credibility and the market acceptance and sales of our products could bematerially adversely affected. Due to the strong name recognition of our brands, an adverse event involving one of our products could result in reducedmarket acceptance and demand for all products within that brand, and could harm our reputation and our ability to market our products in the future. Insome circumstances, adverse events arising from or associated with the design, manufacture or marketing of our products could result in the suspensionor delay of regulatory reviews of our applications for new product approvals. Such challenges could have a material adverse effect on our business,results of operations, financial condition and cash flows.The global supply of Moly is fragile and not stable. Our dependence on a limited number of third-party suppliers for Moly could prevent us fromdelivering some of our products to our customers in the required quantities, within the required timeframe, or at all, which could result in ordercancellations and decreased revenues. A critical ingredient of TechneLite, currently our largest product by annual revenues, is Moly. There are nine major reactors located around theworld which produce large scale amounts of Moly: NRU located in Canada; HFR located in The Netherlands; BR2 located in Belgium; OSIRIS locatedin France; SAFARI located in South Africa; OPAL located in Australia; LVR-10 located in the Czech Republic; MARIA located in Poland; and RA-8located in Argentina. Moly produced at these reactors is then finished at one of six processing sites: Nordion (formerly known as MDS Nordion) inCanada; Covidien in The Netherlands; IRE in Belgium; NTP in South Africa; ANSTO in Australia; and CNEA in Argentina. Finished Moly is thensold to Technetium generator manufacturers, including us. Historically, our largest supplier of Moly has been Nordion which has relied on the NRUreactor owned and operated by AECL, located in Chalk River, Ontario. This reactor was off-line from May 2009 until August 2010 due to a heavywater leak in the reactor vessel. The inability of the NRU reactor to produce Moly and Nordion to finish Moly during the shutdown period had adetrimental effect on our business, results of operations and cash flows. As a result of the NRU reactor shutdown, we experienced business interruptionlosses. We estimate the quantity of such losses to be, in the aggregate, more than $70 million, including increases in the cost of obtaining limitedamounts of Moly from alternate, more distant, suppliers, and substantial decreases in sales revenue as a result of significantly curtailed manufacturing ofTechneLite generators and our decreased ability to sell other Moly-based medical imaging products, including Cardiolite, in comparison to ourforecasted results. The Government of Canada has stated publicly its intent to exit the isotope business when the NRU reactor's current license expiresin October 2016. As part of the conditions for the recent relicensing of the NRU reactor from 2011 to 2016, the Canadian government has asked AECL to shutdown the reactor for at least four weeks at least once a year for inspection and maintenance. The next shutdown period is scheduled to run from mid-April 2012 until mid-May 2012. We currently believe that we will be able to source substantially all of our customer demand for Moly during this timeperiod from our other suppliers. However, because Xenon is a by-product of the Moly production process and is captured by only a limited number ofMoly producers, during this shutdown period, we do not currently believe that we will be able to supply all of our customer demand for Xenon. Therecan be no assurance that such off-line periods will last for the stated time or that the NRU will not experience other unscheduled shutdowns in thefuture. Further prolonged scheduled or unscheduled shutdowns would limit the amount of Moly and Xenon available to us and limit the quantity ofTechneLite that we could manufacture, distribute and sell and the32Table of Contentsamount of Xenon that we could distribute and sell, resulting in a further substantial negative effect on our business, results of operations, financialcondition and cash flows. In the face of the NRU reactor operating challenges, the lack of a long-term commitment by the Government of Canada to the medical isotopeindustry and the NRU reactor re-licensure risks, we entered into Moly supply agreements with NTP and IRE to augment our supply of Moly. Whilethis additional Moly supply allowed us to continue to manufacture and sell Technetium generators during the NRU reactor shutdown, this replacementcapacity was not at the time sufficient to replace the quantity of supply we otherwise received from Nordion. A prolonged disruption of service fromone of our significant Moly suppliers could have a material adverse effect on our business, results of operations, financial condition and cash flows. Weare also pursuing additional sources of Moly from potential new producers around the world to further augment our current supply, but we cannotassure you that these possible additional sources of Moly will result in commercial quantities of Moly for our business, or that these new supplierstogether with our current suppliers will be able to deliver a sufficient quantity of Moly to meet our needs. U.S., Canadian and international governments have encouraged the development of a number of alternative Moly production projects with existingreactors and technologies as well as new technologies. However, the Moly produced from these projects will likely not become available until 2015 orlater. As a result, there is a limited amount of Moly available which could limit the quantity of TechneLite that we could manufacture, distribute and sell,resulting in a further substantial negative effect on our business, results of operations, financial condition and cash flows. If the Moly supply challenges again become acute, there may be further negative effects on our business, results of operations, financial conditionand cash flows.The instability of the global supply of Moly and recent supply shortages have resulted in increases in the cost of Moly, which has negativelyaffected our margins, and more restrictive agreements with suppliers, which could further increase our costs. With the general instability in the global supply of Moly and supply shortages during 2009 and 2010, we have faced substantial increases in thecost of Moly in comparison to historical costs. We are generally able to pass these Moly cost increases on to our customers in our customer contracts. Ifwe are not able to do so in the future, our margins may decline further with respect to our TechneLite generators, which could have a material adverseeffect on our business, results of operations, financial condition and cash flows. In addition, the instability in the global supply of Moly resulted inMoly producers requiring, in exchange for fixed Moly prices, supply minimums in the form of take-or-pay obligations. If we are contractually obligatedto purchase greater volumes of Moly than we can sell, these supply minimums could have a material adverse effect on our business, results ofoperations, financial condition and cash flows.The Moly supply shortage caused by the NRU reactor shutdown has had a negative effect on the demand for some of our products, which willlikely continue in the future. The Moly supply shortage also had a negative effect on the use of other Technetium generator-based diagnostic medical imaging agents, includingCardiolite products. With less Moly, we manufactured fewer generators for radiopharmacies and hospitals to make up unit doses of Cardiolite products,resulting in decreased share of Cardiolite products in favor of Thallium, an older medical isotope that does not require Moly, and other diagnosticmodalities. With the return to service of the NRU reactor, we have seen increased sales TechneLite. However, TechneLite unit volume has not returnedto pre-shortage levels for, we believe, a number of reasons, including: (i) changing staffing and utilization practices in radiopharmacies, which haveresulted in an increased number of unit-doses of Technetium-based radiopharmaceuticals being made from available amounts of Technetium; (ii) shiftsto33Table of Contentsalternative diagnostic imaging modalities during the Moly supply shortage, which have not returned to Technetium-based procedures; and (iii) decreasedamounts of Technetium being used in unit-doses of Technetium-based radiopharmaceuticals due to growing concerns about patient radiation doseexposure. We do not know if the staffing and utilization practices in radiopharmacies, the mix between Technetium and non-Technetium-baseddiagnostic procedures and the increased concerns about radiation exposure will allow Technetium demand to ever return to pre-shortage levels, whichcould have a material adverse effect on our business, results of operations, financial condition and cash flows.In the United States, we are heavily dependent on a few large customers to generate a majority of our revenues for our nuclear imaging products.Outside of the United States, we rely on distributors to generate a substantial portion of our revenue. In the United States, we rely on a limited number of radiopharmacy chains, primarily Cardinal, GE Healthcare , UPPI, and Triad, to distribute ourcurrent largest volume nuclear imaging products and generate a majority of our revenues. These four customers accounted for approximately 51% ofour total revenues in the fiscal year ended December 31, 2011, with Cardinal, GE Healthcare, UPPI, and Triad accounting for 27%, 11%, 8% and 5%,respectively. Among the existing radiopharmacies in the United States, continued consolidations, divestitures and reorganizations may have a negativeeffect on our business, results of operations, financial condition or cash flows. We generally have distribution arrangements with our majorradiopharmacy customers pursuant to multi-year contracts, each of which is subject to renewal, from as soon as December 2012 until as late asDecember 2017. If these contracts are not in force through the balance of their term or are not renewed, it could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows. Outside of the United States, Canada, Australia and Puerto Rico, we have no radiopharmacies or sales force and therefore rely on distributors,either on a country-by-country basis or on a multi-country, regional basis, to market, distribute and sell our products. These distributors accounted forapproximately 19%, 23% and 29% of total non-U.S. revenues for the fiscal years ended December 31, 2011, 2010 and 2009, respectively. In certaincircumstances, these distributors may also sell competing products to our own or products for competing diagnostic modalities. As a result, we cannotassure you that our international distributors will increase or maintain our current levels of unit sales or increase or maintain our current unit pricing,which, in turn, could have a material adverse effect on our business, results of operations, financial condition and cash flows.We face significant competition in our business and may not be able to compete effectively. The market for diagnostic medical imaging agents is highly competitive and continually evolving. Our principal competitors in existing diagnosticmodalities include large, global companies with substantial financial, manufacturing, sales and marketing, and logistics resources that are morediversified than us, such as Covidien, GE Healthcare, Ion Beam Applications, Bayer Schering Pharma AG, or Bayer, Bracco, and Draxis, as well asother competitors. We cannot anticipate their competitive actions, such as price reductions on products that are comparable to our own, development ofnew products that are more cost-effective or have superior performance than our current products, and the introduction of generic versions when ourproprietary products lose their patent protection. Our current or future products could be rendered obsolete or uneconomical as a result of thiscompetition. Our failure to compete effectively could cause us to lose market share to our competitors and have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows.Generic competition has eroded our share of the MPI segment for Cardiolite products and will likely continue to do so. We are currently aware of four separate third-party generic offerings of sestamibi, the first of which launched in September 2008. Managementbelieves that prior to our BVL-related supply34Table of Contentschallenges, our share of the MPI segment held by Cardiolite products decreased from approximately one-half to approximately one-third. During 2011,we have seen our share of the MPI segment decline to just over one-quarter. Cardiolite products accounted for approximately 33%, 22% and 18% ofour total revenues in the fiscal years ended December 31, 2009, 2010, and 2011, respectively. To the extent generic competitors further reduce theirprices, we may be forced to further reduce the price of branded Cardiolite and lose additional segment share, which would have an adverse effect on ourbusiness, results of operations, financial condition and cash flows. With continued pricing pressure from generic competitors, we also sell a genericsestamibi while at the same time continuing to sell branded Cardiolite throughout the MPI segment. See "Item 7—Management's Discussion andAnalysis of Financial Condition and Results of Operations." This strategy of attempting to maintain market share by selling branded Cardiolite andgeneric sestamibi could result in a further decrease in units of branded Cardiolite sold, resulting in lower margins and decreased unit cash flow from thisproduct line. In addition, to the extent other generic competitors further reduce their prices, we may be forced to further reduce the price of our Cardioliteproducts, which could have a further adverse effect on our margins, business, results of operations, financial condition and cash flows. In addition, tothe extent any of the products we manufacture become less available because of supply constraints or other events, such as the recall activities in thesecond half of 2011 and ongoing supply challenges, our current customers may begin to favor a generic offering or a competing agent or diagnosticmodality which could have a material adverse effect on our business, results of operation, financial condition and cash flows.We are highly dependent on payments from third-party healthcare payors, including government sponsored programs, particularly Medicare, inthe United States and other countries in which we operate, and reductions in third-party coverage and reimbursement rates for our productscould adversely affect our business and results of operations. A substantial portion of our revenue depends, in part, on the extent to which the costs of our products are reimbursed by third-party private andgovernmental payors, including Medicare, Medicaid and other U.S. government sponsored programs as well as other non-U.S. governmental payorsand private payors. These third-party payors exercise significant control over patient access and increasingly use their enhanced bargaining power tosecure discounted rates and other requirements that may increase the cost of service or reduce demand for our products. Our potential customers' abilityto obtain appropriate reimbursement for products and services from these third-party payors affects the selection of products they purchase and theprices they are willing to pay. If these third-party payors do not provide appropriate reimbursement for the costs of our products, deny their coverage orreduce their current levels of reimbursement, healthcare professionals may not prescribe our products and providers and suppliers may not purchase ourproducts. In addition, demand for new products may be limited unless we obtain favorable reimbursement policies (including coverage, coding andpayment) from governmental and private third-party payors at the time of the product's introduction. Third-party payors continually review theircoverage policies for existing and new therapies and can deny coverage for treatments that include the use of our products or revise payment policiessuch that payments do not adequately cover the cost of our products. Even if third-party payors make coverage and reimbursement available, suchreimbursement may not be adequate or these payors' reimbursement policies may have an adverse effect on our business, results of operations, financialcondition and cash flows. Over the past several years, Medicare has implemented numerous changes to payment policies for imaging procedures, some of which have had anegative impact on utilization of imaging services. These include limiting payments in physician offices and free-standing imaging facility settings basedupon rates paid to hospital outpatient departments, reducing payments for certain imaging procedures when performed together with other imagingprocedures in the same family of procedures, and making significant revisions to the methodology for determining the practice expense portion ofMedicare35Table of Contentspayment, which covers physician office expenses, including staff, equipment and supplies. In 2010, CMS, began a four year transition to changes in thepractice expense methodology based upon the Physician Practice Information Survey, or PPIS, which collected information on physician practiceexpenses by specialty. For 2011, CMS estimated that these and other changes to Medicare payment policy would reduce payments for cardiologyservices by approximately 2% and for nuclear medicine services by 4%. For 2012, CMS estimates that these would reduce payments for cardiologyservices by approximately 1% and for nuclear medicine services by 3%. Cardiology and nuclear medicine are the key specialties performing imagingprocedures using our products. Unless Medicare changes its plans to implement the PPIS fully by 2013 or Congress mandates such changes, paymentsare expected to be reduced further in 2013. In addition, there has been instability in the Hospital Outpatient Prospective Payment System payment ratesfor certain imaging procedures in the last several years, including cardiac PET and echocardiography with contrast. If payment rates for proceduresformed in the hospital outpatient setting continues to be unstable, this could influence the decisions by hospital outpatient physicians to performprocedures that involve our products. For 2010, CMS reduced the per procedure medical imaging reimbursement in the physician office and free-standing imaging facility. CMStransitioned further reductions in payments through 2013. We believe that this has resulted in certain physicians and group practices ceasing to providethese services and has had the further effect of shifting where certain medical imaging procedures are performed from the physician office and free-standing imaging facility settings to the hospital outpatient setting, which we believe has incrementally reduced the overall number of diagnostic medicalimaging procedures performed. Further, this could slow the acceptance and introduction of next-generation imaging equipment into the marketplace,which, in turn, could adversely impact the future market adoption of certain of our imaging agents already in the market or currently in clinical orpreclinical development. We expect that there will continue to be proposals to reduce or limit Medicare and Medicaid payment for diagnostic services.To the extent any of these or other provisions of the Healthcare Reform Act have the effect of reducing the aggregate number of diagnostic medicalimaging procedures performed in the United States, our business, results of operations, financial condition and cash flows would be adversely affected.See "Item 1—Business—Regulatory Matters." Moreover, under the Medicare statutory formula, payments under the Medicare Physician Fee Schedule would have decreased for the past severalyears if Congress failed to intervene. In the past, when the application of the statutory formula resulted in lower payments, Congress has passed interimlegislation to prevent the reductions. For 2012, President Obama first signed the Temporary Payroll Tax Cut Continuation Act of 2011, which avoidedthe negative update factor for physician services from January 1, 2012, through February 29, 2012. President Obama then signed the Middle Class TaxRelief and Job Creation Act of 2012, which prevented the negative update factor from going into effect and continues the zero percent update forphysician services furnished between March 1, 2012 and December 31, 2012. If Congress fails to intervene to prevent the negative update factor in thefuture through either another temporary measure or a permanent revision to the statutory formula, payments to physicians may be further reduced in thefuture.Reforms to the United States healthcare system may adversely affect our business. A significant portion of our patient volume is derived from U.S. government healthcare programs, principally Medicare, which are highly regulatedand subject to frequent and substantial changes. For example, in March 2010, the President signed one of the most significant healthcare reformmeasures in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act,or, collectively, the Healthcare Reform Act. The Healthcare Reform Act contains a number of provisions that affect coverage and reimbursement of drugproducts and the medical imaging procedures in which our drug products are used. See "Item 1—Business—Regulatory Matters—Health Care ReformAct." A number of states have challenged the36Table of Contentsconstitutionality of certain provisions of the Healthcare Reform Act, and the Supreme Court has agreed to consider certain challengesin 2012. Certainmembers of Congress have also proposed a number of legislative initiatives, including possible repeal of all or portions of the Healthcare Reform Act.At this time, it remains unclear whether there will be any changes made to the Healthcare Reform Act, whether to certain provisions or its entirety. Wecannot assure you that the Healthcare Reform Act, as currently enacted or as amended in the future, will not adversely affect our business and financialresults, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business. In addition, other legislative changes have been proposed and adopted since the Healthcare Reform Act was enacted. In August 2011, the Presidentsigned into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommendproposals in spending reductions to Congress. Because the Joint Select Committee was unable to achieve a targeted deficit reduction of at least $1.2trillion for the years 2013 through 2021, an automatic reduction will be triggered. Unless Congress intervenes to avoid or ameliorate these reductions,these cuts will be made to several government programs and, with respect to Medicare, would include aggregate reductions to Medicare payments toproviders of up to 2% per fiscal year, starting in 2013. The full impact on our business of the Healthcare Reform Act and the new law is uncertain. Nor is it clear whether other legislative changes will beadopted or how such changes would affect our industry generally or our ability to successfully commercialize our products or the development of newproducts.The Healthcare Reform Act could potentially reduce the number of diagnostic medical imaging procedures performed or could reduce the amountof reimbursements paid for such procedures. The Healthcare Reform Act, based on 2010 estimates from the Congressional Budget Office, is expected to extend coverage to approximately32 million previously uninsured Americans. We cannot predict how many, if any, of those additional insureds would be current or future candidates fordiagnostic medical imaging or, if as a result of such larger pool of insured Americans, the aggregate number of diagnostic medical imaging proceduresperformed in the United States would increase. Further, the implementation of the Healthcare Reform Act could potentially reduce the aggregate number of diagnostic medical imaging proceduresperformed in the United States. Under the Healthcare Reform Act, referring physicians under the federal self-referral law must inform patients that theymay obtain certain services, including MRI, computed tomography, PET, and certain other diagnostic imaging services from a provider other than thatphysician, his or her group practice, another physician in his or her group practice, or another individual under the direct supervision of the physician oranother physician in the group practice. The referring physician must provide each patient with a written list of other suppliers who furnish suchservices in the area in which the patient resides. This new information provision could have the effect of shifting where certain diagnostic medicalimaging procedures are performed, which could potentially reduce the overall number of diagnostic medical imaging procedures performed. Further, we expect that there will continue to be proposals to reduce or limit Medicare and Medicaid payment for services. Rates paid by someprivate third-party payors are based, in part, on established physician, clinic and hospital charges and are generally higher than Medicare payment rates.Reductions in the amount of reimbursement paid for diagnostic medical imaging procedures and changes in the mix of our patients between non-governmental payors and government sponsored healthcare programs and among different types of non-government payor sources, could have amaterial adverse effect on our business, results of operations, financial condition and cash flows.37Table of ContentsOur business and industry are subject to complex and costly regulations. If government regulations are interpreted or enforced in a manneradverse to us or our business, we may be subject to enforcement actions, penalties, exclusion and other material limitations on our operations. Both before and after the approval of our products and product candidates, we, our products, product candidates, operations, facilities, suppliers,distributors, contract manufacturers, contract research organizations and contract testing laboratories are subject to extensive regulation by federal, stateand local government agencies in the United States as well as non-U.S. and transnational laws and regulations, with regulations differing from countryto country. In the United States, the FDA regulates, among other things, the pre-clinical testing, clinical trials, manufacturing, safety, efficacy, potency,labeling, storage, record keeping, quality systems, advertising, promotion, sale, distribution, and import and export of drug products. We are required toregister our business for permits and/or licenses with, and comply with the stringent requirements of the FDA, the NRC, the HHS, Health Canada, theEMA, state and provincial boards of pharmacy, state and provincial health departments and other federal, state and provincial agencies. For example, we are required to report certain adverse events and production problems, if any, to the FDA. Additionally, we must comply withrequirements concerning advertising and promotion for our products, including the prohibition on the promotion of our products for indications thathave not been approved by the FDA or a so-called "off-label use." If the FDA determines that our promotional materials constitute the unlawfulpromotion of an off-label use, it could request that we modify our promotional materials or subject us to regulatory or enforcement actions. Also, qualitycontrol and manufacturing procedures at our own facility and at third-party suppliers must conform to cGMP regulations and other applicable law afterapproval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMPs and other applicable law, and, from time to time,makes such cGMPs more stringent. Accordingly, we and others with whom we work must expend time, money, and effort in all areas of regulatorycompliance, including manufacturing, production, and quality control. For example, in June and July 2011, the FDA inspected our facility in Billerica,MA. As a result of the inspection, we filed a field alert and initiated a recall in connection with six lots of Cardiolite and Neurolite manufactured byBVL prior to the shutdown. Although there were no significant changes in product safety risk profiles with relatively stable adverse event rates beingreported and although the rates of serious adverse medical events had also not changed significantly and are rare for these products, our medical riskassessment determined that there was a theoretical risk to patients associated with the injection of product from these lots because of the identification ofcertain particulate matter in a limited number of vials from these lots, which was introduced during the BVL manufacturing process. In connection withthe field alerts, we conducted a 100% inspection for the presence of foreign matter for all unexpired lots of Cardiolite within our control, includingretained vials, stability samples and any remaining inventory. After completing the inspections, we concluded that the probability of patient exposure toforeign matter was very low and the overall patient risk associated with Cardiolite product in the field was very low. Accordingly, we concluded thatCardiolite lots in the field were suitable for use and all inspected material was returned to active inventory status. In addition, in February 2012, the FDA announced that on June 12, 2012, it will began to require that the manufacturers of commercial PETproducts, including radiopharmacies, hospitals and academic medical centers, either submit an NDA or ANDA for producing PET drugs for clinicaluse, or produce the drugs under an IND. We are also subject to laws and regulations that govern financial and other arrangements between pharmaceutical manufacturers and healthcareproviders, including federal and state anti-kickback statutes, federal and state false claims laws and regulations, beneficiary inducement laws andregulations, and other fraud and abuse laws and regulations. For example, in 2010, we entered into a Medicaid Drug Rebate Agreement for certain ofour products, which could subject us to potential liability under the False Claims Act or other laws and regulations in connection with the covered38Table of Contentsproducts as well as the products not covered by the agreement. Although we and most of our competitors have not previously entered into such anagreement and it is unclear that it is required, we received inquiries from several states and decided to enter into such agreement. Determination of therebate amount for our products under the Medicaid program, as well as determination of payment amounts under Medicare and certain other third-partypayers, including government payers, depends upon information reported by us to the government. If we provide customers or government officialswith inaccurate information about the products' eligibility for reimbursement, or the products fail to satisfy eligibility requirements, we could be subjectto potential liability under the False Claims Act or other laws and regulations. Additionally, funds received under all healthcare reimbursement programs are subject to audit with respect to the proper billing. Our customersengage in billing and as such, retroactive adjustments of revenue from these programs could occur. Failure to comply with other requirements and restrictions placed upon us by laws and regulations can result in fines, civil and criminal penalties,program exclusion and debarment. Possible consequences of such actions could include:•substantial modifications to our business practices and operations; a total or partial shutdown of production in one or more of ourfacilities while we remediate the alleged violation; •delays in or the inability to obtain future pre-market clearances or approvals; and •withdrawals or suspensions of current products from the market. Regulations are subject to change as a result of legislative, administrative or judicial action, which may also increase our costs or reduce sales.Violation of any of these regulatory schemes, individually or collectively, could disrupt our business and have a material adverse affect on our business,results of operations, financial condition and cash flows.It is time consuming and costly to obtain regulatory approval for our product candidates, which could delay or prevent us from being able togenerate revenue from product sales. We are not permitted to market our product candidates in the United States or other countries until we have received requisite regulatory approvals.For example, securing FDA approval for a new drug requires the submission of an NDA, to the FDA for our drug candidates. The NDA must includeextensive nonclinical and clinical data and supporting information to establish the product candidate's safety and effectiveness for each indication. TheNDA must also include significant information regarding the chemistry, manufacturing and controls for the product. The FDA review process can takemany years to complete, and approval is never guaranteed. If a product is approved, the FDA may limit the indications for which the product may bemarketed, require extensive warnings on the product labeling, impose restricted distribution programs, require expedited reporting of certain adverseevents, or require costly ongoing requirements for post-marketing clinical studies and surveillance or other risk management measures to monitor thesafety or efficacy of the product candidate. Markets outside of the United States also have requirements for approval of drug candidates with which wemust comply prior to marketing. Obtaining regulatory approval for marketing of a product candidate in one country does not ensure we will be able toobtain regulatory approval in other countries, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on theregulatory process in other countries. Also, any regulatory approval of any of our products or product candidates, once obtained, may be withdrawn.Approvals might not be granted on a timely basis, if at all. Any failure or significant delay in completing clinical trials for our product candidates, or in receiving regulatory approval for the sale of ourproduct candidates, may severely harm our business and delay or prevent us from being able to generate revenue from product sales. See "—Ourbusiness and industry are subject to complex and costly regulations. If government regulations are interpreted or enforced in a manner adverse to us orour business, we may be subject to enforcement actions, penalties, exclusion and other material limitations on our operations."39Table of ContentsOur marketing and sales practices may contain risks that could result in significant liability, require us to change our business practices andrestrict our operations in the future. We are subject to federal, state and local laws targeting fraud and abuse in the healthcare industry, including the federal fraud and abuse laws,including the False Claims Act and Federal Anti-Kickback Statute, the FCPA, the Bribery Act, the self-referral laws and restrictions on the promotionof off-label uses of our products. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment andexclusion from participation in healthcare programs such as Medicare and Medicaid as well as health programs outside the United States. These lawsand regulations are complex and subject to changing interpretation and application, which could restrict our sales or marketing practices. Even minor andinadvertent irregularities could potentially give rise to a charge that the law has been violated. Although we believe we maintain an appropriatecompliance program, it may not be adequate in the detection or prevention of violations and/or the relevant regulatory authorities may disagree with ourinterpretation. Additionally, if there is a change in law, regulation or administrative or judicial interpretations, we may have to change one or more of ourbusiness practices to be in compliance with these laws. Required changes could be costly and time consuming. The Healthcare Reform Act also imposes new reporting and disclosure requirements on device and drug manufacturers for any "transfer of value"to physicians and certain other healthcare practitioners or to teaching hospitals; investment interests held by physicians and their immediate familymembers; or drug samples provided to healthcare practitioners. The first report for samples is due in 2012 while the first report for financial interactionsand ownership interests is due in 2013. Failure to submit required information may result in civil monetary penalties of up to $150,000 per year (and upto $1 million per year for "knowing failures") for all transfers of value or ownership or investment interests not reported in an annual submission. The Healthcare Reform Act also provides greater financial resources to be allocated to enforcement of the fraud and abuse laws and clarifies orlowers the standard of proof for the Federal Anti-Kickback Statute and other criminal healthcare fraud statutes, which may increase overall compliancecosts for industry participants, including us. A person or entity does not need to have actual knowledge of such a statute and specific intent to violate thestatute. In addition, the Healthcare Reform Act revised the False Claims Act to provide that a claim arising from a violation of the Federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the False Claims Act. The violation of these laws, or our exclusion from such programs asMedicare, Medicaid and other governmental programs as a result of a violation of such laws, could have a material adverse effect on our business,results of operations, financial condition and cash flows.Ultrasound contrast agents may cause side effects which could limit our ability to sell DEFINITY. DEFINITY is an ultrasound contrast agent based on perflutren lipid microspheres. In 2007, the FDA received reports of deaths and seriouscardiopulmonary reactions following the administration of ultrasound micro-bubble contrast agents used in echocardiography. Four of the 11 reporteddeaths were caused by cardiac arrest occurring either during infusion or within 30 minutes following the administration of the contrast agent; most ofthe serious but non-fatal reactions also occurred in this time frame. As a result, in October 2007, the FDA requested that we and GE Healthcare, whichdistributes Optison, a competitor to DEFINITY, add a boxed warning to these products emphasizing the risk for serious cardiopulmonary reactions andthat the use of these products was contraindicated in certain patients. In a strong reaction by the cardiology community to the FDA's new position, aletter was sent to the FDA, signed by 161 doctors, stating that the benefit of these ultrasound contrast agents outweighed the risks and urging that theboxed warning be removed. In May 2008, the FDA substantially modified the boxed warning. On May 2, 2011, the FDA held an advisory committeemeeting to consider the status of ultrasound micro-bubble contrast agents and the boxed warning.40Table of ContentsAlthough this advisory committee meeting made no formal conclusions. In October 2011, we received FDA approval of further modifications to theDEFINITY label, including: further relaxing the boxed warning; eliminating the sentence in the Indication and Use section "The safety and efficacy ofDEFINITY with exercise stress or pharmacologic stress testing have not been established" (previously added in October 2007 in connection with theimposition of the box warning); and including summary data from the post-approval CaRES (Contrast echocardiography Registry for SafetySurveillance) safety registry and the post-approval pulmonary hypertension study. DEFINITY is currently the only echocardiography contrast agentable to benefit from these label modifications. If BVL continues to remain shutdown, however, we may be unable to manufacture DEFINITY until suchtime as our second source manufacturer can commercially produce DEFINITY. See "Item 7—Management's Discussion and Analysis of FinancialCondition and Results of Operations—Key Factors Affecting Our Results—Inventory Supply." If additional safety issues arise, this may result infurther changes in labeling or result in restrictions on the approval of our product, including removal of the product from the market. Lingering safetyconcerns about DEFINITY among some healthcare providers or future unanticipated side effects or safety concerns associated with DEFINITY couldhave a material adverse effect on the unit sales of this product and our financial condition and results of operations.Gadolinium-based imaging agents may cause side effects which could limit our ability to sell Ablavar. Ablavar is a contrast agent that contains gadolinium. Gadolinium contrast agents have been associated with the development of a very rare skindisease, nephrogenic systemic fibrosis, or NSF. It has also been reported that NSF may affect the internal anatomy as well as the skin. In May 2007, theFDA requested that manufacturers of all contrast agents containing gadolinium add a boxed warning and a new warning section that describes the riskof NSF because it is currently impossible to definitively determine whether the extent of risks for developing NSF are the same for all agents containinggadolinium. In September 2010, the FDA requested that additional safety-related label changes be implemented for all gadolinium-based contrast agentsto highlight the risks of NSF. Of the seven gadolinium-based contrast agents currently approved for use in the United States, three of them wererequired by the FDA to include certain new contraindications relating to severe kidney disease. The FDA required no substantial changes to the Ablavarprescribing information. We are aware of ongoing litigation in the United States relating to the use of imaging agents containing gadolinium. When it was purchased by usfrom EPIX Pharmaceuticals, Inc., or EPIX, in April 2009, Ablavar was known as Vasovist. To date, there have been no reported cases of NSF inconnection with the administration of Ablavar or, to our knowledge, Vasovist, and neither we nor EPIX have been named as a party or joined in anylitigation relating to NSF. We believe that over 95,000 doses of Ablavar and Vasovist have been sold to date. However, in the event Ablavar is directlylinked to this very rare disease or other unanticipated side effects, such safety concerns could have a material adverse effect on the sales of this product,and our financial conditions and results of operations.Our business depends on our ability to successfully introduce new products and adapt to a changing technology and diagnostic landscape. The healthcare industry is characterized by continuous technological development resulting in changing customer preferences and requirements.The success of new product development depends on many factors, including our ability to anticipate and satisfy customer needs, obtain regulatory andreimbursement approvals on a timely basis, develop and manufacture products in a cost-effective and timely manner, maintain advantageous positionswith respect to intellectual property and differentiate our products from our competitors. To compete successfully in the marketplace, we must makesubstantial investments in new product development whether internally or externally through licensing or acquisitions. Our failure to introduce new andinnovative products in a timely manner would have an adverse effect on our business, results of operations, financial condition and cash flows.41Table of Contents Even if we are able to develop, manufacture and obtain regulatory and reimbursement approvals for our new products, the success of theseproducts would depend upon market acceptance. Levels of market acceptance for our new products could be affected by a number of factors, including:•the availability of alternative products from our competitors, including, in the case of Ablavar, being one of seven gadolinium-basedcontrast agents currently approved for use in the United States; •the price of our products relative to those of our competitors; •the timing of our market entry; •our ability to market and distribute our products effectively, including, in the case of our flurpiridaz F 18, the creation of a complex field-based manufacturing and distribution network involving PET cyclotrons located at radiopharmacies where the agent will bemanufactured and distributed rapidly to end-users, given the agent's 110-minute half-life; and •market acceptance of our products, including, in the case of DEFINITY, appropriate resources to administer an intravenous agent duringan echocardiography procedure, and in the case of flurpiridaz F 18, sufficient market penetration of PET cameras to which nuclearcardiologists have reasonable access. The field of diagnostic medical imaging is dynamic, with new products, including equipment and agents, continually being developed and existingproducts continually being refined. Our own diagnostic imaging agents compete not only with other similarly administered imaging agents but also withimaging agents employed in different and often competing diagnostic modalities. New imaging agents in a given diagnostic modality may be developedthat provide benefits superior to the then-dominant agent in that modality, resulting in commercial displacement. Similarly, changing perceptions aboutcomparative efficacy and safety including, among other things, comparative radiation exposure, as well as changing availability of supply may favor oneagent over another or one modality over another. For example, prior to the outage of the NRU reactor from 2009 to 2010, we experienced a slow annualdecline in demand for Thallium as an MPI agent, in favor of Cardiolite which has superior safety and efficacy characteristics. To the extent there istechnological obsolescence in any of our products that we manufacture, resulting in lower unit sales or decreased unit sales prices, we will haveincreased unit overhead allocable to the remaining share, which could have a material adverse effect on our business, results of operations, financialcondition and cash flows. In addition, in the case of a comparatively new product such as Ablavar, because the market acceptance of Ablavar has been much slower than weinitially anticipated and because of the magnitude of the required purchase minimums originally contained in the agreement with Mallinckrodt, we haveentered into two separate amendments to the agreement in August 2010 and October 2011 to reduce the minimum purchase requirements. Significantcash outflows will still be required during the term of this purchase commitment and for costs incurred in connection with the product launch, withlimited cash inflows from Ablavar until market penetration increases further. In addition, in the fourth quarter of 2010, we recorded an inventory write-down of approximately $10.9 million for Ablavar finished good product that has already been manufactured by Mallinckrodt that will likely expire priorto its sale to and use by customers. In the second quarter of 2011, we recorded an impairment charge of $23.5 million, the full remaining value of theproduct's intellectual property. In addition, in the second and fourth quarters of 2011, we recorded a further inventory write-down of approximately$13.5 million and $12.3 million, respectively, and a loss of $1.9 million and $3.7 million, respectively, for the portion of committed purchases ofAblavar that we do not believe we will be able to sell prior to product expiry. In the event that we do not meet our sales expectations for Ablavar orcannot sell the product we have committed to purchase prior to its expiration, we could incur additional inventory losses and/or losses on our purchasecommitments.42Table of Contents Our current portfolio of products primarily focuses on heart disease and vascular disease. This particular focus, however, may not be in our long-term best interest if the incidence and prevalence of heart disease and vascular disease decrease over time. Despite the aging population in the affluentparts of the world where diagnostic medical imaging is most frequently used, government and private efforts to promote preventative cardiac carethrough exercise, diet and improved medications could decrease the overall demand for our products, which could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows.The process of developing new drugs is complex, time-consuming and costly, and the outcome is not certain. We currently have three pipeline candidates, two of which (flurpiridaz F 18 and our cardiac neuronal imaging agent) are currently in clinicaldevelopment, while a third pipeline candidate (our vascular remodeling agent) is in pre-clinical development. To obtain regulatory approval for theseproduct candidates, we must conduct extensive human tests, which are referred to as clinical trials, as well as meet other rigorous regulatoryrequirements. Satisfaction of all regulatory requirements typically takes many years and requires the expenditure of substantial resources. A number ofother factors may cause significant delays in the completion of our clinical trials, including unexpected delays in the initiation of clinical sites, slowerthan projected enrollment, competition with ongoing clinical trials and scheduling conflicts with participating clinicians, regulatory requirements, limitson manufacturing capacity and failure of a product candidate to meet required standards for administration to humans. In addition, it may take longerthan we project to achieve study endpoints and complete data analysis for a trial. Given the cost and complexity associated with conducting later stageclinical trials, we are currently considering seeking one or more partners to assist us with the development, manufacturing and commercialization offlurpiridaz F 18. We may also consider outlicensing other pipeline candidates in the future. Depending upon the terms that we can negotiate with one ormore prospective partners, the development of our pipeline candidates could be delayed by the timing of the consummation of such transactions as wellas factors specific to the partner or partners involved. Our product candidates are also prone to the risks of failure inherent in drug development and testing. The results of preliminary studies do notnecessarily predict clinical success, and larger and later-stage clinical trials may not produce the same results as earlier-stage trials. Sometimes, productcandidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. Productcandidates in later-stage clinical trials may fail to show desired safety and efficacy traits, despite having progressed through initial clinical testing.Further, the data collected from clinical trials of our product candidates may not be sufficient to support regulatory approval, or regulators could interpretthe data differently and less favorably than we do. Further, the design of a clinical trial can determine whether its results will support approval of aproduct, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Clinical trials of potential productsoften reveal that it is not practical or feasible to continue development efforts. Regulatory authorities may require us or our partners to conduct additionalclinical testing, in which case we would have to expend additional time and resources. The approval process may also be delayed by changes ingovernment regulation, future legislation or administrative action or changes in regulatory policy that occur prior to or during regulatory review. Thefailure to provide clinical and preclinical data that are adequate to demonstrate to the satisfaction of the regulatory authorities that our product candidatesare safe and effective for their proposed use will delay or preclude approval and will prevent us from marketing those products. Even if our product candidates proceed successfully through clinical trials and receive regulatory approval, there is no guarantee that an approvedproduct can be manufactured in commercial quantities at reasonable cost or that such a product will be successfully marketed. For example, flurpiridazF 18 will require the creation of a complex, field-based manufacturing and distribution network involving PET cyclotrons located at radiopharmacieswhere the agent will be manufactured43Table of Contentsand distributed rapidly to end-users, given the agent's 110-minute half-life. Our development costs will increase if we are required to complete additionalor larger clinical trials with respect to product candidates. If the delays or costs are significant, our financial results and our ability to commercialize ourproduct candidates will be adversely affected. To the extent that we enter into a development, manufacturing or commercialization arrangement for one or more of our pipeline candidates and aresuccessful in obtaining regulatory and reimbursement approval for such candidate or candidates, we will likely have to share some of the economicbenefits that those products generate with our partner or partners.A heightened public or regulatory focus on the radiation risks of diagnostic imaging could have an adverse effect on our business. We believe that there has been heightened public and regulatory focus on radiation exposure, including the concern that repeated doses of radiationused in diagnostic imaging procedures pose the potential risk of long-term cell damage, cancer and other diseases. For example, starting in January2012, CMS will require the accreditation of facilities providing the technical component of advanced imaging services, including CT, MRI, PET andnuclear medicine, in non-hospital free-standing settings. In August 2011, the Joint Commission (an independent, not-for-profit organization thataccredits and certifies more than 19,000 health care organizations and programs in the United States) issued an alert on the radiation risks of diagnosticimaging and recommended specific actions of providing "the right test and the right dose through effective processes, safe technology and a culture ofsafety." Heightened regulatory focus on risks caused by the radiation exposure received by diagnostic imaging patients could lead to increased regulation ofradiopharmaceutical manufacturers or health care providers who perform procedures that use our imaging agents, which could make the proceduresmore costly, reduce the number of providers who perform procedures and/or decrease the demand for our products. In addition, heightened public focuson or fear of radiation exposure could lead to decreased demand for our products by patients or by health care providers who order the procedures inwhich our agents are used. Although we believe that our diagnostic imaging agents when properly used do not expose patients and health care providersto unsafe levels of radiation, any of the foregoing risks could have an adverse effect on our business, results of operations, financial condition and cashflows.In the ordinary course of business, we may be subject to product liability claims and lawsuits, including potential class actions, alleging that ourproducts have resulted or could result in an unsafe condition or injury. Any product liability claim brought against us, with or without merit, could be costly to defend and could result in an increase of our insurancepremiums. Although we have not had any such claims to date, claims that could be brought against us might not be covered by our insurance policies.Furthermore, even where the claim is covered by our insurance, our insurance coverage might be inadequate and we would have to pay the amount ofany settlement or judgment that is in excess of our policy limits, which we believe are consistent with other pharmaceutical companies in the diagnosticmedical imaging industry. We may not be able to obtain insurance on terms acceptable to us or at all, since insurance varies in cost and can be difficult toobtain. Our failure to maintain adequate insurance coverage or successfully defend against product liability claims could have a material adverse effecton our business, results of operations, financial condition and cash flows.44Table of ContentsWe use hazardous materials in our business and must comply with environmental laws and regulations, which can be expensive. Our operations use hazardous materials and produce hazardous wastes, including radioactive, chemical and, in certain circumstances, biologicalmaterials and wastes. We are subject to a variety of federal, state and local laws and regulations as well as non-U.S. laws and regulations relating to thetransport, use, handling, storage, exposure to and disposal of these materials and wastes. Environmental laws and regulations are complex, changefrequently and have become more stringent over time. We are required to obtain, maintain and renew various environmental permits and nuclearlicenses. Although we believe that our safety procedures for transporting, using, handling, storing and disposing of, and limiting exposure to, thesematerials and wastes comply in all material respects with the standards prescribed by applicable laws and regulations, the risk of accidentalcontamination or injury cannot be eliminated. We place a high priority in these safety procedures and seek to limit any inherent risks. We generallycontract with third parties for the disposal of wastes generated by our operations. Prior to disposal, we store any low level radioactive waste at ourfacilities until the materials are no longer considered radioactive. Although we believe we have complied in all material respects with all applicableenvironmental, health and safety laws and regulations, we cannot assure you that we have been or will be in compliance with all such laws at all times.If we violate these laws, we could be fined, criminally charged or otherwise sanctioned by regulators. We may be required to incur further costs tocomply with current or future environmental and safety laws and regulations. In addition, in the event of accidental contamination or injury from thesematerials, we could be held liable for any damages that result and any such liability could exceed our resources. While we have budgeted for current and future capital and operating expenditures to maintain compliance with these laws and regulations, wecannot assure you that our costs of complying with current or future environmental, health and safety laws and regulations will not exceed our estimatesor adversely affect our results of operations and financial condition. Further, we cannot assure you that we will not be subject to additionalenvironmental claims for personal injury, investigation or cleanup in the future based on our past, present or future business activities.If we are unable to protect our intellectual property, our competitors could develop and market products with features similar to our products, anddemand for our products may decline. Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our technologies andproduct candidates as well as successfully defending these patents and trade secrets against third-party challenges. We will only be able to protect ourintellectual property from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions forwhich important legal principles remain unresolved. In addition, changes in either the patent laws or in interpretations of patent laws in the United Statesor other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed orenforced in our patents or in third-party patents. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequatelyprotect our rights or permit us to gain or keep our competitive advantage. For example:•we might not have been the first to make the inventions covered by each of our pending patent applications and issued patents, and wecould lose our patent rights as a result; •we might not have been the first to file patent applications for these inventions or our patent applications may not have been timely filed,and we could lose our patent rights as a result;45Table of Contents•others may independently develop similar or alternative technologies or duplicate any of our technologies; •it is possible that none of our pending patent applications will result in any further issued patents; •our issued patents may not provide a basis for commercially viable drugs, may not provide us with any protection from unauthorized useof our intellectual property by third parties, and may not provide us with any competitive advantages; •our patent applications or patents may be subject to interferences, oppositions, reexaminations or similar administrative proceedings; •we may not develop additional proprietary technologies that are patentable; or •the patents of others may have an adverse effect on our business. Moreover, the issuance of a patent is not conclusive as to its validity or enforceability. A third party may challenge the validity or enforceability ofa patent even after its issuance by the U.S. Patent and Trademark Office. It is also uncertain how much protection, if any, will be afforded by our patentsif we attempt to enforce them and they are challenged in court or in other proceedings, which may be brought in U.S. or non-U.S. jurisdictions tochallenge the validity of a patent. The defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings in the UnitedStates are costly, time consuming to pursue and result in diversion of resources. The outcome of these proceedings is uncertain and could significantlyharm our business. If we are not able to defend the patents of our technologies and products, then we will not be able to exclude competitors frommarketing products that directly compete with our products, which could have a material adverse effect on our business, results of operations, financialcondition and cash flows. We will also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable.However, trade secrets are difficult to protect. We use reasonable efforts to protect our trade secrets, but our employees, consultants, contractors, outsidescientific partners and other advisors may unintentionally or willfully disclose our confidential information to competitors or other third parties.Enforcing a claim that a third party improperly obtained and is using our trade secrets is expensive and time consuming, and the outcome isunpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors mayindependently develop equivalent knowledge, methods and know-how. We often rely on confidentiality agreements with our collaborators, employees,consultants and other third parties and invention assignment agreements with our employees to protect our trade secrets and other know-how andproprietary information concerning our business. These confidentiality agreements may not prevent unauthorized disclosure of trade secrets and otherproprietary information, and there can be no guarantee that an employee or an outside party will not make an unauthorized disclosure of our tradesecrets, other technical know-how or proprietary information. We may not have adequate remedies for any unauthorized disclosure. This might happenintentionally or inadvertently. It is possible that a competitor will make use of such information, and that our competitive position will be compromised,in spite of any legal action we might take against persons making such unauthorized disclosures, which could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows. We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered orapplied to register many of these trademarks, including DEFINITY, Cardiolite, TechneLite, Ablavar, Neurolite and Lantheus Medical Imaging. Wecannot assure you that any pending trademark applications will be approved. Third parties may also46Table of Contentsoppose our trademark applications, or otherwise challenge our use of the trademarks. If our trademarks are successfully challenged, we could be forcedto rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing newbrands. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce ourtrademarks.We may be subject to claims that we have infringed, misappropriated or otherwise violated the patent or other intellectual property rights of a thirdparty. The outcome of any such claims is uncertain and any unfavorable result could adversely affect our business, financial condition andresults of operations. We may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property rights. Whilewe believe that the products that we currently manufacture using our proprietary technology do not infringe upon or otherwise violate proprietary rightsof other parties or that meritorious defenses would exist with respect to any assertions to the contrary, we cannot assure you that we would not be foundto infringe on or otherwise violate the proprietary rights of others. We may be subject to litigation over infringement claims regarding the products we manufacture or distribute. This type of litigation can be costlyand time consuming and could generate significant expenses, damage payments (potentially including treble damages) or restrictions or prohibitions onour use of our technology, which could adversely affect our results of operations. In addition, if we are found to be infringing on proprietary rights ofothers, we may be required to develop non-infringing technology, obtain a license (which may not be available on reasonable terms, or at all), makesubstantial one-time or ongoing royalty payments, or cease making, using and/or selling the infringing products, any of which could have a materialadverse effect on our business, results of operations, financial condition and cash flows.We may be adversely affected by the current economic environment. Our ability to attract and retain customers, invest in and grow our business and meet our financial obligations depends on our operating andfinancial performance, which, in turn, is subject to numerous factors, including the prevailing economic conditions and financial, business and otherfactors beyond our control, such as the rate of unemployment, the number of uninsured persons in the United States and inflationary pressures. Wecannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business. We are exposed to risks associated with reduced profitability and the potential financial instability of our customers, many of which may beadversely affected by volatile conditions in the financial markets. For example, unemployment and underemployment, and the resultant loss ofinsurance, may decrease the demand for healthcare services and pharmaceuticals. If fewer patients are seeking medical care because they do not haveinsurance coverage, our customers may experience reductions in revenues, profitability and/or cash flow that could lead them to modify, delay or cancelorders for our products. If customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be ableto pay, or may delay payment of, accounts receivable that are owed to us. This, in turn, could adversely affect our financial condition and liquidity. Inaddition, if economic challenges in the United States result in widespread and prolonged unemployment, either regionally or on a national basis, prior tothe effectiveness of certain provisions of the Healthcare Reform Act, a substantial number of people may become uninsured or underinsured. In turn,this may lead to fewer individuals pursuing or being able to afford diagnostic medical imaging procedures. To the extent economic challenges result infewer procedures being performed, our business, results of operations, financial condition and cash flows could be adversely affected.47Table of ContentsOur business is subject to international economic, political and other risks that could negatively affect our results of operations or financialposition. For the years ended December 31, 2011 and 2010, 24.7% and 25.2%, respectively, of our total revenues were derived from countries outside theUnited States. We anticipate that revenue from non-U.S. operations will grow. Accordingly, our business is subject to risks associated with doingbusiness internationally, including:•less stable political and economic environments and changes in a specific country's or region's political or economic conditions; •international customers which are agencies or institutions of foreign governments, •currency fluctuations; •potential negative consequences from changes in tax laws affecting our ability to repatriate profits; •unfavorable labor regulations; •greater difficulties in relying on non-U.S. courts to enforce either local or U.S. laws, particularly with respect to intellectual property; •greater difficulties in managing and staffing non-U.S. operations; •the need to ensure compliance with the numerous regulatory and legal requirements applicable to our business in each of thesejurisdictions and to maintain an effective compliance program to ensure compliance with these requirements; •changes in public attitudes about the perceived safety of nuclear facilities; •changes in trade policies, regulatory requirements and other barriers; •civil unrest or other catastrophic events; and •longer payment cycles of non-U.S. customers and difficulty collecting receivables in non-U.S. jurisdictions. These factors are beyond our control. The realization of any of these or other risks associated with operating in non-U.S. countries could have amaterial adverse effect on our business, results of operations or financial condition.We face currency and other risks associated with international sales. We generate significant revenue from export sales, as well as from operations conducted outside the United States. During the years endedDecember 31, 2011, 2010 and 2009, the net impact of foreign currency changes on transactions was a loss of $156,000, $209,000 and a gain of$794,000, respectively. Operations outside the United States expose us to risks including fluctuations in currency values, trade restrictions, tariff andtrade regulations, U.S. export controls, non-U.S. tax laws, shipping delays, and economic and political instability. For example, violations of U.S.export controls, including those administered by the U.S. Treasury Department's Office of Foreign Assets Control, could result in fines, other civil orcriminal penalties and the suspension or loss of export privileges which could have a material adverse affect on our business, results of operations,financial conditions and cash flows. The functional currency of each of our non-U.S. operations is generally the local currency, although one non-U.S. operation's functional currencyis the U.S. Dollar. Exchange rates between some of these currencies and U.S. Dollars have fluctuated significantly in recent years and may do so in thefuture. Historically, we have not used derivative financial instruments or other financial instruments to48Table of Contentshedge such economic exposures. It is possible that fluctuations in exchange rates will have a negative effect on our results of operations.U.S. credit markets may impact our ability to obtain financing or increase the cost of future financing, including, in the event we obtain financingwith a variable interest rate, interest rate fluctuations based on macroeconomic conditions that are beyond our control. As of December 31, 2011, we had total consolidated debt of approximately $398.6 million, which consists of $400.0 million in aggregate principalamount of Notes issued May 10, 2010 and March 16, 2011 and due May 15, 2017, net of $3.4 million in consent solicitation fees and $2.0 millionpremium on debt. The Facility provides for a $42.5 million revolving credit facility, under which we currently have no amounts outstanding. Duringperiods of volatility and disruption in the U.S., European, or global credit markets, obtaining additional or replacement financing may be more difficultand the cost of issuing new debt or replacing our Facility could be higher than under our current Facility. Higher cost of new debt may limit our abilityto have cash on hand for working capital, capital expenditures and acquisitions on terms that are acceptable to us. Additionally, the Facility has avariable interest rate. By its nature, a variable interest rate will move up or down based on changes in the economy and other factors, all of which arebeyond our control. If interest rates increase, our interest expense could increase, affecting earnings and reducing cash flows available for workingcapital, capital expenditures and acquisitions.Many of our customer relationships outside of the United States are, either directly or indirectly, with governmental entities, and we could beadversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws outside the United States. The FCPA, the United Kingdom Bribery Act of 2010 and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibitcompanies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing anyimproper business advantage. It also requires us to keep books and records that accurately and fairly reflect our transactions. Because of thepredominance of government-sponsored healthcare systems around the world, many of our customer relationships outside of the United States are,either directly or indirectly, with governmental entities and are therefore subject to the FCPA and similar anti-bribery laws in non-U.S. jurisdictions. Inaddition, the United Kingdom Bribery Act of 2010 has been enacted, although the date of implementation has not yet been determined. Its provisionsextend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments and penalties. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmentalcorruption to some degree, and in certain circumstances strict compliance with anti-bribery laws may conflict with local customs and practices. Despiteour training and compliance programs, our internal control policies and procedures may not always protect us from reckless or criminal acts committedby our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effecton our results of operations, financial condition and cash flows.Our business depends on the continued effectiveness and availability of our information technology infrastructure, and failures of thisinfrastructure could harm our operations. To remain competitive in our industry, we must employ information technologies to support manufacturing processes, quality processes,distribution, R&D and regulatory applications that capture,49Table of Contentsmanage and analyze the large streams of data generated in our clinical trials in compliance with applicable regulatory requirements. We rely extensivelyon technology to allow the concurrent conduct of work sharing around the world. As with all information technology, our systems are vulnerable topotential damage or interruptions from fires, blackouts, telecommunications failures and other unexpected events, as well as to break-ins, sabotage orintentional acts of vandalism. Given the extensive reliance of our business on technology, any substantial disruption or resulting loss of data that is notavoided or corrected by our backup measures could harm our business, operations and financial condition.We may not be able to hire or retain the number of qualified personnel, particularly scientific, medical and sales personnel, required for ourbusiness, which would harm the development and sales of our products and limit our ability to grow. Competition in our industry for highly skilled scientific, healthcare and sales personnel is intense. If we are unable to retain our existing personnel,or attract and train additional qualified personnel, either because of competition in our industry for such personnel or because of insufficient financialresources, our growth may be limited and it could have a material adverse effect on our business.If we lose the services of our key personnel, our business could be adversely affected. Our success is substantially dependent upon the performance, contributions and expertise of our chief executive officer, executive leadership andsenior management team. Don Kiepert, our Chief Executive Officer and President, and other members of our executive leadership and seniormanagement team play a significant role in generating new business and retaining existing customers. We have employment agreements withMr. Kiepert and a limited number of other individuals on our executive leadership team, although we cannot prevent them from terminating theiremployment with us. We do not maintain key man life insurance policies on any of our executive officers. Our inability to retain our existing executiveleadership and senior management team or attract and retain additional qualified personnel could have a material adverse effect on our business.We have a substantial amount of indebtedness which may limit our financial and operating activities and may adversely affect our ability to incuradditional debt to fund future needs. As of December 31, 2011, we had approximately $400.0 million of total principal indebtedness consisting entirely of the Notes, which mature onMay 15, 2017. In addition, we have up to $42.5 million of additional borrowing capacity under the Facility. Our substantial indebtedness and any futureindebtedness we incur could:•require us to dedicate a substantial portion of cash flow from operations to the payment of interest on and principal of our indebtedness,thereby reducing the funds available for other purposes; •make it more difficult for us to satisfy and comply with our obligations with respect to the Notes, namely the payment of interest andprincipal; •subject us to increased sensitivity to interest rate increases; •make us more vulnerable to economic downturns, adverse industry or company conditions or catastrophic external events; •limit our ability to withstand competitive pressures; •reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or •place us at a competitive disadvantage to competitors that have relatively less debt than we have.50Table of Contents In addition, our substantial level of indebtedness could limit our ability to obtain additional financing on acceptable terms, or at all, for workingcapital, capital expenditures and general corporate purposes. Our liquidity needs could vary significantly and may be affected by general economicconditions, industry trends, performance and many other factors not within our control.We may not be able to generate sufficient cash flow to meet our debt service obligations. Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations, which are currently $39.0 millionof interest per year based on our $400.0 million in total principal indebtedness as of December 31, 2011 related to the Notes, which principal is due atmaturity, will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many ofwhich are outside of our control. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including interest paymentsand the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, sellingassets, entering into corporate collaborations or licensing arrangements for one or more of our product candidates, reducing or delaying capitalinvestments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold, licensedor partnered, or, if sold, licensed or partnered, of the timing of the transactions and the amount of proceeds realized from those transactions, thatadditional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debtinstruments then in effect. Furthermore, our ability to refinance would depend upon the condition of the financial and credit markets. Our inability togenerate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis,would have an adverse effect on our business, results of operations and financial condition.Despite our substantial indebtedness, we may incur more debt, which could exacerbate the risks described above. We and our subsidiaries may be able to incur substantial additional indebtedness in the future subject to the limitations contained in the agreementsgoverning our debt, including the Indenture (as defined below) governing the Notes. Although these agreements restrict us and our restrictedsubsidiaries from incurring additional indebtedness, these restrictions are subject to important exceptions and qualifications. For example, we aregenerally permitted to incur certain indebtedness, including indebtedness to finance acquisitions of similar businesses, indebtedness arising in theordinary course of business, indebtedness among restricted subsidiaries and us and indebtedness relating to hedging obligations. We are also permittedto incur indebtedness under the Indenture governing the Notes so long as we comply with a interest coverage ratio of 2.0 to 1.0, determined on a proforma basis for the most recently completed four fiscal quarters. See "Item 7—Management's Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources—External Sources of Liquidity." If we or our subsidiaries incur additional debt, the risks thatwe and they now face as a result of our high leverage could intensify. In addition, the Indenture governing the Notes and the agreement governing theFacility will not prevent us from incurring obligations that do not constitute indebtedness under the agreements.Our debt agreements contain restrictions that will limit our flexibility in operating our business. The Indenture governing the Notes and the agreement governing the Facility contain various covenants that limit our ability to engage in specifiedtypes of transactions. These covenants limit our and our restricted subsidiaries' ability to, among other things:•incur additional debt;51Table of Contents•pay dividends or make other distributions; •redeem stock; •issue stock of subsidiaries; •make certain investments; •create liens; •enter into transactions with affiliates; and •merge, consolidate or transfer all or substantially all of our assets. Additionally, the agreement governing the Facility requires us to maintain certain financial ratios. A breach of any of these covenants could resultin a default under the Indenture governing the Notes and the agreement governing the Facility. In January 2012, we entered into an amendment to theFacility to, among other things increase the applicable consolidated total leverage ratio and decrease the consolidated interest coverage ratio for certainfiscal quarters. Although we believe that anticipated EBITDA amounts will be sufficient such that we will be in compliance with the financial covenants,as amended, if our upcoming quarterly earnings are not sufficient, we could be in violation of the leverage ratio covenant. We may also be unable to takeadvantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenants under our indebtedness.Item 1B. Unresolved Staff Comments None.Item 2. Properties Our executive offices and primary manufacturing facilities are located at our North Billerica, Massachusetts facility, which we own. As ofDecember 31, 2011, we leased an additional 7 facilities in Canada, 2 in Australia and 2 in Puerto Rico. Our owned facilities consist of approximately578,000 square feet of manufacturing, laboratory, mixed use and office space, and our leased facilities consist of approximately 67,416 square feet. Webelieve all of these facilities are well-maintained and suitable for the office, radiopharmacy, manufacturing or warehouse operations conducted in them. The following table summarizes information regarding our significant leased and owned properties, as of December 31, 2011:52Location Square footage Owned/LeasedUnited States North Billerica, Massachusetts 578,000 OwnedCanada Montreal 8,729 LeasedMississauga 13,747 LeasedDorval 13,079 LeasedQuebec 6,261 LeasedHamilton 5,300 LeasedVancouver 880 LeasedAustralia Melbourne 4,634 LeasedAdelaide 4,306 LeasedPuerto Rico San Juan 9,200 LeasedPonce 1,280 LeasedTable of ContentsItem 3. Legal Proceedings From time to time, we are a party to various legal proceedings arising in the ordinary course of business. In addition, we have in the past been, andmay in the future be, subject to investigations by regulatory authorities which expose it to greater risks associated with litigation, regulatory or otherproceedings, as a result of which we could be required to pay significant fines or penalties. The outcome of litigation, regulatory or other proceedingscannot be predicted with certainty and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to us. In addition, intellectualproperty disputes often have a risk of injunctive relief which, if imposed against us, could materially and adversely affect its financial condition orresults of operations. On December 16, 2010, we filed suit against one of our insurance carriers seeking to recover business interruption losses associated with the NRUreactor shutdown and the ensuing global Moly supply challenge (Lantheus Medical Imaging, Inc., Plaintiff v. Zurich American Insurance Company,Defendant, United States District Court, Southern District of New York, Case No. 10 Civ 9371). The claim is the result of the shutdown of the NRUreactor in Chalk River, Ontario. The NRU reactor was off-line from May 2009 until August 2010 due to a "heavy water" leak in the reactor vessel. Thedefendant answered the complaint on January 21, 2011, denying substantially all of the allegations, presenting certain defenses and requesting dismissalof the case with costs and disbursements. On April 4, 2011, the parties had their first pre-trial conference in United States District Court for theSouthern District of New York, and discovery has commenced and is continuing. Non-binding mediation of the case is currently scheduled to takeplace in the summer of 2012. We cannot be certain what amount, if any, or when, if ever, we will be able to recover for business interruption lossesrelated to this matter.Item 4. Mine Safety Disclosures None.53Table of ContentsPART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market and Dividend Information Our outstanding common stock is privately held and there is no established public trading market for our common stock. There is one stockholderof record of our common stock as of December 31, 2011. On March 21, 2011 and on May 10, 2010, our Board of Directors declared dividends of$150 million and $163.8 million, respectively, to our sole stockholder, Intermediate, which declared dividends of equal amounts to Holdings. See"Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—ExternalSources of Liquidity." We do not expect to make comparable cash dividends in the future on a continuous basis, but may, from time to time, declareadditional dividends to our sole stockholder in an amount to be determined. See "Item 13—Certain Relationships and Related Transactions, and DirectorIndependence" and Note 17, "Related Party Transactions" to our consolidated financial statements for a discussion regarding transactions andagreements we have with Avista and "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 10,"Financing Arrangements" to our consolidated financial statements for a discussion of restrictive covenants under the agreements governing ourindebtedness.Unregistered Sales of Equity Securities We sold no equity securities during the year ended December 31, 2011.Securities Authorized for Issuance Under Equity Compensations Plans See "Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Securities Authorized forIssuance Under Equity Compensation Plans."Item 6. Selected Financial Data Basis of Financial Information The term "Predecessor" refers to our predecessor company, BMSMI, formerly a division of BMS, and now known as Lantheus MedicalImaging, Inc. The term "Successor" refers to Lantheus MI Intermediate, Inc., our direct parent, and its subsidiaries. The financial statements underlyingthe 2007 amounts reported in this item were prepared on a carve-out basis using BMS's historical bases in the assets and liabilities and the historicalresults of the operations of BMSMI. The 2007 financial statements were derived from the consolidated financial statements and accounting records ofBMS, principally from statements and records representing the business of BMSMI when operated as a division of BMS. These financial statementswere prepared in accordance with GAAP. The statements of comprehensive (loss) income data for the year ended December 31, 2007 include expense allocations for certain corporatefinancial functions historically provided to BMSMI by BMS, including general corporate expenses related to corporate functions such as executiveoversight, risk management, information technology, accounting, audit, legal, investor relations, human resources, shared services and employeebenefits and incentives, including pension and other post retirement benefits and stock-based compensation arrangements. Additionally, the 2007financial statements of comprehensive (loss) income data include expense allocations relating to the effects of foreign currency derivatives. We consider these allocations to be a reasonable reflection of the utilization of services provided or benefits received. The allocations may not,however, reflect the expense BMSMI would have54Table of Contentsincurred as a stand-alone company, and the expense allocation methodologies used by BMS may not represent actual costs of operating the stand-alonebusiness. Actual costs that may have been incurred if BMSMI had been a stand-alone company would depend on a number of factors, including thechosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as informationtechnology systems and infrastructure. Therefore, the selected financial data for the Successor and Predecessor periods are not comparable. In addition,certain Predecessor items have been reclassified to conform with Successor's presentation. Following our purchase of the medical imaging business from BMS, with the financial sponsorship of Avista, on January 8, 2008 (the"Acquisition"), our audited financial statements were prepared at the Lantheus Intermediate level rather than at the Lantheus level due to covenants inour financial arrangements undertaken in connection with the Acquisition. Because BMSMI is the legal predecessor to Lantheus, we believe thatBMSMI is the effective predecessor of Lantheus MI Intermediate which owns 100% of the capital stock of Lantheus and has no other operations andholds no other assets.Non-GAAP Financial Measures EBITDA and Adjusted EBITDA and the ratios related thereto, or our EBITDA Measures, as defined below and presented in this annual report,are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in theUnited States, or GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to netincome (loss) or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities asmeasures of our liquidity. Our EBITDA Measures may not be comparable to similarly titled measures of other companies and are not measures of performance calculated inaccordance with GAAP. We have included information concerning our EBITDA Measures in this annual report because we believe that suchinformation is used by certain investors as one measure of a company's historical performance. Furthermore, certain financial ratios included in our debtcovenants are based on EBITDA as defined in the debt agreements. See Note 10, "Financing Arrangements." Our EBITDA Measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of ouroperating results or cash flows as reported under GAAP. Some of these limitations are:•they do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; •they do not reflect changes in, or cash requirements for, our working capital needs; •they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments, on ourdebt; •although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and our EBITDAMeasures do not reflect any cash requirements for such replacements; •they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; and •other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures. Because of these limitations, our EBITDA Measures should not be considered as measures of discretionary cash available to us to invest in thegrowth of our business. We compensate for these55Table of Contentslimitations by relying primarily on our GAAP results and using our EBITDA Measures only for supplemental purposes. Please see the consolidatedfinancial statements included elsewhere in this annual report for our GAAP results.Selected Financial Data The following table sets forth (i) certain selected consolidated financial data for Lantheus Intermediate, our parent company and a guarantor of theNotes (as "Successor"), as of and for the fiscal years ended December 31, 2008, 2009, 2010 and 2011, which have been derived from the auditedconsolidated financial statements of Lantheus Intermediate and (ii) certain selected consolidated financial data for BMSMI (as "Predecessor," formerly adivision of BMS and now known as Lantheus Medical Imaging, Inc.) for the year ended December 31, 2007, which have been derived from the auditedfinancial statements of BMSMI. The financial statements of BMSMI as of and for the year ended December 31, 2007 were prepared in connection withthe purchase of the business with Avista's financial sponsorship on January 8, 2008 and contain expense allocations for corporate functions historicallyprovided to BMSMI by BMS and not costs that we would have necessarily incurred as a stand-alone entity. These statements have been prepared usingthe Predecessor's bases in the assets and liabilities and the historical results of operations. As a result, the financial statements of BMSMI as of and forthe year ended December 31, 2007 are not comparable to our financial statements for subsequent periods. See "—Basis of Financial Information." For the purpose of convenience, the selected financial data as of and for the year ended December 31, 2008 assumed an effective date of January 1,2008 for the Acquisition. We determined that the operating results between the effective date and the acquisition date are not material and these resultshave been included with our 2008 operating results. The 2008 operating results include net revenues of approximately $12.0 million, gross profit ofapproximately $8.3 million, operating income of approximately $5.4 million and net income of $3.3 million relating to the period from January 1, 2008through January 7, 2008. The results indicated below and elsewhere in this annual report are not necessarily indicative of our future performance. You should read thisinformation together with "Item 7—Management's56Table of ContentsDiscussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included inItem 8 of this annual report.57 Predecessor Successor Year Ended December 31, 2007 2008 2009 2010 2011 (dollars in thousands) Statement of Comprehensive (Loss)Income Data: Total revenues $629,177 $536,844 $360,211 $353,956 $356,292 Cost of goods sold(1) 223,674 244,496 184,844 204,006 255,466 Loss on firm purchase commitment — — — — 5,610 General and administrative expenses(1) 28,331 64,909 35,430 30,042 32,057 Sales and marketing expenses(1) 64,724 45,730 42,337 45,384 38,689 Research and development expense 50,005 34,682 44,631 45,130 40,945 In-process research and development — 28,240 — — — Restructuring and other charges, net 9,841 — — — — Operating (loss) income 252,602 118,787 52,969 29,394 (16,475)Interest expense — (31,038) (13,458) (20,395) (37,658)Loss on early extinguishment of debt — — — (3,057) — Interest income — 693 73 179 333 Other (expense) income, net (4,224) 2,950 2,720 1,314 1,429 Income (loss) before income taxes 248,378 91,392 42,304 7,435 (52,371)Provision for income taxes 97,073 48,606 21,952 2,465 84,098 Net (loss) income $151,305 $42,786 $20,352 $4,970 $(136,469) Statement of Cash Flows Data: Net cash flows provided by (used in): Operating activities $243,218 $178,445 $95,783 26,317 $22,420 Investing activities (4,808) (530,832) (38,351) (8,550) (7,694)Financing activities (235,880) 376,466 (49,102) (17,550) (6,991)Other Financial Data: EBITDA(2) $320,366 $192,797 $96,214 $62,037 $16,832 Adjusted EBITDA(2) 334,064 253,882 104,060 85,228 80,084 Capital expenditures 4,808 12,175 8,856 8,335 7,694 Balance Sheet Data (at period end): Cash and cash equivalents $— $21,036 $31,480 $33,006 $40,607 Total assets 539,221 528,035 492,543 495,881 358,804 Total liabilities 68,852 240,226 181,964 342,447 492,007 Current portion of long-term debt — 15,000 30,000 — — Total long-term debt, net — 127,751 63,649 250,000 398,629 Total stockholder's (deficit) equity 470,369 287,809 310,579 153,434 (133,203)(1)For comparability purposes, a reclassification totaling $15,788 has been made from general and administrative and sales andmarketing expenses to cost of goods sold in the Predecessor period to be consistent with the Successor period presentation. (2)EBITDA is defined as net (loss) income plus interest, income taxes, depreciation and amortization. EBITDA is a measure usedby management to measure operating performance. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusualitems and other adjustments. AdjustedTable of Contents58EBITDA is used by management to measure operating performance and by investors to measure a company's ability to service itsdebt and meet its other cash needs. Management believes that the inclusion of the adjustments to EBITDA applied in presentingAdjusted EBITDA are appropriate to provide additional information to investors about our performance across reporting periodson a consistent basis by excluding items that we do not believe are indicative of our core operating performance. See "—Non-GAAP Financial Measures."The following table provides a reconciliation of our net (loss) income to EBITDA and Adjusted EBITDA for the periodspresented: Predecessor Successor Year Ended December 31, 2007 2008 2009 2010 2011 (dollars in thousands) Net (loss) income $151,305 $42,786 $20,352 $4,970 $(136,469)Interest expense, net — 30,345 13,385 20,216 37,325 Provision for income taxes(a) 97,073 46,131 20,392 1,215 82,718 Depreciation and amortization 71,988 73,535 42,085 35,636 33,258 EBITDA 320,366 192,797 96,214 62,037 16,832 Non-cash stock-based compensation 2,385 1,368 1,209 1,634 (969)Loss on early extinguishment of debt — — — 3,057 — Legal fees(b) — — — — 2,017 Loss on firm purchase commitment(c) — — — — 5,610 Asset write-off(d) 1,472 5,791 4,125 14,084 52,973 Inventory step-up expense(e) — 8,189 — — — Acquired in-process R&D(f) — 28,240 — — — Severance costs(g) 9,841 13,775 — 1,001 1,995 Transaction expenses(h) — 2,742 — — — Sponsor fee and other(i) — 980 1,060 1,090 1,020 New manufacturer costs(j) — — 910 1,816 606 Ablavar launch costs(k) — — 542 509 — Adjusted EBITDA $334,064 $253,882 $104,060 $85,228 $80,084 (a)Represents provision for income taxes less tax indemnification associated with an agreement with BMS and in 2011includes the establishment of a full valuation allowance against the deferred tax assets. (b)Represents legal services incurred in connection with our business interruption claim associated with the NRU reactorshutdown. (c)Represents a loss associated with a portion of the committed purchases of Ablavar that we do not believe we will be ableto sell prior to expiration. (d)Represents non-cash losses incurred associated with the write-down of inventory and write-off of long-lived assets. The2011 amount consists primarily of $25.8 million inventory write-down related to our Ablavar product and $23.5 millionwrite down related to the Ablavar intangible asset to adjust the carrying value to its fair value of zero. The 2010 amountconsists primarily of $10.9 million inventory write-down related to our Ablavar product. The 2009 amount is primarilyrelated to the write-down of accessoriesTable of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with "Item 6—SelectedFinancial Data" and the consolidated financial statements and the related notes included in Item 8 of this annual report. This discussion containsforward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks anduncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors,including those set forth under "Item 1A—Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."Overview We are a global leader in developing, manufacturing and distributing innovative diagnostic medical imaging agents and products that assistclinicians in the diagnosis of cardiovascular diseases such as coronary artery disease, congestive heart failure and stroke, peripheral vascular disease andother diseases. We were founded in 1956 as New England Nuclear Corporation and purchased by E. I. du Pont de Nemours and Company in 1981. Wewere subsequently acquired by BMS, as part of its acquisition of DuPont Pharmaceuticals in 2001. On January 8, 2008, with the financial sponsorshipof Avista, we purchased the medical imaging business from BMS for an aggregate purchase price of $518.7 million, which is now known as LMI. Our current marketed products are used by nuclear physicians, cardiologists, radiologists, internal medicine physicians, technologists andsonographers working in a variety of clinical settings. We sell our products to radiopharmacies, hospitals, clinics, group practices, integrated deliverynetworks, group purchasing organizations and, in certain circumstances, wholesalers. In addition to our marketed products, we have three products inclinical and pre-clinical development including our lead Phase 3 product, flurpiridaz F 18, an MPI agent, 18F LMI1195, a cardiac neuronal imagingagent, and BMS 753951 for the identification of vascular plaque. We expect ongoing investment in our clinical programs and research and developmentto remain an important component of our business strategy.59related to our TechneLite product as a result of the global Moly shortage and Cardiolite inventory acquired from BMS.The 2008 and 2007 amounts were primarily related to our DEFINITY product as a result of the boxed warning inOctober 2007.(e)Represents the revaluation of inventory as a result of the impact of purchase accounting in connection with theAcquisition. (f)Represents in-process R&D relating to the Acquisition. Immediately following the closing of the Acquisition, the in-process R&D was expensed. (g)In 2007, consists of severance costs relating to a work force reduction of approximately 150 employees of BMS prior tothe Acquisition. In 2008, consists of severance costs relating to the closure of our European operations following theAcquisition. In 2010, consists of severance costs relating to one of our executive officers and a work force reduction inthe fourth quarter. In 2011, consists of severance costs relating to board approved actions and severance of certainexecutives. (h)Represents legal, information technology and human resource advisory services and other advisory fees incurred inconnection with the Acquisition. (i)Represents annual sponsor monitoring fee and related expenses. (j)Represents costs associated with establishing a second manufacturing source for Ablavar and DEFINITY. (k)Represents costs associated with the launch of Ablavar.Table of Contents We market our products globally and have operations in the United States, Puerto Rico, Canada and Australia and distribution relationships inEurope, Asia Pacific and Latin America.Our Products Our principal products include the following: Cardiolite is a technetium-based radiopharmaceutical imaging agent used in MPI procedures to detect coronary artery disease using SPECT.Cardiolite was approved by the FDA in 1990, and its market exclusivity expired in July 2008. TechneLite is a technetium-based generator which provides the essential nuclear material used by radiopharmacies to radiolabel Cardiolite and othertechnetium-based radiopharmaceuticals used in nuclear medicine procedures. TechneLite uses Moly as its main active ingredient. DEFINITY is an ultrasound contrast agent used in ultrasound exams of the heart, also known as echocardiography exams. DEFINITY consists ofperflutren-containing lipid microspheres and is indicated in the United States for use in patients with suboptimal echocardiograms to assist in theimaging of the left ventricular chamber and left endocardial border of the heart in ultrasound procedures. We launched DEFINITY in 2001, and its lastpatent in the United States will currently expire in 2021 and in numerous foreign jurisdictions in 2019. In the United States, our nuclear imaging products, including Cardiolite and TechneLite, are primarily distributed through over 350radiopharmacies that are controlled by or associated with Cardinal, UPPI, Triad and GE Healthcare. A small portion of our nuclear imaging productsales in the United States are made through our direct sales force to hospitals and clinics that maintain their own in-house radiopharmaceuticalcapabilities. Sales of our contrast agents, including DEFINITY, are made through our direct sales force of approximately 85 representatives. Outside theUnited States, we own five radiopharmacies in Canada and two radiopharmacies in each of Puerto Rico and Australia. We also maintain a direct salesforce in each of these countries. In the rest of the world, we rely on third-party distributors to market, distribute and sell our nuclear imaging andcontrast agent products, either on a country-by-country basis or on a multi-country regional basis. The following table sets forth our revenue derived from our principal products:Key Factors Affecting Our Results Our business and financial performance have been, and continue to be, affected by the following:Inventory Supply We currently rely on BVL for sole source manufacturing of DEFINITY, Neurolite and certain TechneLite accessories. We also rely on BVL for amajority of our Cardiolite product supply. In July 2010, BVL temporarily shutdown the facility where it manufactures products for a number ofcustomers, including us, in order to upgrade the facility to meet certain regulatory requirements. In anticipation of this shutdown, BVL manufactured forus additional inventory of these products to meet60 Year Ended December 31, (dollars in thousands) 2011 % 2010 % 2009 % Cardiolite $65,316 18 $77,422 22 $119,304 33 TechneLite 131,241 37 122,044 34 112,910 31 DEFINITY 68,503 19 59,968 17 42,942 12 Other 91,232 26 94,522 27 85,055 24 Total revenues $356,292 100 $353,956 100 $360,211 100 Table of Contentsour expected needs during the shutdown period which was anticipated to end in March 2011. As the shutdown and re-inspection periods have beenlonger than anticipated by BVL and ourselves, we could not meet all of the demand for certain products during the second half of 2011, resulting in anoverall revenue decline over the prior period. We can give no assurances as to when BVL will be able to successfully manufacture and distributeproduct. If BVL is not able to provide us with adequate product supply for a prolonged period of time, we will have limited Cardiolite product supply.We also procure Cardiolite from a second-source manufacturer which could help mitigate the limited product supply, and in February 2012, entered intoa five-year manufacturing and supply agreement for DEFINITY with JHS. Based on our current projections, we believe that we have sufficientDEFINITY inventory until early in the second quarter of 2012. The inventory of Neurolite previously supplied to us by BVL has now been exhausted.We are pursuing new manufacturing relationships to establish and secure additional long-term or alternative suppliers of Cardiolite, and Neurolite andDEFINITY, but we are uncertain of the timing as to when these arrangements could provide meaningful quantities of product. In addition, if BVL is notable to provide us adequate product supply for a further prolonged period of time, we will need to implement additional expense reduction and otheroperating and strategic initiatives. See "Item 1A—Risk Factors—Our dependence upon third parties for the manufacture and supply of a substantialportion of our products could prevent us from delivering our products to our customers in the required quantities, within the required timeframe, or atall, which could result in order cancellations and decreased revenues."Global Moly Supply Historically, our largest supplier of Moly, our highest volume raw material, has been Nordion, which has relied on the NRU reactor in ChalkRiver, Ontario. This reactor was off-line from May 2009 until August 2010 due to a heavy water leak in the reactor vessel. With the return to service ofthe NRU reactor, we have seen increased sales in TechneLite for the year ended December 31, 2011 as compared to the prior year. In response to the global Moly shortage and to minimize the risk of any potential future supply disruption, we took several steps to diversify andbalance our global supply of Moly, including expanding our sourcing of Moly to include NTP in South Africa, IRE in Belgium and ANSTO inAustralia. We are also pursuing additional sources of Moly from potential new producers around the world to further augment our current supply. Inaddition, we are exploring a number of alternative Moly projects with existing reactors and technologies as well as new technologies. During the period the NRU reactor was offline, instability in the global supply of Moly and supply shortages resulted in substantial volatility in thecost of Moly in comparison to historical costs. We were able to pass some of these Moly cost increases on to our customers through our customercontracts. Additionally, the instability in the global supply of Moly has resulted in Moly producers requiring, in exchange for fixed Moly prices, supplyminimums in the form of take-or-pay obligations. With less Moly, we manufactured less TechneLite and fewer generators for radiopharmacies andhospitals to make up unit doses of Cardiolite, resulting in decreased sales of TechneLite and Cardiolite in favor of other diagnostic modalities that do notuse Moly during the period the NRU reactor was offline.Demand for TechneLite Following the global Moly supply challenge, we have experienced reduced demand for TechneLite generators from pre-shortage levels eventhough volume has increased in absolute terms from shortage levels following the return of our normal Moly supply in August 2010. Although, we donot know if Technetium demand will ever return to pre-shortage levels, we believe we will experience some increase in sales of TechneLite generators.61Table of Contents We believe that TechneLite unit volume has not returned to pre-shortage levels for a number of reasons, including: (i) changing staffing andutilization practices in radiopharmacies, which have resulted in an increased number of unit doses of Technetium-based radiopharmaceuticals beingmade from available amounts of Technetium; (ii) shifts to alternative diagnostic imaging modalities during the Moly supply shortage, which have notreturned to Technetium-based procedures; and (iii) decreased amounts of Technetium being used in unit-doses of Technetium-basedradiopharmaceuticals due to growing concerns about patient radiation dose exposure. We also believe that there has been an overall decline in the MPIstudy market because of decreased levels of patient studies during the Moly shortage period that have not returned to pre-shortage levels and industry-wide cost-containment initiatives that have resulted in a transition of location in which imaging procedures are performed from free standing imagingcenters to the hospital setting. We expect these factors will continue to affect Technetium demand in the future. Additionally, our ability to meet thedemand for TechneLite may be impacted by the BVL shutdown. See "—Inventory Supply."Cardiolite Competitive Pressures Cardiolite's market exclusivity expired in July 2008. In September 2008, the first of several competing generic products to Cardiolite was launched.With continued pricing pressure from generic competitors, we also sell our Cardiolite product in the form of a generic sestamibi while at the same timecontinuing to sell branded Cardiolite throughout the MPI segment. We believe this strategy of selling branded as well as generic sestamibi allows us tomaintain total segment share by having multiple sestamibi offerings that are attractive in terms of brand, as well as price. In addition to pricing pressure due to generics, Cardiolite has also faced a moderate decline in the MPI segment due to a change in professionalsociety appropriateness guidelines, on-going reimbursement pressures, the limited availability of Moly during the NRU reactor shutdown, the limitedavailability of Cardiolite during BVL outage and the increase in use of other diagnostic modalities as a result of a shift to more available imaging agentsand modalities. Despite these trends, we believe our share of the MPI segment only decreased from approximately one-half to one-third, prior to theBVL-related supply challenges. During 2011, we have seen our share of the MPI segment decline to just over one-quarter. We believe these decreaseswere limited due to continued brand awareness, loyalty to the agent within the cardiology community and our strong relationships with our distributionpartners.Growth of DEFINITY We believe the market opportunity for our contrast agent, DEFINITY, remains quite significant. As we better educate the physician and healthcareprovider community about the benefits and risks of this product, we believe we will experience further penetration of suboptimal echocardiograms.Sales of DEFINITY have continually increased quarter over quarter since June 2008, when we were able to modify the boxed warning on DEFINITY.Unit sales of DEFINITY had decreased substantially in late 2007 and early 2008 as a result of an FDA request in October 2007 that all manufacturersof ultrasound contrast agents add a boxed warning to their products to notify physicians and patients about potentially serious safety concerns or risksposed by the products. However, in May 2008, the boxed warning was modified by the FDA in response to the substantial advocacy efforts ofprescribing physicians. Since then, DEFINITY sales have continually increased quarter over quarter. In October 2011, we received FDA approval offurther modifications to the DEFINITY label, including: further relaxing the boxed warning; eliminating the sentence in the Indication and Use section"The safety and efficacy of DEFINITY with exercise stress or pharmacologic stress testing have not been established" (previously added in October2007 in connection with the imposition of the box warning); and including summary data from the post-approval CaRES (Contrast echocardiographyRegistry for Safety Surveillance) safety registry and the post-approval pulmonary hypertension study. DEFINITY is62Table of Contentscurrently the only echocardiography contrast agent able to benefit from these label modifications. If BVL continues to remain shutdown, however, wemay be unable to manufacture DEFINITY until such time as our second source manufacturer can commercially produce DEFINITY. See "—InventorySupply."Ablavar Prior to the issuance of our June 30, 2011 financial statements, we performed an analysis of our expected future sales based on an updated salesforecast using actual results through June 30, 2011 and forecasted sales of our Ablavar product. Based on the results of this analysis we recorded aninventory write-down to cost of goods sold of $13.5 million of Ablavar inventory, which represented the cost of Ablavar finished good product andAPI that we did not believe we would be able to sell prior to its expiration. We also evaluated our expected sales forecast for Ablavar in consideration ofour supply agreement for API. Based on the updated sales forecast, coupled with the aggregate six-year shelf life of API and finished goods, webelieved that we would not be able to sell all of the committed supply. As a result, in the second quarter, we also recorded a reserve of $1.9 million forthe loss associated with the portion of the committed purchases of Ablavar product that we did not believe we would be able to sell prior to expiry. Inaddition, we determined that the write down of Ablavar inventory represented an event that warranted assessment of the Ablavar intangible asset for itsrecoverability and concluded that the asset was not recoverable and prior to the issuance of our June 30, 2011 financial statements we recorded in costof goods sold in the U.S. segment an impairment charge of $23.5 million to adjust the carrying value to its fair value of zero. Both the inventory write-down and the intellectual property asset impairment are recorded as cost of goods sold in the accompanying statements of comprehensive (loss) income.Prior to the issuance of our December 31, 2011 financial statements, we assessed our Ablavar inventory balance at December 31, 2011 considering ourthird and fourth quarter results, as well as results subsequent to December 31, 2011, against our current forecast of projected sales and $11.1 ofremaining purchase commitments. Based upon this analysis, we recorded an additional inventory write-down in the fourth quarter to cost of goods soldof $12.3 million of Ablavar inventory, which represented the cost of Ablavar finished good product and API that we did not believe we would be ableto sell prior to its expiration. We also evaluated our expected sales forecast for Ablavar in consideration of our supply agreement for API. Based on thisanalysis, contemplated with the aggregate six-year shelf life of API and finished goods, we believe that we will not be able to sell all of the committedsupply. As a result, in the fourth quarter, we also recorded to cost of goods sold a reserve of $3.7 million for the loss associated with the portion of thecommitted purchases of Ablavar product that we do not believe we will be able to sell prior to expiry. After giving effect to these adjustments, as ofDecember 31, 2011, we have a total of $12.2 million of Ablavar inventory on hand and approximately $11.1 million of remaining committed Ablavarpurchase obligations. In the event that we do not meet our sales expectations for Ablavar or cannot sell the product we have committed to purchase priorto its expiration, we could incur additional inventory losses and/or losses on our purchase commitments. In October 2011, LMI entered into Amendment No. 2 to the Supply Agreement dated as of April 6, 2009 between LMI and Mallinckrodt. TheAblavar Agreement provides for the manufacture and supply by Mallinckrodt of Ablavar API and finished drug product for LMI. Among other things,Amendment No. 2 (i) extends the term of the Ablavar Agreement from September 30, 2012 until September 30, 2014, (ii) reduces the amount of APIMallinckrodt is obligated to supply to LMI and LMI is obligated to purchase from Mallinckrodt over the term of the Ablavar Agreement and(iii) increases the amount of finished drug product Mallinckrodt is obligated to supply to LMI and LMI is obligated to purchase from Mallinckrodt overthe term of the Ablavar Agreement. As a result of Amendment No. 2, the aggregate future purchase obligations of LMI under the Ablavar Agreementwere reduced from approximately $33.8 million to approximately $20.9 million. As of December 31, 2011, our remaining obligation under thisagreement is approximately $11.1 million.63Table of ContentsIncreases in Research and Development Expenses To compete successfully in the marketplace, we must make substantial investments in new product development. As a result, research anddevelopment expenses are a key factor that has historically affected our results and will continue to do so in the future. We expect that research anddevelopment expenses will fluctuate depending primarily on the timing and outcomes of clinical trials, related manufacturing initiatives and the results ofour decisions based on these outcomes. We expect to incur substantial additional expenses over the next several years for clinical trials related to ourproduct development candidates, including flurpiridaz F 18, 18F LMI1195 and BMS 753951. We also expect manufacturing expenses for someprograms included in research and development expenses to increase as we support our manufacturing infrastructure for later stages of clinicaldevelopment.Operating Results The following have impacted our results in the year ended December 31, 2011:•the establishment of a valuation allowance against our deferred tax assets in the amount of $102.7 million; •recording of an impairment charge related to the Ablavar intangible asset of $23.5 million, write-down of Ablavar inventory ofapproximately $25.8 million and recording of a reserve for expected losses on firm purchase commitments of approximately$5.6 million; •increase of interest expense as a result of our issuance of additional debt in March 2011 to approximately $37.7 million in 2011; •limited supply of Neurolite and Cardiolite product inventory as a result of the BVL shutdown and on-going return to service; •costs of product recalls associated with product manufactured by BVL; •continued increase in sales of TechneLite generators to the market following the return of a normal Moly supply in August 2010; •DEFINITY's continued growth in sales; •continued generic competition to Cardiolite; •limited Ablavar revenues to offset costs related to the launch and commercialization of the product; and •action taken on June 30, 2011 to reduce our work force in an effort to reduce costs and increase operating efficiency. For 2012, we believe these challenges will be partially mitigated as a result of the expected continued increase in DEFINITY sales on a year-over-year basis, assuming we are able to obtain adequate DEFINITY supply, and the return of a sustained Moly supply resulting in increased unit volume ofTechneLite as compared to the period during when the NRU reactor was offline. In addition, despite the slower than anticipated market acceptance ofAblavar, we believe that with further education of its benefits and reimbursement, market acceptance of the product will increase in the future.64Table of ContentsYears Ended December 31, 2011, 2010 and 200965 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 Revenues Net productrevenues $345,762 $345,747 $352,303 $15 —%$(6,556) (2)%License andother revenues 10,530 8,209 7,908 2,321 28 301 4 Total revenues 356,292 353,956 360,211 2,336 1 (6,255) (2) Cost of goods sold 255,466 204,006 184,844 51,460 25 19,162 10 Loss on firmpurchasecommitment 5,610 — — 5,610 100 — — Total cost ofgoods sold 261,076 204,006 184,844 57,070 28 19,162 10 Gross profit 95,216 149,950 175,367 (54,734) (37) (25,417) (14) Operating expenses General andadministrativeexpenses 32,057 30,042 35,430 2,015 7 (5,388) (15)Sales andmarketingexpenses 38,689 45,384 42,337 (6,695) (15) 3,047 7 Research anddevelopmentexpenses 40,945 45,130 44,631 (4,185) (9) 499 1 Totaloperatingexpenses 111,691 120,556 122,398 (8,865) (7) (1,842) (2) Operating(loss)income (16,475) 29,394 52,969 (45,869) (156) (23,575) (45)Interest expense (37,658) (20,395) (13,458) (17,263) 85 (6,937) 51 Loss on earlyextinguishmentof debt — (3,057) — 3,057 (100) (3,057) 100 Interest income 333 179 73 154 86 106 145 Other income(expense), net 1,429 1,314 2,720 115 9 (1,406) (52) (Loss) incomebeforeincometaxes (52,371) 7,435 42,304 (59,806) (804) (34,869) (82)Provision forincome taxes 84,098 2,465 21,952 81,633 3,312 (19,487) (89) Net (loss)income $(136,469)$4,970 $20,352 $(141,439) (2,846)%$(15,382) (76)% Table of ContentsComparison of the Years Ended December 31, 2011, 2010, and 2009Revenues Revenues are summarized as follows: Total revenues increased $2.3 million, or 1%, to $356.3 million in the year ended December 31, 2011, as compared to $354.0 million in the yearended December 31, 2010. U.S. segment revenue increased $3.6 million, or 1%, to $268.4 million in the same period, as compared to $264.7 million inthe prior year. This increase in the U.S. segment over the prior year is primarily driven by increased sales of DEFINITY, due to the increase in thenumber of contrast studies performed, TechneLite, which was impacted from May 2009 until August 2010 by a global Moly shortage as a result of theNRU reactor outage and Xenon, primarily due to price increases. Offsetting these increases were lower Thallium revenues primarily due to customersreturning to technetium-based studies following the return of a normal Moly supply and lower Cardiolite and Neurolite revenues primarily due to theBVL supply shortage and continued generic pressure for Cardiolite. The International segment revenues decreased $1.3 million, or 1%, to $87.9 million in the year ended December 31, 2011, as compared to$89.2 million in the year ended December 31, 2010. The decrease was primarily driven by a decrease in Thallium revenues as customers returned totechnetium-based studies following the return of a normal Moly supply, as well as a decrease in Cardiolite and Neurolite revenues as a result of therecent product recall and supply issues, resulting in stock outs of product in certain international markets. Offsetting these decreases was the impact offavorable foreign currency exchange of approximately $4.2 million and higher TechneLite revenues due to an increase in global Moly availabilityfollowing the return of a normal Moly supply.66 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 U.S. Cardiolite $39,214 $50,408 $91,934 $(11,194) (22)%$(41,526) (45)%TechneLite 114,833 108,262 103,312 6,571 6 4,950 5 DEFINITY 67,442 58,846 42,053 8,596 15 16,793 40 Other currentlymarketedproducts 36,346 39,021 31,571 (2,675) (7) 7,450 24 Total U.S. netproduct revenues 257,835 256,537 268,870 1,298 1 (12,333) (5)License andother revenues 10,530 8,209 7,908 2,321 28 301 4 Total U.S. revenues $268,365 $264,746 $276,778 $3,619 1%$(12,032) (4)% International Cardiolite $26,101 $27,014 $27,370 $(913) (3)%$(356) (1)%TechneLite 16,408 13,782 9,598 2,626 19 4,184 44 DEFINITY 1,061 1,122 889 (61) (5) 233 26 Other currentlymarketedproducts 44,357 47,292 45,576 (2,935) (6) 1,716 4 Total Internationalnet productrevenues $87,927 $89,210 $83,433 $(1,283) (1)$5,777 7 Net productrevenues $345,762 $345,747 $352,303 $15 —%$(6,556) (2)%License and otherrevenues 10,530 8,209 7,908 2,321 28 301 4 Total revenues $356,292 $353,956 $360,211 $2,336 1%$(6,255) (2)% Table of Contents Total revenues decreased $6.2 million, or 2%, to $354.0 million in the year ended December 31, 2010, as compared to $360.2 million in the yearended December 31, 2009. U.S. segment revenue decreased $12.0 million, or 4%, to $264.7 million in the same period, as compared to $276.8 millionin the prior year. This decrease was primarily due to the continued impact from the expiration of Cardiolite's market exclusivity in July 2008 andsubsequent introduction of generic competition which began in September 2008, as well as the decrease in available Moly due to the global Molysupply shortage caused by the NRU reactor which was off-line from May 2009 until August 2010. As a result, unit volume and average selling pricedecreased by 32% and 13%, respectively, in the year ended December 31, 2010 as compared to the year ended December 31, 2009. In addition, weexperienced an increase in customer rebates due to new rebate contracts entered in to in 2010. These decreases were offset, in part, by an increase in TechneLite sales due to a 19% price increase related to the additional Moly surcharge anddistribution costs, offset by 14% lower unit volume caused by the decrease in available Moly due to the global Moly supply shortage and lower demandfrom what we believe are changing staffing and utilization practices in radiopharmacies, which have resulted in an increased number of unit doses oftechnetium-based radiopharmaceuticals being made from available amounts of technetium caused by the global Moly supply shortage. The Moly supplyshortage also resulted in an increase in Thallium sales due to a 38% increase in volume due to its substitution for technetium-based studies. In addition,we realized an increase in DEFINITY sales primarily due to a 39% volume increase and 1% price increase as a result of continued market penetrationsince the June 2008 relaunch following a modification of the boxed warning in May 2008 and an increase in Xenon sales primarily due to 26% higherpricing and 15% higher volume from new customers. The International segment revenues increased $5.8 million, or 7%, to $89.2 million in the year ended December 31, 2010, as compared to$83.4 million in the year ended December 31, 2009. This increase was primarily due to favorable currency exchange of approximately $6.2 millionoffset, in part, by lower product volume due to the decrease in available Moly caused by the global Moly supply shortage.Rebates and Allowances Estimates for rebates and allowances represent our estimated obligations under contractual arrangements with third parties. Rebate accruals andallowances are recorded in the same period the related revenue is recognized, resulting in a reduction to product revenue and the establishment of aliability which is included in accrued expenses. These rebates result from performance-based offers that are primarily based on attaining contractuallyspecified sales volumes and growth, Medicaid rebate, programs for certain products, administration fees of group purchasing organizations and certaindistributor related commissions. The calculation of the accrual for these rebates and allowances is based on an estimate of the third party's buyingpatterns and the resulting applicable contractual rebate or commission rate(s) to be earned over a contractual period.67Table of Contents An analysis of the amount of, and change in, reserves is summarized as follows: The accrual for rebates and allowances was approximately $1.4 million and $0.9 at December 31, 2011 and December 31, 2010, respectively. Theincrease in the accrual resulted principally from the full year impact in 2011 of the addition of contracts with rebate rights signed in the second half of2010. In October 2010, we entered into a Medicaid Drug Rebate Agreement for certain of our products, which did not have a material impact on ourresults of operations in 2010 or 2011. If the demand for these products through the Medicaid program increases in the future, our rebates associatedwith this program could increase and could have a material impact on future results of operations.Costs of Goods Sold Cost of goods sold consists of manufacturing, distribution, definite lived intangible asset amortization and other costs related to our commercialproducts. In addition, it includes the write off of excess and obsolete inventory. Cost of goods sold is summarized as follows: Total cost of goods sold increased $57.1 million, or 28%, to $261.1 million in the year ended December 31, 2011, as compared to $204.0 millionin the year ended December 31, 2010. U.S. segment cost of goods sold increased approximately $58.0 million, or 39%, to $206.5 million in sameperiod, as compared to $148.5 million in the prior year period. International segment cost of goods sold decreased $0.9 million, or 2%, to $54.6 millionfor the same period, as compared to $55.5 million in the prior year period.68(in thousands) Rebates Allowances Total Balance, as of January 1, 2009 $7,972 $97 $8,069 Current provisions relating to sales in current year 1,996 471 2,467 Adjustments relating to prior years estimate (1,586) — (1,586)Payments/credits relating to sales in current year (1,579) (430) (2,009)Payments/credits relating to sales in prior years (6,376) (97) (6,473) Balance, as of December 31, 2009 427 41 468 Current provisions relating to sales in current year 3,072 555 3,627 Adjustments relating to prior years estimate — — — Payments/credits relating to sales in current year (2,171) (454) (2,625)Payments/credits relating to sales in prior years (418) (41) (459) Balance, as of December 31, 2010 910 101 1,011 Current provisions relating to sales in current year 3,672 474 4,146 Adjustments relating to prior years estimate (116) — (116)Payments/credits relating to sales in current year (2,617) (441) (3,058)Payments/credits relating to sales in prior years (493) (101) (594) Balance, as of December 31, 2011 $1,356 $33 $1,389 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 United States $206,450 $148,454 $128,692 $57,996 39%$19,762 15%International 54,626 55,552 56,152 (926) (2) (600) (1) Total Cost ofGoods Sold $261,076 $204,006 $184,844 $57,070 28%$19,162 10% Table of Contents For the year ended December 31, 2011 as compared to the same period for 2010, the primary contributing factors to the increase in the U.S.segment cost of goods sold relate to charges resulting from an assessment of future Ablavar sales, on-hand inventory shelf-life, committed supply andan impairment of the Ablavar patent portfolio intangible asset. The total costs included in cost of goods sold of the inventory reserve, the loss contractreserve and the intangible impairment was $54.9 million for the year ended December 31, 2011, as compared to a $10.9 million write-off of Ablavarinventory in 2010, an increase of $44.0 million. The U.S. segment also incurred higher costs as we produced more TechneLite after the return to normalMoly supply following the outage of the NRU reactor in Chalk River, Ontario. Increases in Thallium and Gallium costs also occurred as a result oflower International segment volume, the effect of which burdens the U.S. segment with a greater share of manufacturing overhead expenses. Similarly,we also experienced higher Neurolite manufacturing cost due primarily to lower International segment volume as a direct result of the longer thanexpected BVL shutdown and product recall, the effect of which burdens the U.S. segment with more cost due to lower absorption. These increaseswere partially offset by a decrease for amortization of intangible customer relationships. Cost of goods sold in our International segment decreased primarily due to lower Neurolite volume as a result of the longer than expected BVLoutage and product recall. We also experienced lower Thallium cost due to lower volumes resulting from customers switching to technetium-basedstudies and lower third party and other product cost due to favorable mix and lower material costs. These decreases were partially offset primarily byhigher manufacturing costs in our radiopharmacies. Total cost of goods sold increased $19.2 million, or 10%, to $204.0 million in the year ended December 31, 2010, as compared to $184.8 millionin the year ended December 31, 2009. U.S. segment cost of goods sold increased $19.8 million, or 15%, to $148.5 million in same period, as comparedto $128.7 million in the prior year period. International segment cost of goods sold decreased $0.6 million, or 1%, to $55.5 million for the same period,as compared to $56.1 million in the prior year period. For the year ended December 31, 2010 as compared to the same period for 2009, the increase in the U.S. segment cost of goods sold wasprimarily due to higher material costs for TechneLite and higher Thallium product cost as a result of the global Moly supply shortage, an increase inAblavar cost primarily related to the $10.9 million inventory write-down of Ablavar finished good product which we did not believe we would be ableto utilize prior to its expiration and an increase in the cost of Xenon driven by increased volume. This was offset, in part, by a decrease of amortizationof intangible customer relationships and capitalized software and a decrease in distribution and other overhead costs. The decrease in the International segment cost of goods sold was due to lower costs driven by lower volumes as a result of the global Moly supplyshortage offset by higher material costs for available product and lower amortization related to intangible customer relationships.Gross Profit Total gross profit decreased $54.7 million, or 37%, to $95.2 million in the year ended December 31, 2011, as compared to $150.0 million in theyear ended December 31, 2010. U.S. segment gross profit decreased $54.4 million, or 47%, to $61.9 million, as compared to $116.3 million in the69 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 United States $61,915 $116,292 $148,086 $(54,377) (47)%$(31,794) (21)%International 33,301 33,658 27,281 (357) (1) 6,377 23 Total Gross Profit $95,216 $149,950 $175,367 $(54,734) (37)%$(25,417) (14)% Table of Contentsprior year period. International segment gross profit decreased $0.4 million, or 1%, to $33.3 million for the same period, as compared to $33.7 millionin the prior year period. Gross profit in the U.S. segment decreased primarily due to the $44.0 million incremental expense in 2011 arising from the Ablavar inventory, losscontract reserves and intangible asset impairment previously discussed. We also experienced a decrease in Cardiolite and Neurolite profit relating torevenue loss from the longer than anticipated BVL outage and product recall, coupled with higher manufacturing costs arising from unabsorbed capacitydue primarily to the inability to supply product as a result of the longer than expected BVL shutdown. A decrease in Thallium profit also occurred dueto customers sourcing product from competitors and higher manufacturing cost. These decreases were partially offset by an increase in DEFINITYprofit as demand continues to increase as well as higher profit from Xenon due to an increase in price. Gross profit in our International segment decreased largely due to a decrease in Thallium gross profit due to lower volume as customers returned totechnetium-based studies. We also experienced increased manufacturing costs in our radiopharmacies and a decrease in Cardiolite gross profit relating tothe longer than anticipated BVL outage. These decreases were partially offset by an increase in TechneLite gross profit following the return to normalMoly supply and an increase in third party and other products profit due to lower material costs, favorable mix and higher revenues fromfluorodeoxyglucose ("FDG"), a PET imaging cancer agent, and generic sestamibi. Total gross profit decreased $25.4 million, or 14%, to $150.0 million in the year ended December 31, 2010, as compared to $175.4 million in theyear ended December 31, 2009. U.S. segment gross profit decreased $31.8 million, or 21%, to $116.3 million, as compared to $148.1 million in theprior year period. International segment gross profit increased $6.4 million, or 23%, to $33.7 million for the same period, as compared to $27.3 millionin the prior year period. Gross profit in the U.S. segment decreased primarily due to the expense arising from the Ablavar inventory reserves previously discussed. Grossprofit was also negatively affected by decreased price and volume reductions associated with the expiration of Cardiolite's market exclusivity, along withreductions in TechneLite and Thallium margins as a result of the global Moly supply shortage. These decreases were offset primarily by increased grossprofit associated with increased DEFINITY volume as a result of a continued demand ramp up from the June 2008 relaunch, a reduction in amortizationrelated to intangible customer relationships and capitalized software and an increase in Xenon gross profit due to higher volumes and price. The increase in the International segment gross profit was primarily attributable to a change in product mix between Cardiolite, TechneLite andThallium as a result of the global Moly supply shortage, offset, in part by favorable exchange rates.General and Administrative General and administrative expenses consist of salaries and related costs for personnel in executive, finance, legal, information technology andhuman resource functions. Other costs in general and administrative include professional fees for information technology services, external legal fees,70 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 United States $29,415 $27,193 $33,244 $2,222 8%$(6,051) (18)%International 2,642 2,849 2,186 (207) (7) 663 30 Total General andAdministrative $32,057 $30,042 $35,430 $2,015 7%$(5,388) (15)% Table of Contentsconsulting and accounting services as well as bad debt expense, and certain facility and insurance costs; including director and officer liability insurance. Total general and administrative expenses increased $2.0 million, or 7%, to $32.1 million in the year ended December 31, 2011, as compared to$30.0 million in the year ended December 31, 2010. In the U.S. segment, general and administrative expenses increased $2.2 million, or 8%, to$29.4 million, as compared to $27.2 million in the prior year period. The increase primarily related to legal expenses for a business interruptioninsurance claim, as well as higher salaries and benefits for additional experienced personnel. These increases were partly offset by lower professionalservices fees driven by cost containment initiatives. For the year ended December 31, 2011, general and administrative expenses in the International segment decreased $0.2 million or 7%, to$2.6 million as compared to $2.8 million in the prior year period. This decrease was primarily driven by lower recruitment fees and bad debt expense. Total general and administrative expenses decreased $5.4 million, or 15%, to $30.0 million in the year ended December 31, 2010, as compared to$35.4 million in the year ended December 31, 2009. In the U.S. segment, general and administrative expenses decreased $6.0 million, or 18%, to$27.2 million, as compared to $33.2 million in the prior year period. General and administrative expenses in the U.S. segment decreased primarily dueto: non-recurring external consulting in 2009 related to our infrastructure cost improvement initiative; lower salary, benefits and employee relatedexpenses primarily driven by changes in attainment of performance related compensation; and lower information technology external contractor andservice expenses primarily for non-recurring business transition activities in 2009 as well as cost control efforts in 2010. International segment general and administrative expenses increased $0.6 million, or 30%, to $2.8 million for the same period, as compared to$2.2 million in the prior year period. The increase was attributable to increased bad debt reserves, recruitment fees and other expenses.Sales and Marketing Sales and marketing expenses consist primarily of salaries and related costs for personnel in field sales, marketing, business development, andcustomer service functions. Other costs in sales and marketing expense include the development and printing of advertising and promotional material,professional services, market research, and sales meetings. Total sales and marketing expenses decreased $6.7 million, or 15%, to $38.7 million in the year ended December 31, 2011, as compared to$45.4 million in the year ended December 31, 2010. In the U.S. segment, sales and marketing expense decreased $6.7 million, or 16%, to $34.0 millionin the same period, as compared to $40.8 million in the prior year. The decrease related primarily to the discontinued use of a contracted sales forcesupporting Ablavar, as part of a sales force reorganization in the fourth quarter of 2010. Compensation costs were lower due to a non-recurringreduction of stock compensation expense resulting from an expired liability award. Other decreases, driven by cost containment initiatives, includemarket research primarily related to Ablavar and lower professional services. These decreases were partly offset by increased variable incentivecompensation for the sales force. As a percentage of net revenue in the U.S. segment, sales and marketing expenses were 13% and 15% for the yearsended December 31, 2011 and 2010, respectively.71 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 United States $34,040 $40,762 $37,873 $(6,722) (16)%$2,889 8%International 4,649 4,622 4,464 27 1 158 4 Total Sales andMarketing $38,689 $45,384 $42,337 $(6,695) (15)%$3,047 7% Table of Contents For the year ended December 31, 2011, the International segment sales and marketing expense remained relatively flat. As a percentage of netrevenue, sales and marketing expenses in the International segment were 5% for each of the years ended December 31, 2011 and 2010. Total sales and marketing expenses increased $3.1 million, or 7%, to $45.4 million in the year ended December 31, 2010, as compared to$42.3 million in the year ended December 31, 2009. In the U.S. segment, sales and marketing expenses increased $2.9 million, or 8%, to $40.8 million,as compared to $37.9 million in the prior year period. International segment sales and marketing expenses increased $0.2 million, or 4%, to $4.6 millionfor the same period, as compared to $4.4 million in the prior year period. Sales and marketing expenses in the U.S. segment increased primarily due to a contract sales force hired in the fourth quarter of 2009 to supportthe launch, advertising, promotion and sales of Ablavar. Other increases associated with marketing development initiatives for flurpiridaz F 18 and otherpotential products were offset by lower advertising and other promotion costs related to DEFINITY, due to the delay of new agency selection and costcontrol efforts. As a percentage of net revenue in the U.S. segment, sales and marketing expenses were 15% and 13% for the years ended December 31,2010 and 2009, respectively. Sales and marketing expenses in the International segment increased primarily due to market research related to product opportunities in foreignmarkets. As a percentage of net revenue, sales and marketing expenses in the International segment were 5% for each of the years ended December 31,2010 and 2009.Research and Development Total research and development expense decreased $4.2 million, or 9%, to $40.9 million for the year ended December 31, 2011, as compared to$45.1 million in the year ended December 31, 2010. In the U.S. segment, research and development expense decreased $4.3 million, or 10%, to$40.3 million, as compared to $44.6 million in the prior year period. In the International segment, research and development expenses increased$0.1 million, or 14%, to $0.6 million, as compared to $0.5 million in the prior year period. The decrease in research and development expense in the U.S. segment was primarily due to the timing of clinical activity related to our flurpiridazF 18 program. During the first half of 2011, we were primarily in the planning and preparation stage for our flurpiridaz F 18 Phase 3 trial. At the end ofthe second quarter we enrolled our first patient and continued to actively enroll patients and activate sites during the second half of 2011. In 2010, wehad costs related to multiple clinical trials, principally, the flurpiridaz F 18 Phase 2 clinical trial and our DEFINITY Phase 4 clinical trial. These clinicaltrial expenses were offset, in part, by the closure and final true-up of our Cardiolite Pediatrics clinical trial. This reduction of clinical activity in 2011resulted in lower costs related to drug products, lab supplies, clinical site monitoring and consultants. Additionally, we had a decrease in personnelrelated costs resulting from a work force reduction in June 2011, fewer independent medical education grants and lower regulatory filing fees as the2010 results include a one-time fee to the FDA for a supplemental New Drug Application, or sNDA, for our DEFINITY product.72 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 United States $40,387 $44,639 $43,535 $(4,252) (10)%$1,104 3%International 558 491 1,096 67 14 (605) (55) Total Research andDevelopment $40,945 $45,130 $44,631 $(4,185) (9)%$499 1% Table of Contents Research and development expenses in the International segment remained relatively consistent for 2011 as compared to 2010. Total research and development expenses increased $0.5 million, or 1%, to $45.1 million in the year ended December 31, 2010, as compared to$44.6 million in the year ended December 31, 2009. U.S. segment sales and marketing expenses increased $1.1 million, or 3%, to $44.6 million, ascompared to $43.5 million in the prior year period. International segment sales and marketing expenses decreased $0.6 million, or 55%, to $0.5 millionfor the same period, as compared to $1.1 million in the prior year period. Research and development expenses in the U.S. segment increased primarily due to new employees hired during the second half of 2009 tosupport clinical programs, including medical liaison support for Ablavar, additional pharmacovigilance services and product support, and increasedregulatory fees primarily related to our sNDA filing for DEFINITY stress indication and our annual product registration fee to the European MedicinesAgency. These increases in expenses were offset, in part, by a reduction in clinical trial costs resulting from the completion of our Cardiolite long-termfollow up study, the completion of a DEFINITY Phase 4 study, and the completion of patient enrollment in our flurpiridaz F 18 Phase 2 clinical trial inthe second quarter of 2010. Research and development expenses in the International segment decreased primarily due to lower regulatory service cost in the European market. Our research and development expenses related to our Flurpiridaz F 18 program for 2010 consisted primarily of costs related to the completion ofour Phase 2 and the planning of our Phase 3 clinical trials. We commenced our Phase 3 trials in the second quarter of 2011 and expect to incuradditional expenses related to our Phase 3 trials in 2012.Other Income (Expense), NetInterest Expense For the year ended December 31, 2011 compared to the same period in 2010, interest expense increased to $37.7 million from $20.4 million, as aresult of the issuance of $150 million of New Notes. See Note 10, "Financing Arrangements" in our accompanying consolidated financial statements. Interest expense was $20.4 million in the year ended December 31, 2010 compared to $13.5 million in the year ended December 31, 2009, anincrease of $6.9 million, or 51%. This increase was due to the interest related to our Existing Notes.73 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 Interest expense $(37,658)$(20,395)$(13,458)$(17,263) 85%$(6,937) 51%Loss on earlyextinguishmentof debt — (3,057) — 3,057 (100) (3,057) 100 Interest Income 333 179 73 154 86 106 145 Other Income, Net 1,429 1,314 2,720 115 9 (1,406) (52) Total OtherExpense, net $(35,896)$(21,959)$(10,665)$(13,937) 63%$(11,294) 106% Table of ContentsInterest Income For the year ended December 31, 2011 compared to the same period in 2010, interest income increased to $0.3 million from $0.2 million, primarilyas a result of an increase in cash in interest bearing accounts. Interest income was $0.2 million in the year ended December 31, 2010 compared to $0.1 million in the year ended December 31, 2009, an increaseof $0.1 million, or 145%. This change was due to increased cash balances in interest bearing savings accounts.Other Income, net For the year ended December 31, 2011 compared to the same period in 2010, other income, net increased by $115,000 primarily as a result of anincrease in the amount of income recognized related to our tax indemnification agreement with BMS offset slightly by foreign currency exchange. Other income, net in the year ended December 31, 2010 was $1.3 million compared to $2.7 million in the year ended December 31, 2009. Thedecrease was primarily attributable to changes in the amount of income recognized related to our tax indemnification agreement with BMS, as well aschanges in exchange rates, primarily between the British Pound and U.S. Dollar currencies, in 2010 as compared to 2009.Provision for Income Taxes For the year ended December 31, 2011 compared to the same period in 2010, provision for income taxes increased, due primarily to the increase invaluation allowance. We have generated domestic pre-tax losses for the past two years. This loss history coupled with uncertainties surrounding our ability to obtainsustained product supply demonstrates negative evidence concerning our ability to utilize our gross deferred tax assets. In order to overcome thepresumption of recording a valuation allowance against our net deferred tax assets, we must have sufficient positive evidence that we can generatesufficient taxable income to utilize these deferred tax assets within the carryover or forecast period. Although we have no history of expiring netoperating losses or other tax attributes, our pre-tax loss of $52.4 million in 2011, the cumulative loss incurred over the three-year period endedDecember 31, 2011, and the uncertainty regarding product supply issues, management determined that all of the net U.S. deferred tax assets are notmore likely than not recoverable. As a result of this analysis, we have recorded a valuation allowance in the amount of $102.7 million in 2011. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions, which we expect to be fairly consistent in the near term. It isalso affected by discrete events that may not occur in any given year, but are not consistent from year to year. The provision for income taxes was $84.1million for the year ended December 31, 2011, $2.5 million for the year ended December 31, 2010 and $22.0 million for the year ended December 31,2009. The decrease in tax for 2010 compared to 2009 was attributable primarily to a decrease in pre tax income. Our effective tax rates for the yearsended December 31, 2011, 2010, and 2009 were, 160.7%, 33.1%, and 51.9%, respectively. The effective tax rate was lower than the statutory rate in2011 due to the increase in the valuation allowance, the foreign tax rate differential, research credits, and the affect of uncertain tax provisions. Theeffective tax rate was lower than the statutory rate in 2010 due to the foreign tax rate differential, the utilization of net operating losses, research credits,an adjustment to the tax rate applied to net state deferred tax74 2011 comparedto 2010 2010 comparedto 2009 December 31, Change$ Change% Change$ Change% (dollars in thousands) 2011 2010 2009 Provision forincome taxes $84,098 $2,465 $21,952 $81,633 3,312%$(19,487) (89)%Table of Contentsassets and adjustments to prior years tax returns. The excess of our effective tax rate over the statutory rate in 2009 results primarily from uncertain taxpositions and the impact of changing the tax rate on state deferred taxes. Undistributed earnings of various foreign subsidiaries aggregated$14.1 million, $9.5 million and $6.5 million at December 31, 2011, 2010, and 2009, respectively. As of December 31, 2011, we do not believe that wewill reinvest approximately $13.0 million of earnings in three of our foreign subsidiaries, and have recorded a related tax provision of $5.9 million.Liquidity and Capital ResourcesCash Flows The following table provides information regarding our cash flows:Net Cash Provided by Operating Activities Cash provided by operating activities is primarily driven by our earnings and changes in working capital. The decrease in cash provided byoperating activities for the year ended December 31, 2011 as compared to 2010 was primarily driven by lower revenues due to the supply challenges asa result of the recent recall and prolonged BVL outage, offset, in part, by a contract amendment with Covidien which decreased our 2011 purchasecommitments of Ablavar product. The decrease in cash provided by operating activities for 2010 as compared to 2009 was primarily driven by decreased cash receipts associatedwith customer receivables at the end of 2010 and increased expenditures for inventory purchases associated with manufacturing of Ablavar, which waslaunched in January 2010.Net Cash Used in Investing Activities Our primary uses of cash in investing activities are for the purchase of property and equipment and the acquisition of product rights. Net cash usedin investing activities in 2011 and 2010 reflected the purchase of property and equipment for $7.7 million and $8.3 million, respectively. In addition, in2010 and 2009, investing activities used $0.2 million and $29.5 million, respectively, of cash for the acquisition of the rights to a MRA agent, nowknown as Ablavar.Net Cash Used in Financing Activities Our primary historical uses of cash in financing activities are principal payments on our then existing term loan and line of credit. On May 10,2010 and March 21, 2011 we issued $250.0 million and $150.0 million, respectively, of our Notes and paid associated financing costs, paid outstandingprincipal on the term loan and issued dividends to Holdings. Net cash used in 2011 and 2010 primarily represents the results of these activities as wellas the draw down and repayment in 2011 of $10.0 million on our line of credit. Net cash used in financing activities in 2009 reflected aggregateprincipal payments on our term loan of $49.1 million and proceeds from the draw down on our line of credit of $28.0 million offset by payments on ourline of credit of $28.0 million.75 % Change Year Ended December 31, 2011Comparedto 2010 2010Comparedto 2009 2011 2010 2009 (dollars in thousands) Cash provided by (used in): Operating activities $22,420 $26,317 $95,783 (15)% (73)%Investing activities (7,694) (8,550) (38,351) (10)% (78)%Financing activities (6,991) (17,550) (49,102) (60)% (64)%Table of Contents Since 2010, our primary source of cash flows from financing activities has been the proceeds from the issuance of the Notes. Going forward, weexpect our primary source of cash flows from financing activities to be further issuances of securities or other financing arrangements into which wemay enter. Our primary historical uses of cash in financing activities are principal payments on our term loan and line of credit as well as dividends toHoldings, our parent. See "—External Sources of Liquidity."External Sources of Liquidity On May 10, 2010, LMI issued $250.0 million in aggregate principal amount of 9.750% Senior Notes due in 2017, or the Restricted Notes, at facevalue, net of issuance costs of $10.1 million, under the indenture, dated as of May 10, 2010. The net proceeds were used to repay $77.9 million dueunder LMI's outstanding credit agreement and to issue a $163.8 million dividend to Holdings. Holdings utilized the dividend to repay a $75.0 milliondemand note and to repurchase $90.0 million of Holdings' Series A Preferred Stock at the accreted value. The $75.0 million Demand Note was issuedin June 2009, was payable on demand and had an interest rate equal to the greater of the prime rate plus 2.25% or LIBOR plus 5.0%; the interest rate atDecember 31, 2009 was 5.5%. On February 2, 2011, LMI consummated an exchange offer where LMI exchanged $250.0 million aggregate principalamount of our Restricted Notes for an equal principal amount of 9.750% Senior Notes due 2017, or the Exchange Notes and, together with theRestricted Notes, the Existing Notes, that were registered under the Securities Act, with substantially identical terms in all respects. On March 21, 2011, LMI issued an additional $150.0 million in aggregate principal amount of our New Restricted Notes at face value, net ofissuance costs of $4.9 million, under the indenture, dated as of May 10, 2010, as supplemented by the First Supplemental Indenture, dated as ofMarch 14, 2011, and the Second Supplemental Indenture, dated as of March 21, 2011, or together, the Indenture. The net proceeds were used to fund a$150.0 million dividend to Holdings. Holdings utilized the dividend to repurchase all of the remaining Holdings' Series A Preferred Stock at theaccreted value of approximately $44 million and to issue an approximate $106 million dividend to our common securityholders. On May 10, 2011, LMIconsummated an exchange offer where LMI exchanged $150.0 million aggregate principal amount of New Restricted Notes for an equal principalamount of 9.750% Senior Notes due 2017, or the New Exchange Notes and, together with the New Restricted Notes, the New Notes, registered underthe Securities Act, with substantially identical terms in all respects. The Existing Notes and the New Notes, or together, the Notes mature on May 15, 2017. Interest on the Notes accrues at a rate of 9.750% per yearand is payable semiannually in arrears on May 15 and November 15 commencing on November 15, 2010 for the Notes issued on May 10, 2010 andMay 15, 2011 for the Notes issued on March 21, 2011. Our annual interest expense has increased from $24.4 million to $39.0 million as a result of theMarch 21, 2011 issuance of Notes. In connection with the Restricted Notes issuance, LMI entered into a revolving facility (the "Facility") for total borrowings up to $42.5 millionwith the ability to request the lenders to increase the Facility by an additional amount of up to $15.0 million at the discretion of the lenders. In March2011, LMI received the consent of the lenders under the Facility to amend the agreement to allow us to use the net proceeds of the March 2011 issuanceas described above. The amendment also increased the consolidated total leverage ratio to accommodate the New Notes issuance and decreased theconsolidated interest coverage ratio to accommodate the associated increase in semiannual interest payments. Additionally, the amendment adjusted theeffective interest rate of borrowings thereunder. The amendment was consummated concurrently with the consummation of the New Notes issuance.Interest on the Facility will be at either LIBOR plus 3.75% or the Reference Rate (as defined in the agreement) plus 2.75%. The Facility expires onMay 10, 2014, at which time all outstanding borrowings are due and payable. At December 31, 2011, LMI had $42.5 million of borrowing availabilityunder the Facility.76Table of Contents On January 26, 2012, we executed an amendment to the Facility to change the financial covenants. See "—Revolving Credit Facility FinancialCovenants Per Amendment." Also, on February 3, 2012, we entered into a Standby Letter of Credit for up to $4.4 million relating to ourdecommissioning liability, which expires February 2, 2013. The letter of credit decreases the borrowing availability under the Facility by $4.4 million. The Notes and the Facility contain affirmative and negative covenants, as well as restrictions on the ability of LMI, Lantheus Intermediate and itssubsidiaries to: (i) incur additional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity; (iii) paydividends on, repurchase or make distributions in respect of its capital stock or make other restricted payments; (iv) make certain investments; (v) sellcertain assets; (vi) create liens; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and (viii) enter into certaintransactions with our affiliates. The Notes contain customary events of default provisions, including payment default and cross-acceleration for non-payment of any outstanding indebtedness, where such indebtedness exceeds $10.0 million. The Facility also contains customary default provisions andwe are required to comply with financial covenants in the Facility including a total leverage ratio and interest coverage ratio, beginning with the quarterended September 30, 2010, as well as limitations on the amount of capital expenditures. The financial ratios are determined by the Company's EBITDA (as defined in the Facility), or the Facility EBITDA. The total leverage ratio is thefinancial covenant that is currently the most restrictive, which requires Lantheus Intermediate and its Subsidiaries (as defined in the Facility) to maintaina leverage ratio as defined in the table below:Revolving Credit Facility Financial Covenants (Prior to Amendment) On January 26, 2012, we executed an amendment to the Facility which changed the financial covenants. We incurred approximately $0.2 million infees associated with this amendment. The revised financial covenants are displayed in the table below.77Period Total Leverage Ratio Interest Coverage Ratio Q1 2011 5.50 to 1.00 1.75 to 1.00 Q2 2011 5.50 to 1.00 1.75 to 1.00 Q3 2011 5.25 to 1.00 1.75 to 1.00 Q4 2011 5.00 to 1.00 2.00 to 1.00 Q1 2012 4.75 to 1.00 2.00 to 1.00 Q2 2012 4.50 to 1.00 2.15 to 1.00 Q3 2012 4.50 to 1.00 2.15 to 1.00 Q4 2012 4.25 to 1.00 2.25 to 1.00 Q1 2013 4.25 to 1.00 2.25 to 1.00 Q2 2013 4.25 to 1.00 2.25 to 1.00 Q3 2013 4.25 to 1.00 2.25 to 1.00 Thereafter 3.75 to 1.00 2.25 to 1.00 Table of ContentsRevolving Credit Facility Financial Covenants Per Amendment As of December 31, 2011, we were in compliance with all applicable financial covenants. As of December 31, 2011 and the date hereof, therewere no amounts outstanding under the Facility. On February 3, 2012, we entered into a Standby Letter of Credit for up to $4.4 million which expiresFebruary 2, 2013. The letter of credit decreases the borrowing availability under the Facility by $4.4 million. If BVL is not able to provide us adequateproduct supply for a further prolonged period of time, we will need to implement certain expense reduction and other operating and strategic initiativesbeginning in the second quarter of 2012. If we are not successful in those initiatives, we could, at some time in the future, be in non-compliance withone or more of the financial ratio covenants in the Facility. If this were to occur, we would seek either an additional amendment to our Facility or awaiver of the appropriate financial covenants to eliminate such potential default. There can be no assurance that we would be able to obtain anamendment or waiver from our lenders. See "Item 1A—Risk Factors—We may not be able to generate sufficient cash flow to meet our debt serviceobligations." On March 20, 2012, pursuant to our new contractual relationship with BVL, we terminated the 2008 Agreement and entered into the SettlementAgreement, the Transition Services Agreement and the Manufacturing and Service Contract. In the Settlement Agreement, BVL and we agreed to abroad mutual waiver and release for all matters that occurred prior to the date of the Settlement Agreement, a covenant not to sue and a settlementpayment for us in the amount of $30,000,000. We intend to use the proceeds from the BVL settlement for working capital purposes. We may from time to time repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our balance sheet.These actions may include open market repurchases of any Notes outstanding, prepayments of our term loans or other retirements or refinancing ofoutstanding debt. The amount of debt that may be repurchased or otherwise retired, if any, would be decided upon at the sole discretion of our Board ofDirectors and will depend on market conditions, trading levels of our debt from time to time, our cash position and other considerations.Funding Requirements Our future capital requirements will depend on many factors, including:•the effect of the BVL shutdown and our ability to have product manufactured at alternative manufacturing sites; •the level of product sales of our currently marketed products and any additional products that we may market in the future;78Period Total Leverage Ratio Interest Coverage Ratio Q4 2011 5.00 to 1.00 2.00 to 1.00 Q1 2012 6.80 to 1.00 1.40 to 1.00 Q2 2012 7.55 to 1.00 1.30 to 1.00 Q3 2012 6.70 to 1.00 1.40 to 1.00 Q4 2012 5.50 to 1.00 1.80 to 1.00 Q1 2013 4.60 to 1.00 2.00 to 1.00 Q2 2013 4.60 to 1.00 2.10 to 1.00 Q3 2013 4.25 to 1.00 2.15 to 1.00 Q4 2013 4.25 to 1.00 2.15 to 1.00 Q1 2014 3.75 to 1.00 2.25 to 1.00 Thereafter 3.75 to 1.00 2.25 to 1.00 Table of Contents•the scope, progress, results and costs of development activities for our current product candidates and whether we obtain one or morepartners to help share such development costs; •the costs, timing and outcome of regulatory review of our product candidates; •the number of, and development requirements for, additional product candidates that we pursue; •the costs of commercialization activities, including product marketing, sales and distribution and whether we obtain one or more partnersto help share such commercialization costs; •the costs and timing of establishing manufacturing and supply arrangements for clinical and commercial supplies of our productcandidates and products; •the extent to which we acquire or invest in products, businesses and technologies; •the extent to which we choose to establish collaboration, co-promotion, distribution or other similar arrangements for our marketedproducts and product candidates; •the legal costs relating to maintaining, expanding and enforcing our intellectual property portfolio, pursuing insurance or other claims anddefending against product liability, regulatory compliance or other claims; •the cost of interest on any additional borrowings which we may incur under our financing arrangements. If BVL is not able to provide us adequate product supply for a further prolonged period of time, we will need to implement certain expensereduction and other operating and strategic initiatives, as further described in Note 2 of the consolidated financial statements included in Item 8 of thisannual report. To the extent that our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs throughpublic or private equity offerings, debt financings, corporate collaboration and licensing arrangements, sale/leasebacks or other financing alternatives, tothe extent such transactions are permissible under the covenants of the Notes and the Facility. Additional equity or debt financing, or corporatecollaboration and licensing arrangements, may not be available on acceptable terms, if at all. If any of the transactions require a waiver under thecovenants in the Notes and the Facility, which could result in additional expenses associated with obtaining the amendment or waiver, we will seek toobtain such a waiver to remain in compliance with the covenants of the Notes and the Facility. However, we cannot assure you that such a waiverwould be granted, or that additional capital will be available on acceptable terms, if at all. Our only committed external source of funds is borrowing availability under the Facility. As of December 31, 2011, we had $42.5 million ofborrowing capacity under the Facility, and there were no amounts outstanding thereunder. On February 3, 2012, we entered into a Standby Letter ofCredit for up to $4.4 million which expires February 2, 2013. The letter of credit decreases the borrowing availability under the Facility by $4.4 million.Based on our current operating plans, we believe that our existing cash and cash equivalents, results of operations and borrowing capacity under theFacility will be sufficient to continue to fund our liquidity requirements for at least the next twelve months. As of December 31, 2011, we had $40.6 million of cash and cash equivalents. In addition, we have included $1.6 million, $3.2 million and$1.5 million in accounts payable related to our purchases of property, plant and equipment at December 31, 2011, 2010 and 2009, respectively.Contractual Obligations Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent contractualliabilities for which we cannot reasonably predict79Table of Contentsfuture payment, including contingencies related to potential future development, financing, certain suppliers, contingent royalty payments and/orscientific, regulatory, or commercial milestone payments under development agreements. The following table summarizes our contractual obligations asof December 31, 2011:Off-Balance Sheet Arrangements Since inception, we have not engaged in any off-balance sheet arrangements, including structured finance, special purpose entities or variableinterest entities.Effects of Inflation We do not believe that inflation has had a significant impact on our revenues or results of operations since inception. We expect our cost of productsales and other operating expenses will change in the future in line with periodic inflationary changes in price levels. Because we intend to retain andcontinue to use our property and equipment, we believe that the incremental inflation related to the replacement costs of such items will not materiallyaffect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which couldincrease our level of expenses and the rate at which we use our resources. While our management generally believes that we will be able to offset theeffect of price-level changes by adjusting our product prices and implementing operating efficiencies, any material unfavorable changes in price levelscould have a material adverse affect on our financial condition, results of operations and cash flows.Recent Accounting Standards In September 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2011-08, TestingGoodwill for Impairment, or ASU 2011-08. Under this guidance, an entity has the option to first assess qualitative factors to determine whether theexistence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carryingvalue. If the entity determines that it is more likely than not80 Payments Due by Period Total Less than1 Year 1 - 3Years 3 - 5Years More than5 Years (dollars in thousands) Debt obligations (principal) $400,000 $— $— $— $400,000 Interest on debt obligations 214,500 39,000 78,000 78,000 19,500 Operating leases(1) 4,311 956 1,768 815 772 Purchase obligations(2) 125,822 59,176 66,646 — — Asset retirement obligation 4,868 — — — 4,868 Other long-term liabilities(3) 34,564 — — — 34,564 Total contractual obligations $784,065 $99,132 $146,414 $78,815 $459,704 (1)Operating leases include minimum payments under leases for our facilities and certain equipment. See "Item 2—Properties." (2)Purchase obligations include fixed or minimum payments under manufacturing and service agreements with Covidien and otherthird-parties. (3)Due to the uncertainty related to the timing of the reversal of uncertain tax positions, the liability is not subject to fixed paymentterms and the amount and timing of payments, if any, which we will make related to this liability, are not known.Table of Contentsthat the carrying value of a reporting unit is less than its fair value, then performing the two-step impairment test is unnecessary. The amendments areeffective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The implementation of theamended accounting guidance will have no material impact on our consolidated financial position and results of operations. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (Topic 220). This guidance, effective retrospectively forthe interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensiveincome, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensiveincome or in two separate but consecutive statements. The adoption of this guidance did not have a material impact upon our financial position andresults of operations.Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which havebeen prepared in accordance with GAAP. These financial statements require us to make estimates and judgments that affect our reported assets andliabilities, revenues and expenses, and other financial information. Actual results may differ materially from these estimates under different assumptionsand conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particularaccounting standard. We believe the following represent our critical accounting policies and estimates used in the preparation of our financial statements.Revenue Recognition Our revenue is generated from the sales of our diagnostic imaging agents to wholesalers, distributors, radiopharmacies and directly to hospitals andclinics. We recognize revenue when evidence of an arrangement exists, title has passed, substantially all the risks and rewards of ownership havetransferred to the customer, the selling price is fixed or determinable and collectability is reasonably assured. For transactions for which revenuerecognition criteria have not yet been met, the respective amounts are recorded as deferred revenue until such point in time when criteria are met andrevenue can be recognized. Revenue is recognized net of reserves, which consist of allowances for returns and sales rebates. The estimates of theseallowances are based on historical sales volumes and mix and require assumptions and judgments to be made in order to make such estimates. In theevent that the sales mix is different from our estimates, we may be required to pay higher or lower total price adjustments than we previously estimated.Any changes to these estimates are recorded in the current period. In 2011, 2010 and 2009, these changes in estimates were not material to our results. Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether thedelivered element has stand-alone value to the customer. Supply or service transactions may involve the charge of a nonrefundable initial fee withsubsequent periodic payments for future products or services. The up-front fees, even if nonrefundable, are earned (and revenue is recognized) as theproducts and/or services are delivered and performed over the term of the arrangement.Inventory Inventories include material, direct labor and related manufacturing overhead, and are stated at the lower of cost or market determined on a first-in,first-out basis. We record inventory when we take delivery and title to the product. Any commitment for product ordered but not yet received is includedas purchase commitments in our contractual obligations table. We assess the recoverability of inventory81Table of Contentsto determine whether adjustments for impairment are required. Inventory that is in excess of future requirements is written down to its estimated netrealizable value-based upon estimates of forecasted demand for our products. The estimates of demand require assumptions to be made of futureoperating performance and customer demand. If actual demand is less than what has been forecasted by management, additional inventory write downsmay be required.Goodwill, Intangibles and Long-Lived Assets Goodwill is not amortized but the carrying value is tested annually for impairment at October 31, as well as whenever events or changes incircumstances suggest that the carrying amount may not be recoverable. We perform this test by comparing the fair value of the reporting unit containinggoodwill to its carrying value, including goodwill. If the fair value exceeds the carrying value, goodwill is not impaired. If the carrying value exceeds thefair value, then we would calculate the potential impairment loss by comparing the implied fair value of goodwill with the carrying value of thegoodwill. If the implied fair value of goodwill is less than the carrying value, then an impairment charge would be recorded. We completed our required annual impairment test for goodwill as of the fourth quarter of 2011, 2010 and 2009 and determined that at each ofthose periods the carrying amount of goodwill was not impaired. In each year, our fair value, which includes goodwill, was substantially in excess ofour carrying value. In addition, as a result of the continued supply challenges with BVL, we performed an interim impairment test for goodwill as of December 31,2011. The interim impairment test did not indicate that there was any impairment as of December 31, 2011. We calculate the fair value of our reporting units using the income approach which utilizes discounted forecasted future cash flows and the marketapproach which utilizes fair value multiples of comparable publicly traded companies. The discounted cash flows are based on our most recent long-term financial projections and are discounted using a risk adjusted rate of return which is determined using estimates of market participant risk-adjustedweighted average costs of capital and reflects the risks associated with achieving future cash flows. The market approach is calculated using theguideline company method, where we use market multiples derived from stock prices of companies engaged in the same or similar lines of business.There is not a quoted market price for our reporting units or the company as a whole, therefore, a combination of the two methods is utilized to derivethe fair value of the business. We evaluate and weigh the results of these approaches as well as ensure we understand the basis of the results of thesetwo methodologies. We believe the use of these two methodologies ensures a consistent and supportable method of determining our fair value that isconsistent with the objective of measuring fair value. If the fair value were to decline, then we may be required to incur material charges relating to theimpairment of those assets. We test intangible and long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an assetor group of assets may not be recoverable. We measure the recoverability of assets to be held and used by comparing the carrying amount of the asset tofuture undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment equals the amountby which the carrying amount of the assets exceeds the fair value of the assets. Any impairments are recorded as permanent reductions in the carryingamount of the assets. As a result of the continued supply challenges with BVL, we tested intangible and long-lived assets for recoverability as ofDecember 31, 2011, which included the most recently available information as to BVL's return to service date and our technology transfer schedule fora certain product. The analysis indicated that there was no impairment as of December 31, 2011.82Table of ContentsAccounting for Stock-Based Compensation Our employees are eligible to receive awards from our 2008 Equity Plan (as defined below). Our stock-based compensation cost is measured at thegrant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vestingperiod, and includes an estimate of the awards that will be forfeited. We use the Black Scholes valuation model for estimating the fair value on the dateof grant of stock options. The fair value of stock option awards is affected by the valuation assumptions, including the volatility of market participants,expected term of the option, risk-free interest rate and expected dividends as well as the estimated fair value of our common stock. The fair value of ourcommon stock is determined by our Board of Directors at each award date. Any material change to the assumptions used in estimating the fair value ofthe options could have a material impact on our results of operations. When a contingent cash settlement of vested options becomes probable, wereclassify the vested awards to a liability and account for any incremental compensation cost in the period in which the settlement becomes probable.Income Taxes The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes. The provision forincome taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result fromdifferences between the financial and tax bases of our assets and liabilities. Deferred tax assets and liabilities are measured using the currently enactedtax rates that apply to taxable income in effect for the years in which those tax attributes are expected to be recovered or paid, and are adjusted forchanges in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Theassessment of whether or not a valuation allowance is required involves the weighing of both positive and negative evidence concerning both historicaland prospective information with greater weight given to evidence that is objectively verifiable. A history of recent losses is negative evidence that isdifficult to overcome with positive evidence. In evaluating prospective information there are four sources of taxable income: reversals of taxabletemporary differences, items that can be carried back to prior tax years (such as net operating losses), pre-tax income and tax planning strategies. Anytax planning strategies that are considered must be prudent and feasible, and would only be undertaken in order to avoid losing an operating losscarryforward. Adjustments to the deferred tax valuation allowances are made in the period when such assessments are made. We have a tax indemnification agreement with BMS related to certain contingent tax obligations arising prior to the acquisition of the businessfrom BMS. The tax obligations are recognized in liabilities and the tax indemnification receivable is recognized within other noncurrent assets. Thechanges in the tax indemnification asset are recognized within other income, net in the statement of income, and the changes in the related liabilities arerecorded within the tax provision. Accordingly, as these reserves change, adjustments are included in the tax provision while the offsetting adjustment isincluded in other income. Assuming that the receivable from BMS continues to be considered recoverable by us, there is no net effect on earningsrelated to these liabilities and no net cash outflows. The calculation of our tax liabilities involves certain estimates, assumptions and the application of complex tax regulations in numerousjurisdictions worldwide. Any material change in our estimates or assumptions, or the tax regulations, may have a material impact on our results ofoperations.83Table of ContentsItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments toreduce these risks or for trading purposes.Interest Rate Risk We are subject to interest rate risk in connection with the Facility, which is variable rate indebtedness. Interest rate changes could increase theamount of our interest payments and thus negatively impact our future earnings and cash flows. As of December 31, 2011, there was no amountoutstanding under the Facility. Any increase in the interest rate under the Facility will have a negative impact on our future earnings, depending on theoutstanding balance of the Facility during the respective period.Foreign Currency Risk We face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with thirdparties that are denominated in currencies other than our, or its, functional currency. Intercompany transactions between entities that use differentfunctional currencies also expose us to foreign currency risk. During 2011 and 2010, the net impact of foreign currency changes on transactions was aloss of $156,000 and a loss of $209,000, respectively. Historically, we have not used derivative financial instruments or other financial instruments tohedge such economic exposures. Gross margins of products we manufacture at our U.S. plants and sell in currencies other than the U.S. Dollar are also affected by foreign currencyexchange rate movements. Our gross margin on total revenue was 26.7% in 2011 and 42.4% in 2010. If the U.S. Dollar had been stronger by 1%, 5%or 10%, compared to the actual rates during 2011, our gross margin on total net product sales would have been 26.7%, 26.9% and 27.0%, respectively.If the U.S. Dollar had been stronger by 1%, 5% or 10%, compared to the actual rates during 2010, our gross margin on total net product sales wouldhave been 42.4%, 42.6% and 42.9%, respectively. In addition, a portion of our earnings is generated by our foreign subsidiaries, whose functional currencies are other than the U.S. Dollar. Ourearnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the earnings of such subsidiaries intothe U.S. Dollar. If the U.S. Dollar had been uniformly stronger by 1%, 5% or 10%, compared to the actual average exchange rates used to translate the financialresults of our foreign subsidiaries, our net product sales and net income for 2011 would have been impacted by approximately the following amounts:84 ApproximateDecrease inNet Revenue ApproximateDecrease inNet Income (dollars in thousands) 1% $(608)$(24)5% (3,041) (118)10% (6,082) (236)Table of ContentsItem 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofLantheus MI Intermediate, Inc.North Billerica, Massachusetts We have audited the accompanying consolidated balance sheets of Lantheus MI Intermediate, Inc. and subsidiaries (the "Company") as ofDecember 31, 2011 and 2010, and the related consolidated statements of comprehensive (loss) income, stockholder's (deficit) equity, and cash flows foreach of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits includedconsideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no suchopinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiariesas of December 31, 2011 and 2010, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2011,in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the consolidated financial statements, the Company changed the presentation of comprehensive income to reflect therequirements of Financial Accounting Standards Board Accounting Standards Update 2011-5, Comprehensive Income (Topic 220), as amended, duringthe year ended December 31, 2011./s/ DELOITTE & TOUCHE LLPBoston, MassachusettsMarch 30, 201285Table of ContentsLantheus MI Intermediate, Inc. and subsidiaries Consolidated Balance Sheets See notes to consolidated financial statements.86(in thousands except share data) December 31,2011 December 31,2010 Assets Current assets Cash and cash equivalents $40,607 $33,006 Accounts receivable, net 40,000 50,452 Inventory 14,765 20,117 Deferred tax assets 93 4,266 Other current assets 2,662 3,158 Total current assets 98,127 110,999 Property, plant and equipment, net 112,452 120,684 Capitalized software development costs 3,582 3,896 Intangibles, net 82,749 124,689 Goodwill 15,714 15,714 Deferred tax assets — 78,312 Deferred financing costs 13,141 9,425 Due from parent 1,286 — Other long-term assets 31,753 32,162 Total assets $358,804 $495,881 Liabilities and Stockholder's (Deficit) Equity Current liabilities Accounts payable 22,010 24,528 Accrued expenses 20,949 18,605 Income tax payable 1,482 128 Deferred tax liability — — Deferred revenue 3,918 7,261 Total current liabilities 48,359 50,522 Asset retirement obligations 4,868 4,372 Long-term debt, net 398,629 250,000 Deferred tax liability 931 1,853 Deferred revenue — 2,668 Other long-term liabilities 39,220 33,032 Total liabilities 492,007 342,447 Commitments and contingencies (see Notes 14 and 16) — — Stockholder's (deficit) equity Common stock ($0.001 par value, 10,000 shares authorized; 1 share issued andoutstanding) — — Additional paid-in capital 1,085 150,316 (Accumulated deficit) retained earnings (134,659) 2,410 Accumulated other comprehensive income 371 708 Total stockholder's (deficit) equity (133,203) 153,434 Total liabilities and stockholder's (deficit) equity $358,804 $495,881 Table of ContentsLantheus MI Intermediate, Inc. and subsidiaries Consolidated Statements of Comprehensive (Loss) Income See notes to consolidated financial statements.87 Year Ended December 31, (in thousands) 2011 2010 2009 Revenues Net product revenues $345,762 $345,747 $352,303 License and other revenues 10,530 8,209 7,908 Total revenues 356,292 353,956 360,211 Cost of goods sold 255,466 204,006 184,844 Loss on firm purchase commitment 5,610 — — Total cost of goods sold 261,076 204,006 184,844 Gross profit 95,216 149,950 175,367 Operating expenses General and administrative expenses 32,057 30,042 35,430 Sales and marketing expenses 38,689 45,384 42,337 Research and development expenses 40,945 45,130 44,631 Total operating expenses 111,691 120,556 122,398 Operating (loss) income (16,475) 29,394 52,969 Interest expense (37,658) (20,395) (13,458)Loss on early extinguishment of debt — (3,057) — Interest income 333 179 73 Other income, net 1,429 1,314 2,720 (Loss) income before income taxes (52,371) 7,435 42,304 Provision for income taxes 84,098 2,465 21,952 Net (loss) income $(136,469)$4,970 $20,352 Foreign currency translation (104) 1,150 1,303 Income tax expense related to items of other comprehensive (loss) income (233) — — Other comprehensive (loss) income (337) 1,150 1,303 Total comprehensive (loss) income $(136,806)$6,120 $21,655 Table of ContentsLantheus MI Intermediate, Inc. and subsidiaries Consolidated Statements of Stockholder's (Deficit) Equity See notes to consolidated financial statements.88 Common Stock (AccumulatedDeficit)RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) TotalStockholder's(Deficit)Equity AdditionalPaid-InCapital (in thousands, except share data) Shares Amount Balance at January 1, 2009 1 $— $246,768 $42,786 $(1,745)$287,809 Net income — — — 20,352 — $20,352 Other comprehensiveincome — — — — 1,303 1,303 Stock-based compensation — — 1,115 — — 1,115 Balance at December 31,2009 1 — 247,883 63,138 (442) 310,579 Dividend paid to LMIHoldings (see Note 10) — — (98,078) (65,698) — (163,776)Net income — — — 4,970 — $4,970 Other comprehensiveincome — — — — 1,150 1,150 Stock-based compensation — — 511 — — 511 Balance at December 31,2010 1 — 150,316 2,410 708 153,434 Dividend paid to LMIHoldings (see Note 10) — — (149,400) (600) — (150,000)Net loss — — — (136,469) — $(136,469)Other comprehensiveincome — — — — (337) (337)Stock-based compensation — — 169 — — 169 Balance at December 31,2011 1 $— $1,085 $(134,659)$371 $(133,203) Table of ContentsLantheus MI Intermediate, Inc. and subsidiaries Consolidated Statements of Cash Flows Year ended December 31, (in thousands) 2011 2010 2009 Cash flow from operating activities Net (loss) income $(136,469)$4,970 $20,352 Adjustments to reconcile net (loss) income to cash flow from operating activities Depreciation 12,915 11,377 10,865 Amortization 19,847 23,824 30,842 Impairment of intangible asset 23,474 — — Amortization of debt related costs 1,554 1,812 2,626 Write-off of deferred financing costs — 2,278 — Provision for bad debt 301 — — Provision for excess and obsolete inventory 29,432 13,814 4,125 Stock-based compensation (969) 1,634 1,209 Deferred income taxes 81,330 (1,549) 10,826 Accretion of asset retirement obligations 496 435 378 Loss on disposal of long-lived assets 54 270 — Loss on firm purchase commitment 5,610 — — Long-term income tax receivable (1,122) 1,519 (942)Long-term income tax payable and other long-term liabilities 1,533 556 3,325 Increase (decrease) in cash from operating assets and liabilities Accounts receivable, net 9,466 (7,564) 28,023 Prepaid expenses and other current assets 626 (237) 5,480 Inventory (22,293) (27,209) (10,595)Due from parent (614) — — Deferred revenue (5,995) (151) 6,036 Accounts payable (1,002) 3,227 (3,171)Income tax payable 1,353 (1,325) 1,453 Accrued expenses and other liabilities 2,893 (1,364) (15,049) Cash provided by operating activities 22,420 26,317 95,783 Cash flows from investing activities Capital expenditures (7,694) (8,335) (8,856)Acquisition of intangibles — (215) (29,495) Cash used in investing activities (7,694) (8,550) (38,351) Cash flows from financing activities Proceeds from issuance of debt 152,250 250,000 — Consent solicitation fee (3,750) — — Payment of term loan — (93,649) (49,102)Debt issuance costs (5,491) (10,125) — Proceeds from line of credit 10,000 — 28,000 Payments on line of credit (10,000) — (28,000)Payment of dividend (150,000) (163,776) — Cash used in financing activities (6,991) (17,550) (49,102) Effect of foreign exchange rate on cash (134) 1,309 2,114 Increase in cash and cash equivalents 7,601 1,526 10,444 Cash and cash equivalents, beginning of year 33,006 31,480 21,036 Cash and cash equivalents, end of year $40,607 $33,006 $31,480 Supplemental disclosure of cash flow information  See notes to consolidated financial statements.89Interest paid $33,958 $15,246 $10,693 Income taxes paid / (refunded), net $(233)$1,854 $(2,318)Table of ContentsLantheus MI Intermediate, Inc. and subsidiaries Notes to Consolidated Financial Statements Unless the context requires otherwise, references to the "Company," "Lantheus," "our company," "we," "us" and "our" refer to Lantheus MIIntermediate, Inc. and its direct and indirect subsidiaries, references to "Lantheus Intermediate" refer to only Lantheus MI Intermediate, Inc., the parentof Lantheus Medical Imaging, Inc., references to "Holdings" refer to Lantheus MI Holdings, Inc., the parent of Lantheus Intermediate and references to"LMI" refer to Lantheus Medical Imaging, Inc., the subsidiary of Lantheus Intermediate. Solely for convenience, we refer to trademarks, service marksand trade names without the TM, SM and ® symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullestextent permitted under applicable law, our rights to our trademarks, service marks and trade names.1. Description of BusinessOverview The Company manufactures, markets, sells and distributes medical imaging products globally with operations in the United States (U.S.), PuertoRico, Canada and Australia and distribution relationships in Europe, Asia Pacific and Latin America. The Company provides medical imaging products,primarily focused on cardiovascular diagnostic imaging, to nuclear physicians, cardiologists, radiologists, internal medicine physicians, independentdelivery networks, group purchasing organizations and technologists/sonographers working in a variety of clinical settings. The Company's principal products include:•DEFINITY—an ultrasound contrast agent; •Cardiolite—a myocardial perfusion imaging agent; •TechneLite—a generator that provides the radioisotope used to radiolabel Cardiolite and other radiopharmaceuticals. In the U.S., the Company's nuclear imaging products are primarily distributed through radiopharmacy chains, with a small portion of the sales ofthese products also made through the Company's direct sales force to hospitals and clinics that maintain their own in-house radiopharmacies. In theU.S., sales of the Company's contrast agents are made through a direct sales force. Outside of the U.S., the Company owns five radiopharmacies inCanada and two radiopharmacies in each of Puerto Rico and Australia. The Company also maintains a direct sales force in each of these countries. Inthe rest of the world, the Company relies on third-party distributors to sell both nuclear imaging and contrast agent products.2. Summary of Significant Accounting PoliciesBasis of Consolidation and Presentation The financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the UnitedStates of America (U.S. GAAP). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Allintercompany accounts and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared on a goingconcern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. The Company incurred a netloss of $136.5 million and an operating loss of $16.5 million during the year ended December 31, 2011. The Company currently relies on Ben VenueLaboratories ("BVL") as its sole source manufacturer for DEFINITY and Neurolite and as the primary manufacturer for the Cardiolite90Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)product supply. The delay of BVL in resuming full production of the Company's products represents a supply uncertainty to the Company's business.The Company has expedited a number of technology transfer programs to secure and qualify production of its BVL-manufactured products to alternatecontract manufacturer sites. Currently, the Company is utilizing an alternate manufacturer for Cardiolite and has entered into a manufacturing and supplyagreement with Jubilant HollisterStier ("JHS") for the manufacture of DEFINITY, which will ultimately replace BVL as the primary supplier ofDEFINITY. During the first quarter of 2012, the Company implemented a reduction in force and other cost cutting measures in conjunction withbusiness pressures resulting from the continuing BVL outage. As further described in Note 21, "Subsequent Events," the Company received asettlement payment of $30 million of cash from BVL in connection with the Settlement and Mutual Release Agreement the Company entered into withBVL in the first quarter of 2012. In addition, the Company may receive up to an additional $5 million of cash from BVL under the Transition ServicesAgreement based on the timing of BVL's delivery of LMI product. If BVL is not able to provide the Company adequate product supply for a furtherprolonged period of time, or the Company is not successful with the technology transfer programs in 2012, the Company will need to continue toimplement expense reductions such as a delay of discretionary spending and other operating and strategic initiatives such as entering into potentialpartnering arrangements.Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts ofrevenues and expenses during the reporting period. The more significant estimates reflected in the Company's consolidated financial statements includecertain judgments regarding revenue recognition, goodwill and intangible asset valuation, inventory valuation, asset retirement obligations, income taxliabilities, deferred tax assets and liabilities, accrued expenses and stock-based compensation. Actual results could materially differ from those estimatesor assumptions.Revenue Recognition The Company recognizes revenue when evidence of an arrangement exists, title has passed, the risks and rewards of ownership have transferred tothe customer, the selling price is fixed or determinable, and collectability is reasonably assured. For transactions for which revenue recognition criteriahave not yet been met, the respective amounts are recorded as deferred revenue until such point in time the criteria are met and revenue can berecognized. Revenue is recognized net of reserves, which consist of allowances for returns and allowances for rebates. Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether thedelivered element has stand-alone value to the customer. Supply or service transactions may involve the charge of a nonrefundable initial fee withsubsequent periodic payments for future products or services. The up-front fees, even if nonrefundable, are earned (and revenue is recognized) as theproducts and/or services are delivered and performed over the term of the arrangement. On January 1, 2009, LMI executed an amendment to a license and supply agreement (the "Agreement") with one of its customers, granting non-exclusive U.S. license and supply rights to the91Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)customer for the period from January 1, 2009 through December 31, 2012. Under the terms of the Agreement, the customer paid LMI $10.0 million inlicense fees; $8.0 million of which was received upon execution of the Agreement and $2.0 million of which was received in June 2009 upon deliveryof a special license as defined in the Agreement. The Company's product sales under the Agreement are recognized in the same manner as its normalproduct sales. The Company is recognizing the license fees as revenue on a straight line basis over the term of the four-year Agreement. The Companyrecognized $2.5 million in fiscal years 2011, 2010, and 2009 in license fee revenue pursuant to the Agreement, and had deferred revenue of $2.5 millionand $5.0 million as of December 31, 2011 and December 31, 2010, respectively, related to the Agreement. The $2.5 million of deferred revenue as ofDecember 31, 2011 will be recognized as revenue in 2012. In addition, the Company had other revenue of $8.0 million, $5.7 million and $5.4 million in fiscal years 2011, 2010 and 2009, respectively. Otherrevenue primarily represents contract manufacturing services related to one of the Company's products for one customer. The related costs are includedin cost of goods sold. In January 2010, the Company launched a new medical imaging product, Ablavar, which was acquired by the Company in April 2009. Becausethe Company has not determined that the price is fixed and determinable and due to the inability to reasonably estimate product returns, the Companydeferred recognition of $1.0 million and $2.6 million of revenue at December 31, 2011 and 2010, respectively, relating to Ablavar shipments, associatedwith a distributor arrangement. The corresponding cost has been recorded as inventory as of December 31, 2011 and 2010. The Company isrecognizing revenue and the related costs associated with this arrangement on the sell-through method.Product Returns The Company provides a reserve for its estimate of sales recorded for which the related products are expected to be returned. The Company doesnot typically accept product returns unless an over shipment or non-conforming shipment was provided to the customer, or if the product was defective.The Company adjusts its estimate of product returns if it becomes aware of other factors that it believes could significantly impact its expected returns,including product recalls. These factors include its estimate of actual and historical return rates for non-conforming product and open return requests.Historically, the Company's estimates of returns have reasonably estimated actual returns.Distributor Relationships Revenue for product sold to distributors is recognized at shipment, unless revenue recognition criteria have not been met. In such instances wherecollectibility cannot be determined or the selling price cannot be reasonably estimated until the distributor has sold through the goods, the Companydefers such revenue until such time as the goods have been sold through to the end-user customer, or the selling price can be reasonably estimated basedon history of transactions with such distributor.Rebates and Allowances Estimates for rebates and allowances represent the Company's estimated obligations under contractual arrangements with third parties. Rebateaccruals and allowances are recorded in the same period the related revenue is recognized, resulting in a reduction to product revenue and theestablishment of a liability which is included in accrued expenses in the accompanying consolidated92Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)balance sheets. These rebates result from performance-based offers that are primarily based on attaining contractually specified sales volumes andgrowth, Medicaid rebate programs for certain products, administration fees of group purchasing organizations and certain distributor relatedcommissions. The calculation of the accrual for these rebates and allowances is based on an estimate of the third party's buying patterns and the resultingapplicable contractual rebate or commission rate(s) to be earned over a contractual period. The accrual for rebates and allowances was approximately $1.4 million and $0.9 million at December 31, 2011 and 2010, respectively.Income Taxes The Company accounts for income taxes using an asset and liability approach. The provision for income taxes represents income taxes paid orpayable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basesof the Company's assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable incomein effect for the years in which those tax attributes are expected to be recovered or paid, and are adjusted for changes in tax rates and tax laws whenchanges are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Theassessment of whether or not a valuation allowance is required involves the weighing of both positive and negative evidence concerning both historicaland prospective information with greater weight given to evidence that is objectively verifiable. A history of recent losses is negative evidence that isdifficult to overcome with positive evidence. In evaluating prospective information there are four sources of taxable income: reversals of taxabletemporary differences, items that can be carried back to prior tax years (such as net operating losses), pre-tax income, and tax planning strategies. Anytax planning strategies that are considered must be prudent and feasible, and would only be undertaken in order to avoid losing an operating losscarryforward. Adjustments to the deferred tax valuation allowances are made in the period when such assessments are made. The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognitionand measurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amountsrecognized in the financial statements are recorded as adjustments to income taxes payable or receivable, or adjustments to deferred taxes, or both. TheCompany provides disclosure at the end of each annual reporting period on a tabular reconciliation of unrecognized tax benefits. The Companyclassifies interest and penalties within the provision for income taxes.Cash and Cash Equivalents Cash and cash equivalents include savings deposits, certificates of deposit and money market funds that have maturities of three months or lesswhen purchased.93Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)Accounts Receivable Accounts receivable consist of amounts billed and currently due from customers. The Company maintains an allowance for doubtful accounts forestimated losses. In determining the allowance, consideration includes the probability of recoverability based on past experience and general economicfactors. Certain accounts receivable may be fully reserved when specific collection issues are known to exist, such as pending bankruptcy. As ofDecember 31, 2011 and 2010, the Company had allowances for doubtful accounts of approximately $0.5 million and $0.8 million, respectively.Concentration of Risks and Limited Suppliers Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. TheCompany periodically reviews its accounts receivable for collectibility and provides for an allowance for doubtful accounts to the extent that amountsare not expected to be collected. The Company sells primarily to large national distributors, which in turn, may resell the Company's products. Therewere three customers that represented greater than 10% of the total net accounts receivable balance and net revenue, the majority of which is included inthe U.S. segment. The Company's cash and cash equivalents are maintained with various financial institutions. The Company relies on certain materials used in its development and manufacturing processes, some of which are procured from only one or a fewsources. The failure of one of these suppliers to deliver on schedule could delay or interrupt the manufacturing or commercialization process and therebyadversely affect the Company's operating results. In addition, a disruption in the commercial supply of, or a significant increase in, the cost of one of theCompany's materials from these sources could have a material adverse effect on the Company's business, financial position and results of operations. InMay 2009 until August 2010, Nordion, the Company's largest supplier of molybdenum-99 ("moly"), a key raw material in the Company's TechneLite®product, was affected by a nuclear reactor shutdown. The Company was not fully able to replace all of the quantity of supply it previously received fromNordion, which had a negative impact on the Company's results of operations. The Company relies on BVL as its sole source manufacturer for DEFINITY, and Neurolite, and as its primary manufacturer for the Company'sCardiolite product supply. All the Company's products are manufactured by BVL within the South Complex of its Bedford, Ohio facility. In July 2010,BVL temporarily shut down the South Complex to upgrade the facility to meet certain regulatory requirements. In anticipation of this shutdown, BVLmanufactured for the Company additional inventory of these products to meet the Company's expected needs during the shutdown period which wasanticipated to end in March 2011. As the shutdown and re-inspection periods have been longer94 AccountsReceivableas ofDecember 31, Revenue for the yearended December 31, 2011 2010 2011 2010 2009 Company A 16% 23% 27% 27% 30%Company B 9% 13% 8% 15% 13%Company C 10% 9% 11% 12% 10%Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)than anticipated by BVL and the Company, the Company could not meet all of the demand for certain products during the second half of 2011. TheCompany also procures Cardiolite from an alternate manufacturer which will mitigate to an extent the limited product supply from BVL. In February2012, the Company entered into a five year manufacturing and supply agreement for DEFINITY with JHS and anticipates receiving DEFINITY fromthis source by the second half of 2012. Based on the Company's current projections, the Company believes that it will have sufficient DEFINITYinventory until early in the second quarter of 2012. The inventory of Neurolite previously supplied to the Company by BVL has now been exhausted.The Company is pursuing new manufacturing relationships to establish and secure additional long-term or alternative suppliers of DEFINITY,Cardiolite, and Neurolite. There can be no assurance that the Company will be successful in these efforts. Cardiolite, DEFINITY and TechneLite, accounted for approximately 19%, 20% and 38%, respectively, of net product revenue for the year endedDecember 31, 2011, 22%, 17% and 34%, respectively, of net product revenue for the year ended December 31, 2010 and 34%, 12% and 32%,respectively, for the year ended December 31, 2009.Inventory Inventory includes material, direct labor and related manufacturing overhead, and is stated at the lower of cost or market on a first-in, first-outbasis. The Company does have consignment arrangements with certain customers where the Company retains title and the risk of ownership of theinventory, which is included in the Company's inventory balance. The Company assesses the recoverability of inventory to determine whether adjustments for excess and obsolete inventory are required. Inventorythat is in excess of future requirements is written down to its estimated net realizable value based upon forecasted demand for its products. If actualdemand is less favorable than what has been forecasted by management, additional inventory write-down may be required.Property, Plant and Equipment Property, plant and equipment are stated at cost. Replacements of major units of property are capitalized and replaced properties are retired.Replacements of minor components of property and repair and maintenance costs are charged to expense as incurred. Depreciation is generallycomputed on a straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes ofdepreciable assets are as follows: Upon retirement or other disposal of property, plant and equipment, the cost and related amount of accumulated depreciation are removed from theasset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds is included in operating(loss) income.95Buildings 50 yearsLand improvements 40 yearsMachinery and equipment 3 - 20 yearsFurniture and fixtures 15 yearsLeasehold improvements Lesser of lease term or 15 yearsTable of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)Capitalized Software Development Costs Certain costs to obtain internal use software for significant systems projects are capitalized and amortized over the estimated useful life of thesoftware, which ranges from 3 to 5 years. Costs to obtain software for projects that are not significant are expensed as incurred. Capitalized softwaredevelopment costs, net of accumulated amortization, was $3.6 million and $3.9 million at December 31, 2011 and 2010, respectively. Approximately$1.1 million of software development costs were capitalized in the year ended December 31, 2011. Amortization expense related to the capitalizedsoftware was $1.4 million, $1.3 million and $1.2 million for the years ended December 31, 2011, 2010 and 2009, respectively.Goodwill, Intangibles and Long-Lived Assets Goodwill is not amortized but the carrying value is tested annually for impairment at October 31 as well as whenever events or changes incircumstances suggest that the carrying amount may not be recoverable. The Company performs this test by comparing the fair value of the reportingunit containing goodwill to its carrying value, including goodwill. If the fair value exceeds the carrying value, goodwill is not impaired. If the carryingvalue exceeds the fair value, then the Company would calculate the potential impairment loss by comparing the implied fair value of goodwill with thecarrying value of the goodwill. If the implied fair value of goodwill is less than the carrying value, then an impairment charge would be recorded. TheCompany calculates the fair value of its reporting units using the income approach which utilizes discounted forecasted future cash flows and the marketapproach which utilizes fair value multiples of comparable publicly traded companies. The discounted cash flows are based on the Company's mostrecent long-term financial projections and are discounted using a risk adjusted rate of return which is determined using estimates of market participantrisk-adjusted weighted-average costs of capital and reflects the risks associated with achieving future cash flows. The market approach is calculatedusing the guideline company method, where the Company uses market multiples derived from stock prices of companies engaged in the same or similarlines of business. A combination of the two methods is utilized to derive the fair value of the business in order to decrease the inherent risk associatedwith each model if used independently. If the fair value were to decline, the Company may be required to incur material charges relating to theimpairment of goodwill. The Company did not identify any impairment in goodwill in 2011, 2010 or 2009. Goodwill is not deductible for tax purposes. In addition, as a result of the continued supply challenges with BVL, the Company performed an interim impairment test of goodwill as ofDecember 31, 2011. The analysis utilized the most recently available forecast information, which considered the potential impact of the continued supplychallenges. The interim impairment test did not indicate that there was any impairment as of December 31, 2011. The Company tests intangible and long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying valueof an asset or group of assets may not be recoverable. The Company measures the recoverability of assets to be held and used by comparing thecarrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired,the impairment equals the amount by which the carrying amount of the assets exceeds the fair value of the assets. Any impairments are recorded aspermanent reductions in the carrying amount of the assets. As a result of the continued supply challenges with96Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)BVL, the Company tested intangible and long-lived assets for recoverability as of December 31, 2011, which included the most recently availableinformation as to BVL's return to service date and the technology transfer schedule for a certain product. The analysis indicated that there was noimpairment as of December 31, 2011. Intangible assets, consisting of patents, trademarks and customer relationships related to the Company's products are amortized in a methodequivalent to the estimated utilization of the economic benefit of the asset, with weighted average useful lives ranging from 6 to 19 years. Trademarksand patents are amortized on a straight line basis and customer relationships are amortized on an accelerated basis.Deferred Financing Costs Debt issuance costs are capitalized and amortized to interest expense using the effective interest method. As of December 31, 2011 and 2010, theunamortized deferred financing costs were $13.1 million and $9.4 million, respectively. The expense associated with the amortization of deferredfinancing costs was $1.4 million, $1.8 million and $2.6 million for the years ended December 31, 2011, 2010 and 2009, respectively, and was includedin interest expense. In connection with the Company's refinancing in the second quarter of 2010, a write-off of existing deferred financing costs of$2.3 million was recorded. These charges were also included in interest expense.Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business,that cover a wide range of matters, including, among others, product and environmental liability. The Company records accruals for such losscontingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company does not recognizegain contingencies until realized.Fair Value of Financial Instruments The estimated fair values of the Company's financial instruments, including its cash and cash equivalents, receivables, accounts payable andaccrued expenses approximate the carrying values of these instruments due to their short term nature. The estimated fair value of the debt, atDecember 31, 2011, based on recent market activity available to the Company was $320.0 million compared to the face value of $400.0 million. AtDecember 31, 2010, the estimated fair value of the debt based on borrowing rates available to the Company for similar debt was $257.9 millioncompared to the face value of $250.0 million.Shipping and Handling Revenues and Costs The Company typically does not charge customers for shipping and handling costs. Shipping and handling costs are included in cost of goods soldand were $20.3 million, $16.6 million and $16.6 million for the years ended December 31, 2011, December 31, 2010 and December 31, 2009,respectively.97Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred and totaled $4.1 million, $4.2 million and $4.1 million for the years ended December 31,2011, December 31, 2010 and December 31, 2009, respectively, and are included in sales and marketing expenses.Research and Development Research and development costs are expensed as incurred and relate primarily to the development of new products to add to the Company'sportfolio and costs related to its medical affairs and medical information functions. Nonrefundable advance payments for goods or services that will beused or rendered for future research and development activities are deferred and recognized as an expense as the goods are delivered or the relatedservices are performed.Foreign Currency Translation The statements of comprehensive (loss) income of the Company's foreign subsidiaries are translated into U.S. Dollars using average exchangerates. The net assets of the Company's foreign subsidiaries are translated into U.S. Dollars using the end of period exchange rates. The impact fromtranslating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation adjustment account, which is included inaccumulated other comprehensive income (loss). For the years ended December 31, 2011 and December 31, 2010, losses arising from foreign currency transactions totaled approximately $156,000and $209,000, respectively. For the year ended December 31, 2009, gains arising from foreign currency transactions totaled approximately $794,000.Transaction gains and losses are reported as a component of other income, net.Accounting for Stock-Based Compensation The Company's stock-based compensation cost is measured at the grant date of the stock-based award based on the fair value of the award and isrecognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimate of the awards that willbe forfeited. The Company uses the Black-Scholes valuation model for estimating the fair value of stock options. The fair value of stock option awardsis affected by the valuation assumptions, including the expected volatility based on comparable market participants, expected term of the option, risk-freeinterest rate and expected dividends. When a contingent cash settlement of vested options becomes probable, the Company reclassifies its vested awardsto a liability and accounts for any incremental compensation cost in the period in which the settlement becomes probable.Accumulated Other Comprehensive (Loss) Income Comprehensive (loss) income is comprised of net (loss) income, plus all changes in equity of a business enterprise during a period fromtransactions and other events and circumstances from non-owner sources, including any foreign currency translation adjustments. These changes inequity are recorded as adjustments to accumulated other comprehensive (loss) income in the Company's consolidated balance sheet. The components ofaccumulated other comprehensive income (loss) consist of foreign currency translation adjustments.98Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)Asset Retirement Obligations The Company's compliance with federal, state, local and foreign environmental laws and regulations may require it to remove or mitigate the effectsof the disposal or release of chemical substances in jurisdictions where it does business or maintains properties. The Company establishes accrualswhen such costs are probable and can be reasonably estimated. Accrual amounts are estimated based on currently available information, regulatoryrequirements, remediation strategies, historical experience, the relative shares of the total remediation costs and a relevant discount rate, when the timeperiods of estimated costs can be reasonably predicted. Changes in these assumptions could impact the Company's future reported results. The amountsrecorded for asset retirement obligations in the accompanying balance sheets at December 31, 2011 and 2010 were $4.9 million and $4.4 million,respectively.Self Insurance Reserves The Company's consolidated balance sheet at December 31, 2011 and 2010 includes approximately $0.6 million of accrued liabilities associatedwith employee medical costs that are retained by the Company. The Company estimates the required liability of such claims on an undiscounted basisbased upon various assumptions which include, but are not limited to, the Company's historical loss experience and projected loss development factors.The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents(frequency) and change in the ultimate cost per incident (severity). The Company also maintains a separate cash account to fund these medical claimsand must maintain a minimum balance as determined by the plan administrator. The balance of this restricted cash account was approximately$0.1 million at both December 31, 2011 and 2010, and is included in other current assets.Recent Accounting Standards In September 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-08, Testing Goodwill for Impairment ("ASU 2011-08").Under this guidance, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to adetermination that it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the entity determines that it is morelikely than not that the carrying value of a reporting unit is less than its fair value, then performing the two-step impairment test is unnecessary. Theamendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Theimplementation of the amended accounting guidance will have no material impact on the consolidated financial position and results of operations.99Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued) In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (Topic 220). This guidance, effective retrospectively forthe interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensiveincome, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensiveincome or in two separate but consecutive statements. The adoption of this guidance did not have a material impact on the Company's financial positionand results of operations.3. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. In order to increase consistency and comparability in fair value measurements, financial instruments are categorizedbased on a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access atthe measurement date. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets orliabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yieldcurves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (marketcorroborated inputs). Level 3—Unobservable inputs that reflect a Company's estimates about the assumptions that market participants would use in pricing theasset or liability. The Company develops these inputs based on the best information available, including its own data. At December 31, 2011 and 2010, the Company's financial assets that are measured at fair value on a recurring basis are comprised of moneymarket securities and are classified as cash equivalents. The Company invests excess cash from its operating cash accounts in overnight investments andreflects these amounts in cash and cash equivalents on the consolidated balance sheet using quoted prices in active markets for identical assets (Level 1). 100(in thousands) Total fairvalue atDecember 31,2011 Quoted pricesin activemarkets(Level 1) Significant otherobservableinputs(Level 2) Significantunobservableinputs(Level 3) Money Market $6,024 $6,024 — — $6,024 $6,024 $— $— (in thousands) Total fairvalue atDecember 31,2010 Quoted pricesin activemarkets(Level 1) Significant otherobservableinputs(Level 2) Significantunobservableinputs(Level 3) Money Market $22,883 $22,883 $— $— $22,883 $22,883 $— $— Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)3. Fair Value of Financial Instruments (Continued) In addition, at December 31, 2011 and 2010, the Company had approximately $34.6 million and $10.1 million, respectively, of cash on hand. The estimated fair values of the Company's financial instruments, including its cash and cash equivalents, receivables, accounts payable andaccrued expenses approximate the carrying values of these instruments due to their short term nature. The estimated fair value of the debt, atDecember 31, 2011, based on recent market activity available to the Company was $320.0 million compared to the face value of $400.0 million. AtDecember 31, 2010, the estimated fair value of the debt based on borrowing rates available to the company for similar debt was $257.9 millioncompared to the face value of $250.0 million.4. Income Taxes The components of (loss) income before income taxes for the years ended December 31 were: The provision (benefit) for income taxes as of December 31 was:101(in thousands) 2011 2010 2009 United States $(55,658)$2,316 $41,125 International 3,287 5,119 1,179 $(52,371)$7,435 $42,304 (in thousands) 2011 2010 2009 Current Federal $(41)$768 $5,140 State 2,607 1,649 3,981 International 202 1,602 2,005 $2,768 $4,019 $11,126 Deferred Federal $75,939 $(184)$9,396 State 6,326 (1,270) 4,244 International (935) (100) (2,814) $81,330 $(1,554)$10,826 $84,098 $2,465 $21,952 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)4. Income Taxes (Continued) The Company's provision for income taxes in the years ended December 31, 2011, 2010 and 2009 was different from the amount computed byapplying the statutory U.S. Federal income tax rate to (loss) income from operations before income taxes, as a result of the following: The components of deferred income tax assets (liabilities) at December 31 were:102(in thousands) 2011 2010 2009 U.S. statutory rate $(18,331) 35.0%$2,602 35.0%$14,806 35.0%Permanent differences (363) 0.7% 277 3.7% — — Losses not benefited — — — — 155 0.4%U.S manufacturing deduction — — — — (281) (0.7)%Uncertain tax positions 1,148 (2.2)% 2,685 36.1% 2,505 5.9%Research credits (910) 1.7% (666) (9.0)% — — State and local taxes (1,815) 3.5% 53 0.7% 631 1.5%Impact of rate change on deferred taxes (393) 0.7% (308) (4.1)% 3,956 9.3%Utilization of net operating losses — — (339) (4.6)% (1,407) (3.3)%True-up of prior year tax 33 (0.1)% (1,311) (17.6)% 1,592 3.8%Foreign tax rate differential (584) 1.1% (528) (7.1)% — — Valuation allowance 102,692 (196.1)% — — — — Tax on repatriation 2,600 5.0% — — — — Other 21 —% — — (5) 0.0% $84,098 (160.7)%$2,465 33.1%$21,952 51.9% (in thousands) 2011 2010 Deferred Tax Assets Federal benefit of state taxes payable $10,311 $9,670 Reserves, accruals and other 29,019 12,383 Capitalized R&D 9,536 — Amortization of intangibles other than goodwill 74,744 81,836 Net operating loss carryforwards 1,381 384 Deferred tax assets 124,991 104,273 Deferred Tax Liabilities Reserves, accruals and other $(6,457) — Customer relationships (12,935) (17,361)Depreciation (3,745) (6,187) Deferred tax liability (23,137) (23,548)Less: Valuation allowance (102,692) — $(838)$80,725 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)4. Income Taxes (Continued) In 2010, the Company determined that, at the time of the purchase of LMI, a deferred tax benefit related to the asset retirement obligation had notbeen recorded. Accordingly, in 2010 it recorded such deferred tax asset. The offset for this item has been recorded as a reduction in goodwill. The Company files separate federal income tax returns for Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. For state taxpurposes, the Company files combined tax returns with Lantheus MI Holdings, Inc. For income tax provision purposes, the Company uses the separatereturn method in calculating its state tax provision. As of December 31, 2011 and December 31, 2010, the Company reflects an amount payable toLantheus MI Holdings of $85,000 and $69,000, respectively, for the tax benefit of losses incurred by Lantheus MI Holdings. The Company is currently under audit in the province of Quebec and in the states of Florida and New York for corporate income taxes. TheCompany has not recorded a financial statement impact associated with these audits. Tax years 2008-2011 remain open in all jurisdictions. Statutesbegin to expire in 2012 for the 2008 tax year. Within the next twelve months, unrecognized tax benefits of $1.3 million associated with federal researchcredits may be recognized due to the closing of the statute of limitations. As of December 31, 2011 and 2010, total liabilities for tax obligations and associated interest and penalties were $34.6 million and $33.0 million,respectively, consisting of income tax provisions for uncertain tax benefits of $17.0 million and $17.7 million, interest accruals of $14.4 million and$12.2 million and penalty accruals of $3.2 million and $3.2 million, respectively, which were included in other long-term liabilities on the consolidatedbalance sheet with the offsetting asset in other long-term assets. The total noncurrent asset related to the indemnification was $18.8 million and$17.6 million as of December 31, 2011 and 2010, respectively. Included in the 2011, 2010 and 2009 tax provision is $2.4 million, $2.4 million and$2.5 million, respectively, relating to current year interest expense, with an offsetting amount included in other income due to the indemnification relatedto these obligations. During 2011, the Company conducted transfer pricing studies relating to its foreign subsidiaries. As a result of these studies, theCompany has reversed $968,000 of uncertain tax positions.103 2011 2010 Recorded in the accompanying consolidated balance sheet as: Current deferred tax assets $93 $4,266 Noncurrent deferred tax assets — 78,312 Current deferred tax liability — — Noncurrent deferred tax liability (931) (1,853) Net deferred tax liabilities $(838)$80,725 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)4. Income Taxes (Continued) A reconciliation of the Company's changes in uncertain tax positions for 2011, 2010 and 2009 is as follows: As of December 31, 2011 and December 31, 2010, the total amount of unrecognized tax benefits was $15.4 million and $16.1 million,respectively, all of which would affect the effective tax rate, if recognized. These amounts are primarily associated with domestic state tax issues, suchas the allocation of income among various state tax jurisdictions, transfer pricing and U.S. federal R&D credits. Included in the 2010 results is a netprovision of $1.6 million relating to transfer pricing exposures associated with operating in multiple jurisdictions. Since the Company operates in anumber of countries in which it has income tax treaties, it believes that it is more likely than not that the Company should be able to receive competentauthority relief for any potential adjustment in those countries. The Company has included $3.2 million within other long-term liabilities and hasreflected an offset in other assets for $1.6 million. In accordance with the Company's acquisition of the medical imaging business from Bristol-Myers Squibb ("BMS") in 2008, the Companyobtained a tax indemnification agreement with BMS related to certain tax obligations arising prior to the acquisition of the Company, for which theCompany has the primary legal obligation. The tax indemnification receivable is recognized within other noncurrent assets. The changes in the taxindemnification asset are recognized within other income, net in the statement of comprehensive (loss) income. In accordance with the Company'saccounting policy, the change in the tax liability and penalties and interest associated with these obligations (net of any offsetting federal or state benefit)is recognized within the tax provision. Accordingly, as these reserves change, adjustments are included in the tax provision while the offsettingadjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there is no neteffect on earnings related to these liabilities and no net cash outflows. During the years ended December 31, 2011 and 2010, BMS, on behalf of the Company, made payments totaling $0.3 million and $4.6 millionrespectively to a number of states in connection with prior year state income tax filings. As a result of these payments, the amount due from BMS,included within other noncurrent assets, and the income tax liability included within other long-term liabilities, decreased by $0.5 million and$5.1 million respectively, which represents the total cash payments of $0.3 million and $4.6 million respectively and a reduction in the reserve of$0.2 million and $0.5 million104(in thousands) Beginning balance of uncertain tax positions as of January 1, 2009 $17,939 Additions to tax positions related to current year 877 Reduction to tax positions related to prior year — Balance of uncertain tax positions as of December 31, 2009 $18,816 Additions to tax positions related to current year 1,194 Reduction to tax positions related to prior year (3,951) Balance of uncertain tax positions as of December 31, 2010 $16,059 Additions to tax positions related to current year 195 Reduction to tax positions related to prior year (876) Balance of uncertain tax positions as of December 31, 2011 $15,378 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)4. Income Taxes (Continued)respectively, representing the difference between amounts paid and amounts originally estimated. There were no resolutions associated with uncertaintax positions during the year ended December 31, 2009. Undistributed earnings of foreign subsidiaries aggregated to $14.1 million and $9.5 million at December 31, 2011 and 2010, respectively. TheCompany may not permanently reinvest approximately $13.0 million of accumulated earnings from its Australian, Canadian, and Puerto Ricosubsidiaries. For the year ended December 31, 2011, the Company has recorded a deferred tax liability of $5.9 million relating to the additional tax thatwould be due in the U.S. upon repatriation of these earnings less $3.3 million of foreign tax credits. Due to anticipated tax losses in 2012, the estimatedcurrent tax cost is expected to be $0.3 million associated with foreign withholding taxes. The Company has generated domestic pre-tax losses for the past two years. This loss history coupled with uncertainties surrounding theCompany's ability to obtain sustained product supply demonstrates negative evidence concerning the Company's ability to utilize its domestic grossdeferred tax assets. In order to overcome the presumption of recording a valuation allowance against the deferred tax assets, the Company must havesufficient positive evidence that it can generate sufficient taxable income to utilize these deferred tax assets within the carryover or forecast period.Although the Company has no history of expiring net operating losses or other tax attributes, based on the Company's pre-tax loss of $52.4 million in2011, the cumulative loss incurred over the three-year period ended December 31, 2011, and the uncertainty regarding product supply issues,management determined that the net U.S. deferred tax assets are not more likely than not recoverable. As a result of this analysis, the Company hasrecorded a valuation allowance in the amount of $102.7 million in 2011. The following is a reconciliation of the Company's valuation allowance for the years ending December 31, 2011, 2010, and 2009. At December 31, 2011, the Company has federal and state net operating loss carryovers of $1.6 million, which begins to expire in 2030. TheCompany has $1.3 million of federal research credits, which begins to expire in 2029. The Company has foreign tax credits of approximately$4.0 million that will begin to expire in 2020. The Company has state research credits of $1.7 million, which will expire between 2023 and 2026. TheCompany has Massachusetts investment tax credits of approximately $0.5 million, which have no expiration date.105Balance at January 1, 2009 $5,535 Charged to provision for income taxes — Deductions (use of net operating loss) (5,196) Balance at December 31, 2009 339 Charged to provision for income taxes — Deductions (use of net operating loss) (339) Balance at December 31, 2010 — Charged to provision for income taxes 102,692 Deductions — Balance at December 31, 2011 $102,692 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)4. Income Taxes (Continued) In 2010, the Company was granted a tax holiday from the Commonwealth of Puerto Rico, which expires on January 1, 2024. This grant providesfor a 4% tax rate on activities relating to the operations of the Company's radiopharmacies. This grant is conditioned upon the Company meeting certainemployment and investment thresholds. The impact of this tax holiday was to decrease foreign tax by approximately $0.2 million in both 2011 and2010.5. Inventory The Company includes within current assets the amount of inventory that is estimated to be utilized within twelve months. Inventory that will beutilized after twelve months is classified within other long-term assets. Inventory, classified in inventory or other long-term assets, consisted of the following: At December 31, 2011, inventories reported as other long-term assets included $10.7 million of raw materials and $0.5 million of finished goods.At December 31, 2010 other long-term assets included $7.8 million of raw materials, $1.4 million in work-in-process and $3.6 million of finishedgoods. The Company's Ablavar product was commercially launched in January 2010 and the Company is continuing the process of educating radiologistson optimizing the use of the product within their patient populations. The revenues for this product through December 31, 2011 have not beensignificant. At December 31, 2011 and December 31, 2010, the balances of inventory on-hand reflect approximately $12.2 million and $13.9 million,respectively, of finished products, work-in-process and raw materials related to Ablavar. At December 31, 2011 and December 31, 2010, approximately$11.2 million and $12.8 million, respectively, of Ablavar inventory was included in long-term assets. LMI entered into an agreement with a supplier toprovide Active Pharmaceutical Ingredient ("API") and finished products for Ablavar under which LMI is required to purchase future minimumquantities. The supply agreement was amended during October 2011 to extend the term of the agreement from September 30, 2012 until September 30,2014, reduce the amount of API LMI is obligated to purchase over the term of the agreement, and increase the amount of finished drug product LMI isobligated to purchase over the term of the agreement. At December 31, 2011, the remaining purchase commitment under the amended agreement wasapproximately $11.1 million. The Company records the inventory when it takes delivery, at which time the Company assumes title and risk of loss. Prior to the issuance of the June 30, 2011 financial statements and in the fourth quarter of 2010, the Company performed analyses of its expectedfuture sales of its Ablavar product and recorded an inventory write-down to cost of goods sold of $13.5 million and $10.9 million, respectively, whichrepresents the cost of Ablavar finished good product and API that the Company does not believe it will106(in thousands) December 31,2011 December 31,2010 Raw materials $7,755 $7,116 Work in process 2,615 5,605 Finished goods 4,395 7,396 Inventory 14,765 20,117 Other long-term assets 11,249 12,781 Total $26,014 $32,898 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)5. Inventory (Continued)be able to sell prior to its expiration. Prior to the issuance of the Company's June 30, 2011 financial statements, the Company completed an updatedsales forecast for Ablavar based on actual sales through June 30, 2011 in consideration of its supply agreement for API. Based on the updated salesforecast, coupled with the aggregate six-year shelf life of API and finished goods, the Company recorded in cost of goods sold a reserve of $1.9 millionfor the loss associated with the portion of the committed purchases of Ablavar product that the Company did not believe it would be able to sell prior toits expiration. Also, the Company determined that its write-down of Ablavar inventory represented an event that warranted assessment of the intellectualproperty associated with Ablavar for its recoverability and concluded that the intellectual property was not recoverable and in the second quarter of2011, recorded in cost of goods sold an impairment of this intangible asset of $23.5 million. See Note 8, "Intangibles, net." Prior to the issuance of theDecember 31, 2011 financial statements, the Company assessed third and fourth quarter results, as well as results subsequent to December 31, 2011,against the current forecast of projected sales and $11.1 million of remaining purchase commitments. Based upon this analysis, the Company recordedan additional inventory write-down in the fourth quarter to cost of goods sold of $12.3 million of Ablavar inventory, a reserve of $3.7 million for anadditional loss associated with the portion of the committed purchases of Ablavar product that the Company did not believe it would sell prior to expiry.In the event that the Company does not meet its sales expectations for Ablavar or cannot sell the product it has committed to purchase prior to itsexpiration, the Company could incur additional inventory write-downs and/or losses on its purchase commitments.6. Property, Plant and Equipment, net Property, plant and equipment consisted of the following at December 31: Depreciation expense related to property, plant and equipment was $12.9 million, $11.4 million and $10.9 million for the years endedDecember 31, 2011, 2010 and 2009, respectively. Included within property, plant and equipment are spare parts of approximately $2.8 million and $4.0 million as of December 31, 2011 and 2010,respectively. Spare parts include replacement parts relating to plant and equipment and are either recognized as an expense when consumed or re-classified and capitalized as part of the related plant and equipment and depreciated over a time period not exceeding the useful life of the related asset. Inaddition, the Company included $1.6 million, $3.2 million and $1.5 million of additions to its property, plant and equipment in accounts payable atDecember 31, 2011, 2010 and 2009.107(in thousands) 2011 2010 Land $22,450 $22,450 Buildings 64,029 62,014 Machinery, equipment and fixtures 65,648 60,713 Construction in progress 4,383 7,631 Accumulated depreciation (44,058) (32,124) Property, plant and equipment, net $112,452 $120,684 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)7. Asset Retirement Obligations The Company considers the legal obligation to remediate its facilities upon a decommissioning of its radioactive related operations as an assetretirement obligation. The operations of the Company have radioactive production facilities at its North Billerica, Massachusetts and San Juan, PuertoRico sites. The fair value of a liability for asset retirement obligations is recognized in the period in which the liability is incurred. The liability is measured atthe present value of the obligation when incurred and is adjusted in subsequent periods as accretion expense is recorded. The corresponding assetretirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life. The following is a reconciliation of the Company's asset retirement obligations for the years ended December 31, 2011, 2010 and 2009:8. Intangibles, net Intangibles, net consisted of the following: 108(in thousands) Balance at January 1, 2009 $3,283 Capitalization 85 Accretion expense 378 Balance at December 31, 2009 3,746 Capitalization 191 Accretion expense 435 Balance at December 31, 2010 4,372 Capitalization — Accretion expense 496 Balance at December 31, 2011 $4,868 December 31, 2011(in thousands) Cost Accumulatedamortization Net WeightedAverageUseful Life AmortizationMethodTrademarks $53,390 $13,779 $39,611 16 years Straight-lineCustomer relationships 113,480 74,575 38,905 19 years AcceleratedOther patents 42,780 38,547 4,233 2 years Straight-line $209,650 $126,901 $82,749 December 31, 2010(in thousands) Cost Accumulatedamortization Net WeightedAverageUseful Life AmortizationMethodTrademarks $53,390 $10,317 $43,073 16 years Straight-lineCustomer relationships 113,480 61,909 51,571 19 years AcceleratedAblavar patent rights, know-how 29,710 4,842 24,868 11 years Straight-lineOther patents 42,780 37,603 5,177 2 years Straight-line $239,360 $114,671 $124,689 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)8. Intangibles, net (Continued) On April 6, 2009, the Company acquired the U.S., Canadian and Australian territory rights to a Gadolinium-based blood pool contrast agent,Ablavar (formerly known as Vasovist), from EPIX Pharmaceuticals for an aggregate purchase price of $32.6 million, including drug product and activepharmaceutical ingredient inventory. Ablavar was approved by the U.S. Food and Drug Administration ("FDA") in December 2008 and commerciallylaunched by the Company in early January 2010 after final FDA approval of its product label. In June 2010, the Company acquired the remaining worldrights to Ablavar. The Company determined that the write-down of Ablavar inventory in the fourth quarter of 2010 represented an event that warrantedassessment of the $24.6 million Ablavar patent portfolio for its recoverability. See Note 5, "Inventory." Based on the Company's estimate of futureundiscounted cash flows associated with the Ablavar product as of December 31, 2010, the Company concluded the patent portfolio was recoverable bya narrow margin. During the interim periods subsequent to December 31, 2010, the Company monitored the recoverability of the Ablavar patentportfolio. Prior to the issuance of the Company's June 30, 2011 financial statements, the Company completed an update of its sales forecast based onactual sales results through June 30, 2011 and its forecasted Ablavar sales activity. The Company, using its revised sales forecast, conducted animpairment analysis as of June 30, 2011 and concluded that the estimate of future undiscounted cash flows associated with the Ablavar product did notexceed the carrying amount of the asset and therefore, the asset would need to be written down to its fair value. In order to calculate the fair value of theAblavar patent portfolio asset, the Company estimated the future discounted cash flows associated with the Ablavar product and as a result of thisanalysis, recorded an impairment charge of $23.5 million to adjust the carrying value to its fair value of zero. This expense was recorded within cost ofgoods sold in the accompanying statement of comprehensive (loss) income. The Company recorded amortization expense for its intangible assets of $18.5 million, $22.5 million and $29.6 million for the years endedDecember 31, 2011, 2010 and 2009, respectively. In the first quarter of 2012, the Company reviewed the estimated useful life of certain of its trademarks. As a result of utilizing the most recentforecasted data, the Company revised its estimate of the remaining useful life of one of its trademarks to five years. The revised expected futureamortization expense related to the intangible assets is as follows (in thousands):109Years ended December 31, 2012 $16,109 2013 14,437 2014 13,156 2015 11,484 2016 10,732 2017 and thereafter 16,831 $82,749 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)9. Accrued Expenses Accrued expenses are comprised of the following at December 31: On June 30, 2011, the Company took action to reduce its work force in an effort to reduce costs and increase operating efficiency, which resultedin approximately $1.6 million charge to the statement of comprehensive (loss) income in the second quarter of 2011. The remaining balance in accruedexpenses at December 31, 2011 associated with this action is approximately $37,000.10. Financing Arrangements On March 21, 2011, LMI issued $150.0 million of New Restricted Notes. The New Restricted Notes were issued at a price of 101.50% and wereissued as additional debt securities under the Indenture pursuant to which LMI previously issued $250.0 million in aggregate principal amount of9.750% Senior Notes due 2017. The New Restricted Notes were issued with the same terms and conditions as the Existing Notes, except that the NewRestricted Notes were subject to a separate registration rights agreement. The New Notes and the Existing Notes vote as one class under the Indenture.As a result of the issuance of the New Notes, LMI has $400.0 million in aggregate principal amount of Notes outstanding. The Notes bear interest at arate of 9.750% per year, payable on May 15 and November 15 of each year, beginning May 15, 2011 with respect to the New Notes. Interest on theNew Notes accrues from November 15, 2010. The Notes mature on May 15, 2017. The net proceeds of the Existing Notes were used to repay$77.9 million due under LMI's then outstanding credit agreement and to pay a $163.8 million dividend to Holdings to repay a $75.0 million demandnote it issued and for Holdings to repurchase $90.0 million of its Series A Preferred Stock at the accreted value. The net proceeds of the New RestrictedNotes were used to pay a $150 million dividend to Holdings, which it used to fully redeem the balance of its Series A Preferred Stock at the accretedvalue of $44.0 million and to pay a $106.0 million dividend to the holders of its common securities and stock options. In conjunction with the issuanceof the New Restricted Notes, LMI also made a cash payment of $3.75 million to the Holders of the Existing Notes in exchange for the Holders of theExisting Notes consent to amend the Indenture to modify the restricted payments covenant to provide for additional restricted payment capacity in orderto accommodate the dividend payment. The premium of $2.25 million and the consent fee of $3.75 million were capitalized and are being amortized overthe term of the Notes as an adjustment to interest expense. All of the Notes have been registered with the Securites and Exchange Commission.110(in thousands) 2011 2010 Compensation and benefits $5,501 $5,839 Accrued interest 4,886 3,137 Accrued professional fees 1,927 2,342 Research and development services 2,100 1,327 Freight and distribution 3,416 3,368 Marketing expense 1,104 989 Accrued rebates, discounts and chargebacks 1,356 910 Other 659 693 $20,949 $18,605 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)10. Financing Arrangements (Continued)Redemption LMI can redeem the Notes at 100% of the principal amount on May 15, 2016 or thereafter. LMI may also redeem the Notes prior to May 15, 2016depending on the timing of the redemption during the twelve month period beginning May 15 of each of the years indicated below: In addition, at any time prior to May 15, 2013, LMI may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued at109.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date, subject to the right ofholders of record on such date to receive any interest due, using proceeds of an equity offering, provided that at least 65% of the aggregate principalamount of the Notes remains outstanding immediately after such redemption and that such redemption occurs within 90 days of each equity offering (asdefined in the Indenture). At any time prior to May 15, 2014, LMI may also redeem all or a part of the Notes, with notice, at a redemption price equal to 100% of theprincipal amount thereof of the Notes redeemed plus the applicable premium (as defined in the Indenture) as of, and accrued and unpaid interest andadditional interest (as defined in the Indenture), if any, to, but not including, the redemption date, subject to the rights of holders of record on therelevant record date to receive interest due on the relevant interest payment date. Upon a change of control (as defined in the Indenture), LMI will be required to make an offer to purchase each holder's Note at a price of 101% ofthe principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. If LMI or its subsidiaries engage in asset sales (as defined in the Indenture), they generally must either invest the net cash proceeds from such salesin such business within a specified period of time, prepay certain indebtedness or make an offer to purchase a principal amount of the Notes equal to theexcess net cash proceeds (as defined in the Indenture), subject to certain exceptions. The Notes are unsecured and are equal in right of payment to all of the existing and future senior debt, including borrowings under its securedcredit facilities, subject to the security interest thereof. LMI's obligations under the Notes are fully and unconditionally guaranteed, jointly and severally,on an unsecured senior basis by Lantheus Intermediate and by certain of LMI's subsidiaries, and the obligations of such guarantors under theirguarantees are equal in right of payment to all of their existing and future senior debt.Revolving Line of Credit In connection with the issuance of the New Restricted Notes, certain covenants and interest rates under LMI's existing $42.5 million revolvingfacility (the "Facility") were modified as disclosed below. The other terms of the Facility were unchanged, including LMI's ability to request the lendersto increase the Facility by an additional amount of up to $15.0 million at the discretion of the Lenders.111Year Percentage 2014 104.875%2015 102.438%2016 100.000%Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)10. Financing Arrangements (Continued)Interest on the Facility will be at either LIBOR plus 3.75% or the Reference Rate (as defined in the Facility) plus 2.75%. The Facility expires onMay 10, 2014, at which time all outstanding borrowings are due and payable. At December 31, 2011 and 2010, there was no outstanding balance under the Facility and the aggregate borrowing capacity was $42.5 million.Subsequent to December 31, 2011, we executed an amendment to the Facility to change the financial covenants. Also, on February 3, 2012, theCompany entered into a Standby Letter of Credit for up to $4.4 million which expires February 2, 2013. The letter of credit decreases the borrowingavailability under the Facility by $4.4 million.Covenants The Notes and the Facility contain affirmative and negative covenants, as well as restrictions on the ability of Lantheus Intermediate, LMI andLMI's subsidiaries, to: (i) incur additional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity;(iii) pay dividends on, repurchase or make distributions in respect of its capital stock or make other restricted payments; (iv) make certain investments;(v) sell certain assets; (vi) create liens; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's assets; and(viii) enter into certain transactions with the Company's affiliates. The Notes contain customary events of default provisions, including payment defaultand cross-acceleration for non-payment of any outstanding indebtedness, where such indebtedness exceeds $10.0 million. The Facility also containscustomary default provisions and the Company is required to comply with financial covenants in the Facility including a total leverage ratio and interestcoverage ratio, beginning with the quarter ended September 30, 2010, as well as limitations on the amount of capital expenditures. The financial ratiosare driven by the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") as defined in the Facility ("Facility EBITDA").The total leverage ratio is considered by the Company to be the financial covenant that is currently the most restrictive. The financial covenants, prior tothe amendment are displayed in the table below:Revolving Credit Facility Financial Covenants (Prior to Amendment) 112Period Total Leverage Ratio Interest Coverage Ratio Q1 2011 5.50 to 1.00 1.75 to 1.00 Q2 2011 5.50 to 1.00 1.75 to 1.00 Q3 2011 5.25 to 1.00 1.75 to 1.00 Q4 2011 5.00 to 1.00 2.00 to 1.00 Q1 2012 4.75 to 1.00 2.00 to 1.00 Q2 2012 4.50 to 1.00 2.15 to 1.00 Q3 2012 4.50 to 1.00 2.15 to 1.00 Q4 2012 4.25 to 1.00 2.25 to 1.00 Q1 2013 4.25 to 1.00 2.25 to 1.00 Q2 2013 4.25 to 1.00 2.25 to 1.00 Q3 2013 4.25 to 1.00 2.25 to 1.00 Thereafter 3.75 to 1.00 2.25 to 1.00 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)10. Financing Arrangements (Continued) On January 26, 2012 the Company executed an amendment to the credit facility which revised the financial covenants. The revised financialcovenants are displayed in the table below.Revolving Credit Facility Financial Covenants Per Amendment Financing Costs LMI incurred and capitalized approximately $15.6 million in direct financing fees including $5.2 million associated with the New Restricted Notesissued in March 2011, consisting primarily of underwriting fees and expenses, consent solicitation fee, legal fees, accounting fees and printing costs inconnection with the issuance of the New Restricted Notes, the Existing Notes and the Facility. Deferred financing costs are being amortized over the lifeof the Notes and the Facility, as appropriate, using the effective interest method and are included in interest expense in the accompanying consolidatedstatements of comprehensive (loss) income.11. Stockholder's Equity As of December 31, 2011 and 2010, the authorized capital stock of the Company consisted of 10,000 shares of voting common stock with a parvalue of $0.001 per share and 1 share outstanding.12. Stock-Based Compensation The Company's employees are eligible to receive awards from Holdings' 2008 Equity Incentive Plan (the "2008 Plan"). The 2008 Plan isadministered by the Holdings Board of Directors. The 2008 Plan permits the granting of nonqualified stock options, stock appreciation rights, or SARs,restricted stock and restricted stock units to its employees, officers, directors and consultants of Holdings or any subsidiary of Holdings (includingIntermediate and LMI). The maximum number of shares that may be issued pursuant to awards under the 2008 Plan at December 31, 2011 is4,995,450. Option awards are granted with an exercise price equal to the fair value of Holdings' stock at the date of grant, as determined by the Board ofDirectors of Holdings. Time based option awards vest based on time, either four or five years, and performance based option awards vest based on theperformance criteria specified in the grant. All option awards have a ten year contractual term. The Company recognizes compensation costs for its timebased awards on a straight-line basis equal to the vesting period. The113Period Total Leverage Ratio Interest Coverage Ratio Q4 2011 5.00 to 1.00 2.00 to 1.00 Q1 2012 6.80 to 1.00 1.40 to 1.00 Q2 2012 7.55 to 1.00 1.30 to 1.00 Q3 2012 6.70 to 1.00 1.40 to 1.00 Q4 2012 5.50 to 1.00 1.80 to 1.00 Q1 2013 4.60 to 1.00 2.00 to 1.00 Q2 2013 4.60 to 1.00 2.10 to 1.00 Q3 2013 4.25 to 1.00 2.15 to 1.00 Q4 2013 4.25 to 1.00 2.15 to 1.00 Q1 2014 3.75 to 1.00 2.25 to 1.00 Thereafter 3.75 to 1.00 2.25 to 1.00 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)12. Stock-Based Compensation (Continued)compensation cost for performance based awards is recognized on a graded vesting basis, based on the probability of achieving the performance targetsover the requisite service period for the entire award. The fair value of each option award is estimated on the date of grant using a Black-Scholesvaluation model that uses the assumptions noted in the following table. Expected volatilities are based on the historic volatility of a selected peer group.Expected dividends represents the dividends expected to be issued at the date of grant. The expected term of options represents the period of time thatoptions granted are expected to be outstanding. The risk-free interest rate assumption is the seven-year U.S. Treasury rate at the date of the grant whichmost closely resembles the expected life of the options. A summary of option activity for 2011 is presented below: The weighted average grant-date fair value of options granted during the years ended December 31, 2011, 2010 and 2009 was $4.05, $4.48 and$3.16, respectively. During the years ended December 31, 2011, 2010 and 2009, 362,300, 465,370 and 1,084,547 options vested, respectively, with anaggregate fair value of approximately $422,000, $468,000 and $987,000, respectively. There were 14,650 options exercised during the year endedDecember 31, 2011 with an intrinsic value of approximately $46,000. In the year ended December 30, 2010, 15,000 options were exercised with anintrinsic value of approximately $124,000. During the year ended December 31, 2009, the Company received notices for exercise, for which the Years Ended December 31, 2011 2010 2009 Expected volatility 33 - 40% 36 - 39% 41 - 39%Expected dividends — — — Expected life (in years) 6.5 6.5 6.5 Risk-free interest rate 1.9 - 2.9% 2.2% - 3.3% 2.4% - 3.4% Time Based PerformanceBased Shares WeightedAverageExercisePrice WeightedAverageRemainingContractualTerm AggregateIntrinsicValue Outstanding atJanuary 1,2011 2,368,350 1,797,569 4,165,919 $2.70 7.0 $32,618,000 Options granted 148,500 148,500 297,000 10.21 Optionscancelled (94,850) (74,861) (169,711) 2.93 Optionsexercised (10,000) (4,650) (14,650) 6.84 Optionsforfeited andexpired (124,400) (559,020) (683,420) 5.14 Outstanding atDecember 31,2011 2,287,600 1,307,538 3,595,138 2.9 6.4 $22,787,000 Vested andexpected tovest atDecember 31,2011 2,267,794 872,174 3,139,968 2.90 6.4 $19,893,000 Exercisable atDecember 31,2011 1,333,780 763,218 2,096,998 2.18 6.2 $14,613,000 Company immediately called the options and settled the obligation in cash. As such, no common stock was issued for these transactions during 2009.Stock-based compensation114Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)12. Stock-Based Compensation (Continued)expense (income) for both time based and performance based awards was recognized in the consolidated statements of comprehensive (loss) income asfollows: Stock-based compensation (income) expense recognized in the consolidated statement of comprehensive (loss) income for the years endedDecember 31, 2011, 2010, and 2009 are based on awards ultimately expected to vest as well as any changes in the probability of achieving certainperformance features as required. As part of the 2008 Plan, the Company has the right to call options upon notice of exercise and to settle the exercise in cash in lieu of issuingshares. As a result of this right, upon termination of service, stock-based awards are reclassified to liability based awards until the period of probableexercise has lapsed. As of December 31, 2010, the Company had recorded a liability $1.1 million, representing 138,515 options relating to stock-basedliabilities that it could settle in part or in whole, in cash in the following period. There were no stock-based liabilities as of December 31, 2011. The total of all stock-based liability awards paid out during 2010 was approximately $84,000. There were no stock-based liability awards paid outin 2011 or 2009. The Company did not recognize an income tax benefit for the year ended December 31, 2011. For the years ended December 31, 2010 and 2009,the Company recognized an income tax benefit of $46,000 and $7,000, respectively. As of December 31, 2011, there was approximately $1.3 million oftotal unrecognized compensation costs related to non-vested stock options granted under the 2008 Plan. These costs are expected to be recognized overa weighted-average remaining period of 1.3 years. In addition, performance based awards contain certain contingent features, such as change in controlprovisions, which allow for the vesting of previously forfeited and unvested awards. As of December 31, 2011, there is approximately $1.3 million ofunrecognized compensation expense relating to these features.13. Other Income, net Other income, net consisted of the following:115 Years Ended December 31, (in thousands) 2011 2010 2009 Cost of goods sold $2 $37 $101 General and administrative 58 253 828 Sales and marketing (1,064) 1,114 97 Research and development 35 230 183 Total stock-based compensation (income) expense $(969)$1,634 $1,209 Years Ended December 31, (in thousands) 2011 2010 2009 Foreign currency (losses) gains $(156)$(209)$794 Tax indemnification income 1,380 1,250 1,560 Other income 205 273 366 Total other income, net $1,429 $1,314 $2,720 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)14. Commitments The Company leases certain buildings, hardware and office space under operating leases. In addition, the Company has entered into purchasingarrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis. Minimum lease and purchasecommitments under noncancelable arrangements are as follows (in thousands): Lease expense was $951,000, $941,000 and $810,000 for the years ended December 31, 2011, 2010 and 2009, respectively.15. 401(k) Plan The Company maintains a qualified 401(k) plan (the "401(k) Plan") for its U.S. employees. The 401(k) Plan covers U.S. employees who meetcertain eligibility requirements. Under the terms of the 401(k) Plan, the employees may elect to make tax-deferred contributions through payrolldeductions within statutory and plan limits, and the Company may elect to make non-elective discretionary contributions. During the years endedDecember 31, 2011, 2010 and 2009, the Company matched employee contributions up to 4.5% of eligible compensation and did not contribute anadditional non-elective discretionary match. The Company may also make optional contributions to the 401(k) Plan for any plan year at its discretion.Expense recognized by the Company for matching contributions related to the 401(k) Plan was $1.9 million, $1.8 million and $1.8 million for the yearsended December 31, 2011, 2010 and 2009, respectively.16. Legal Proceedings From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. In addition, the Company has inthe past been, and may in the future be, subject to investigations by regulatory authorities which expose it to greater risks associated with litigation,regulatory or other proceedings, as a result of which the Company could be required to pay significant fines or penalties. The outcome of litigation,regulatory or other proceedings cannot be predicted with certainty and some lawsuits, claims, actions or proceedings may be disposed of unfavorably tothe Company. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materiallyand adversely affect its financial condition or results of operations. On December 16, 2010, LMI filed suit against one of its insurance carriers seeking to recover business interruption losses associated with theNRU reactor shutdown and the ensuing global Moly supply challenge. The claim is the result of the shutdown of the NRU reactor in Chalk River,Ontario. The NRU reactor was off-line from May 2009 until August 2010 due to a "heavy water" leak in the116Years ended December 31, Operating Leases Other Total 2012 $956 $98,176 $99,132 2013 904 105,646 106,550 2014 864 39,000 39,864 2015 484 39,000 39,484 2016 331 39,000 39,331 2017 and thereafter 772 458,932 459,704 $4,311 $779,754 $784,065 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)16. Legal Proceedings (Continued)reactor vessel. The defendant answered the complaint on January 21, 2011, denying substantially all of the allegations, presenting certain defenses andrequesting dismissal of the case with costs and disbursements. On April 4, 2011, the parties had their first pre-trial conference in United States DistrictCourt for the Southern District of New York, and discovery has commenced and is continuing. Non-binding mediation of the case is currentlyscheduled to take place in the summer of 2012. The Company cannot be certain what amount, if any, or when, if ever, it will be able to recover forbusiness interruption losses related to this matter.17. Related Party Transactions Avista, the majority shareholder of LMI Holdings, provides certain advisory services to the Company pursuant to an advisory services andmonitoring agreement. The Company is required to pay an annual fee of $1.0 million and other reasonable and customary advisory fees, as applicable,paid on a quarterly basis. The initial term of the agreement is seven years. Upon termination, all remaining amounts owed under the agreement shallbecome due immediately. There are no outstanding amounts owed at December 31, 2011 or 2010. Effective June 30, 2009, the Company entered into a Master Services Agreement with Quintiles Commercial US, Inc. ("Quintiles") (formerlyknown as Innovex Inc.) to provide a contract sales force in connection with the launch and promotion of Ablavar. The Company incurred costsassociated with this contract of approximately $3.3 million and $1.0 million for the years ended December 31, 2010 and 2009, respectively. The MasterServices Agreement was extended on June 11, 2010 and was terminated as of December 31, 2010. A son of the Company's Chairman of the Board wasa Director of Business Development for Quintiles during part of the term of the agreement. He left Quintiles in June 2010 prior to the contract extensionand renegotiation. In March 2010, the Company engaged a tax and financial services consulting firm, to assist the Company to prepare for compliance under theSarbanes-Oxley Act. As of December 31, 2011 and 2010, the Company has incurred costs associated with this engagement of approximately $117,000and $176,000, respectively. A son of the Company's former Chief Financial Officer is a partner of the consulting firm.18. Segment Information The Company reports two operating segments, U.S. and International, based on geographic customer base. The results of these operating segmentsare regularly reviewed by the chief operating decision maker, the President and Chief Executive Officer. The Company's segments derive revenuesthrough the manufacturing, marketing, selling and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging.The U.S. segment comprises 75.3%, 74.8% and 76.8% of consolidated revenues in 2011, 2010 and 2009, respectively, and 85.5% and 89.7% ofconsolidated assets at December 31, 2011 and 2010, respectively. All goodwill has been allocated to the U.S. operating segment.117Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)18. Segment Information (Continued) Selected information for each business segment are as follows (in thousands):118(in thousands) 2011 2010 2009 Revenues U.S. $291,344 $295,352 $295,818 International 87,927 89,210 83,433 Total revenue, including inter-segment 379,271 384,562 379,251 Inter-segment revenue (22,979) (30,606) (19,040) $356,292 $353,956 $360,211 Revenues from external customers U.S. $268,365 $264,746 $276,778 International 87,927 89,210 83,433 $356,292 $353,956 $360,211 Revenues by product Cardiolite $65,316 $77,422 $119,304 TechneLite 131,241 122,044 112,910 DEFINITY 68,503 59,968 42,942 Other 91,232 94,522 85,055 $356,292 $353,956 $360,211 Geographical revenue U.S. $268,365 $264,746 $276,778 Canada 42,366 42,225 37,511 All other 45,561 46,985 45,922 $356,292 $353,956 $360,211 Operating income/(loss) U.S. $(25,881)$16,953 $35,708 International 12,767 12,952 8,166 Total operating income, including inter-segment (13,114) 29,905 43,874 Inter-segment operating income (loss) (3,361) (511) 9,095 $(16,475)$29,394 $52,969 Depreciation and amortization U.S. $28,912 $30,767 $36,438 International 3,850 4,434 5,269 $32,762 $35,201 $41,707 Capital expenditures U.S. $7,100 $7,005 $6,906 International 594 1,330 1,950 $7,694 $8,335 $8,856 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)18. Segment Information (Continued) 19. Valuation and Qualifying Accounts Amounts charged to deductions from reserves represent the write-off of uncollectible balances.20. Guarantor Financial Information The Notes are guaranteed by Lantheus Intermediate and Lantheus MI Real Estate, LLC, one of Lantheus Intermediate's consolidated subsidiaries(the "Guarantor Subsidiary"). The guarantees are full and unconditional and joint and several. The following supplemental financial information setsforth, on a condensed consolidating basis, balance sheet information as of December 31, 2011 and 2010, and comprehensive (loss) income and cashflow information for the years ended December 31, 2011, 2010 and 2009 for Lantheus Intermediate, LMI, the Guarantor Subsidiary and LantheusIntermediate's other subsidiaries (the "Non-Guarantor Subsidiaries"). The supplemental financial information reflects the investments of LantheusIntermediate in LMI and Lantheus Intermediate's investment in the Guarantor Subsidiary and Non-Guarantor Subsidiaries using the equity method ofaccounting.119 2011 2010 Assets U.S. $306,615 $444,767 International 52,189 51,114 $358,804 $495,881 2011 2010 Long-lived assets U.S. $197,565 $244,784 International 16,932 20,199 $214,497 $264,983 (in thousands) Balance atBeginning ofFiscal Year Charge toCostsandExpenses DeductionsFromReserves Balance at Endof Fiscal Year Year ended December 31, 2011: Allowance for doubtful accounts $796 $301 $(635)$462 Year ended December 31, 2010: Allowance for doubtful accounts $738 $394 $(336)$796 Year ended December 31, 2009: Allowance for doubtful accounts $752 $63 $(77)$738 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Consolidating Balance Sheet InformationDecember 31, 2011 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Assets: Current assets Cash and cashequivalents $— $20,474 $— $20,133 $— $40,607 Accountsreceivable,net — 27,872 — 12,128 — 40,000 Intercompanyaccountsreceivable — 1,414 — — (1,414) — Inventory — 12,269 — 2,496 — 14,765 Deferred taxassets — — — 93 — 93 Other currentassets — 2,349 — 313 — 2,662 Total currentassets — 64,378 — 35,163 (1,414) 98,127 Property, plantand equipment,net — 80,225 23,275 8,952 — 112,452 Capitalizedsoftwaredevelopmentcosts — 3,575 — 7 — 3,582 Intangibles, net — 74,775 — 7,974 — 82,749 Goodwill — 15,714 — — — 15,714 Deferred taxassets — — — — — — Deferredfinancing costs — 13,141 — — — 13,141 Investment insubsidiaries (133,203) 66,983 — — 66,220 — Due from parent — 1,286 — — — 1,286 Other long-termassets — 31,659 — 94 — 31,753 Total assets $(133,203)$351,736 $23,275 $52,190 $64,806 $358,804 Liabilities and(deficit) equity: Currentliabilities Accountspayable $— $19,738 $— $2,272 $— $22,010 120Intercompanyaccountspayable — — — 1,414 (1,414) — Accruedexpenses — 17,780 — 3,169 — 20,949 Income taxpayable — 1,595 — (113) — 1,482 Deferred taxliability — — — — — — Deferredrevenue — 3,712 — 206 — 3,918 Total currentliabilities — 42,825 — 6,948 (1,414) 48,359 Asset retirementobligations — 4,737 — 131 — 4,868 Long-term debt,net — 398,629 — — — 398,629 Deferred taxliability — — — 931 — 931 Other long-termliabilities — 38,748 — 472 — 39,220 Totalliabilities — 484,939 — 8,482 (1,414) 492,007 (Deficit) equity (133,203) (133,203) 23,275 43,708 66,220 (133,203) Totalliabilitiesand(deficit)equity $(133,203)$351,736 $23,275 $52,190 $64,806 $358,804 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Consolidating Balance Sheet InformationDecember 31, 2010 (in thousands except share data) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Assets Current assets Cash and cash equivalents $— $19,079 $— $13,927 $— $33,006 Accounts receivable, net — 36,925 — 13,527 — 50,452 Intercompany accountsreceivable — 4,462 — — (4,462) — Inventory — 12,611 — 7,506 — 20,117 Deferred tax assets — 4,187 — 79 — 4,266 Other current assets — 2,845 — 313 — 3,158 Total current assets — 80,109 — 35,352 (4,462) 110,999 Property, plant andequipment, net — 87,258 23,355 10,071 — 120,684 Capitalized softwaredevelopment costs — 3,887 — 9 — 3,896 Intangibles, net — 114,570 — 10,119 — 124,689 Goodwill — 15,714 — — — 15,714 Deferred tax assets — 78,312 — — — 78,312 Deferred financing costs — 9,425 — — — 9,425 Investment in subsidiaries 153,434 63,827 — — (217,261) — Other long-term assets — 31,966 — 196 — 32,162 Total assets $153,434 $485,068 $23,355 $55,747 $(221,723)$495,881 Liabilities and equity Current liabilities Accounts payable $— $22,334 $— $2,194 $— $24,528 Intercompany accountspayable — — — 4,462 (4,462) — Accrued expenses — 15,879 — 2,726 — 18,605 Income tax payable — (741) — 869 — 128 Deferred revenue — 5,383 — 1,878 — 7,261 Total current liabilities — 42,855 — 12,129 (4,462) 50,522 Asset retirement obligations — 4,260 — 112 — 4,372 Long-term debt, net — 250,000 — — — 250,000 Deferred tax liability — — — 1,853 — 1,853 Deferred revenue — 2,668 — — — 2,668 Other long-term liabilities — 31,851 — 1,181 — 33,032 Total liabilities — 331,634 — 15,275 (4,462) 342,447 Equity 153,434 153,434 23,355 40,472 (217,261) 153,434 Total liabilities andequity $153,434 $485,068 $23,355 $55,747 $(221,723)$495,881 121Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Consolidating Comprehensive (Loss) Income InformationYear Ended December 31, 2011 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues Net productrevenues $— $293,775 $— $74,966 $(22,979)$345,762 License and otherrevenues — 10,530 — — — 10,530 Totalrevenues — 304,305 — 74,966 (22,979) 356,292 Cost of goods sold — 213,121 — 65,324 (22,979) 255,466 Loss on firm purchasecommitment — 5,610 — — — 5,610 Total cost ofgoods sold — 218,731 — 65,324 (22,979) 261,076 Grossprofit — 85,574 — 9,642 — 95,216 Operating expenses General andadministrativeexpenses — 29,335 80 2,642 — 32,057 Sales and marketingexpenses — 34,665 — 4,024 — 38,689 Research anddevelopmentexpenses — 40,387 — 558 — 40,945 Operatingincome(loss) — (18,813) (80) 2,418 — (16,475)Interest expense — (37,658) — — — (37,658)Interest income — 1 — 332 — 333 Other income(expense) — 1,573 — (144) — 1,429 Equity in earnings(losses) of affiliates (136,469) 3,288 — — 133,181 — (Loss) incomebefore incometaxes (136,469) (51,609) (80) 2,606 133,181 (52,371)Provision (benefit) forincome taxes — 84,860 (28) (734) — 84,098 Net (loss)income (136,469) (136,469) (52) 3,340 133,181 (136,469) Foreign currencytranslation — — — (104) — (104)122Income tax expenserelated to items ofothercomprehensive(loss) income — (233) — — — (233) Total othercomprehensive(loss) income $(136,469)$(136,702)$(52)$3,236 $133,181 $(136,806) Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Consolidating Comprehensive (Loss) Income InformationYear Ended December 31, 2010 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues Net productrevenues $— $300,084 $— $76,269 $(30,606)$345,747 License and otherrevenues — 8,209 — — — 8,209 Total revenues — 308,293 — 76,269 (30,606) 353,956 Cost of goods sold — 171,061 — 63,551 (30,606) 204,006 Gross profit — 137,232 — 12,718 — 149,950 Operating expenses General andadministrativeexpenses — 27,113 80 2,849 — 30,042 Sales and marketingexpenses — 41,234 — 4,150 — 45,384 Research anddevelopmentexpenses — 44,638 — 492 — 45,130 Operatingincome(loss) — 24,247 (80) 5,227 — 29,394 Interest expense — (20,395) — — — (20,395)Loss on earlyextinguishment ofdebt — (3,057) — — — (3,057)Interest income — 2 — 177 — 179 Other income(expense) — 1,599 — (285) — 1,314 Equity in losses(earnings) ofaffiliates 4,970 3,565 — — (8,535) — Income (loss)before incometaxes 4,970 5,961 (80) 5,119 (8,535) 7,435 Provision (benefit) forincome taxes — 991 (28) 1,502 — 2,465 Net income(loss) 4,970 4,970 (52) 3,617 (8,535) 4,970 123 Foreign currencytranslation — — — 1,150 — 1,150 Income tax expenserelated to items ofothercomprehensive(loss) income — — — — — — Total othercomprehensive(loss) income $4,970 $4,970 $(52)$4,767 $(8,535)$6,120 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Consolidating Comprehensive (Loss) Income InformationDecember 31, 2009 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues Net productrevenues $— $301,099 $— $70,244 $(19,040)$352,303 License and otherrevenues — 7,908 — — — 7,908 Total revenues — 309,007 — 70,244 (19,040) 360,211 Cost of goods sold — 141,154 — 62,730 (19,040) 184,844 Gross profit — 167,853 — 7,514 — 175,367 Operating expenses General andadministrativeexpenses — 33,164 80 2,186 — 35,430 Sales and marketingexpenses — 38,111 — 4,226 — 42,337 Research anddevelopmentexpenses — 43,535 — 1,096 — 44,631 Operatingincome (loss) — 53,043 (80) 6 — 52,969 Interest expense — (13,458) — — — (13,458)Interest income — 14 — 59 — 73 Other income — 1,693 — 1,027 — 2,720 Equity in losses(earnings) ofaffiliates 20,352 1,849 — — (22,201) — Income (loss)before incometaxes 20,352 43,141 (80) 1,092 (22,201) 42,304 Provision (benefit) forincome taxes — 22,789 (28) (809) — 21,952 Net income(loss) 20,352 20,352 (52) 1,901 (22,201) 20,352 Foreign currencytranslation — — — 1,303 — 1,303 Income tax expenserelated to items ofother124othercomprehensive(loss) income — — — — — — Total othercomprehensive(loss) income $20,352 $20,352 $(52)$3,204 $(22,201)$21,655 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Condensed Consolidating Cash Flow InformationYear Ended December 31, 2011 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cashprovidedbyoperatingactivities $600 $15,409 $— $7,011 $(600)$22,420 Cash flowsfrominvestingactivities Capitalexpenditures — (7,023) — (671) — (7,694)Proceeds fromdividend 149,400 — — — (149,400) — Cashprovidedby (usedin)investingactivities 149,400 (7,023) — (671) (149,400) (7,694) Cash flowsfromfinancingactivities Proceeds fromissuance ofdebt — 152,250 — — — 152,250 Consentsolicitationfee — (3,750) — — — (3,750)Debt issuancecosts — (5,491) — — — (5,491)Proceeds fromline of credit — 10,000 — — — 10,000 Payments online of credit — (10,000) — — — (10,000)Payment ofdividend (150,000) (150,000) — — 150,000 (150,000) Cash usedinfinancingactivities (150,000) (6,991) — — 150,000 (6,991) 125Effect offoreignexchangerate on cash — — — (134) — (134) Increase incash andcashequivalents — 1,395 — 6,206 — 7,601 Cash and cashequivalents,beginning ofyear — 19,079 — 13,927 — 33,006 Cash and cashequivalents,end of year $— $20,474 $— $20,133 $— $40,607 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Condensed Consolidating Cash Flow InformationYear Ended December 31, 2010 126 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cash provided byoperatingactivities $65,698 $22,344 $— $6,055 $(67,780)$26,317 Cash flows frominvestingactivities Capital expenditures — (7,005) — (1,330) — (8,335)Proceeds fromdividend 98,078 — — — (98,078) — Acquisition ofintangibles — (215) — — — (215) Cash provided by(used in)investingactivities 98,078 (7,220) — (1,330) (98,078) (8,550) Cash flows fromfinancingactivities Proceeds fromissuance of debt — 250,000 — — — 250,000 Payment of term loan — (93,649) — — — (93,649)Debt issuance costs — (10,125) — — — (10,125)Payment of dividend (163,776) (163,776) — (2,082) 165,858 (163,776) Cash used infinancingactivities (163,776) (17,550) — (2,082) 165,858 (17,550) Effect of foreignexchange rate oncash — — — 1,309 — 1,309 (Decrease)Increase incash and cashequivalents $— $(2,426)$— $3,952 $— $1,526 Cash and cashequivalents,beginning of year — 21,505 — 9,975 — 31,480 Cash and cashequivalents, end ofyear $— $19,079 $— $13,927 $— $33,006 Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial Statements (Continued)20. Guarantor Financial Information (Continued)Condensed Consolidating Cash Flow InformationDecember 31, 2009 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cashprovidedbyoperatingactivities $— $90,890 $— $4,893 $— $95,783 Cash flowsfrominvestingactivities Capitalexpenditures — (6,906) — (1,950) — (8,856)Acquisition ofintangibles — (29,495) — — — (29,495) Cash usedininvestingactivities — (36,401) — (1,950) — (38,351) Cash flowsfromfinancingactivities Payment onterm loan — (49,102) — — — (49,102)Proceeds fromline of credit — 28,000 — — — 28,000 Payment online of credit — (28,000) — — — (28,000) Cash used infinancingactivities — (49,102) — — — (49,102) Effect offoreignexchangerate on cash — — — 2,114 — 2,114 Increase incash andcashequivalents $— $5,387 $— $5,057 $— $10,444 Cash and cashequivalents,21. Subsequent Events On March 20, 2012, BVL and LMI: (i) terminated their original manufacturing agreement and entered into (i) a Settlement and Mutual ReleaseAgreement (the "Settlement Agreement"); (ii) a Transition Services Agreement (the "Transition Services Agreement"), under which BVL willmanufacture for LMI an initial supply of Definity, Cardiolite, Neurolite, and certain TechneLite accessories; and (iii) a Manufacturing and ServiceContract (the "Manufacturing and Service Contract") under which BVL will manufacture for LMI supplies of Definity, Cardiolite, Neurolite, andcertain TechneLite accessories following the initial supply provided under the Transition Services Agreement through 2013.•In the Settlement Agreement, LMI and BVL agreed to a broad mutual waiver and release for all matters that occurred prior to the date ofthe Settlement Agreement, a covenant not to sue and a settlement payment to LMI in the amount of $30.0 million. •Under the Transition Services Agreement, BVL will manufacture for LMI an initial supply of Definity, Cardiolite, Neurolite and certainTechneLite accessories, and will make weekly payments to LMI, up to an aggregate of $5.0 million, based on the timing of BVL'sdelivery of the initial supply of LMI's products. •Under the Manufacturing and Service Contract, BVL will manufacture for LMI supplies of Definity, Cardiolite, Neurolite and certainTechneLite accessories following the initial supply provided under the Transition Services Agreement. The agreement expires onDecember 31, 2013.127beginning ofyear — 16,118 — 4,918 — 21,036 Cash and cashequivalents,end of year $— $21,505 $— $9,975 $— $31,480 Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.Item 9A. Controls and Procedures Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weconducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under theExchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls andprocedures were effective as of the end of the period covered by this report.Management's Annual Report on Internal Control Over Financial Reporting Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing andmaintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, asamended (the "Exchange Act"). Our internal control system is designed to provide reasonable assurance to our management and Board of Directorsregarding the preparation and fair presentation of published financial statements. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making its assessment ofinternal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission in Internal Control—Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2011, ourinternal control over financial reporting is effective. We do not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting inthis annual report. Our report was not subject to attestation by the Company's independent registered public accounting firm pursuant to the Dodd-FrankWall Street Reform and Consumer Protection Act signed into law on July 21, 2010 ("Dodd-Frank"). Dodd-Frank provides a permanent exemptionfrom the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 for those entities that are neither large accelerated filers nor acceleratedfilers. As a result, we were not required to have our independent registered public accounting firm attest to, and report on, internal controls overfinancial reporting.Changes in Internal Control Over Financial Reporting There have been no changes during the quarter ended December 31, 2011 in our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.Item 9B. Other Information None.128Table of ContentsPART III All information contained in Part III is included in this annual report and not incorporated by reference because we do not have any public equitythat requires us to file a definitive proxy statement.Item 10. Directors, Executive Officers and Corporate Governance The following table sets forth the names, ages and positions of the executive officers and directors of Holdings and other key employees ofLantheus, as of March 15, 2012. Holdings is our ultimate parent company, and the Board of Directors of Holdings is the primary board that takes actionwith respect to our business and strategic planning. Set forth below is a description of the business experience of the foregoing persons. Don Kiepert is our President and Chief Executive Officer, a position he has held since January 2008. He is also our Director and a Director ofHoldings, serving since January 2008. Previously, Mr. Kiepert was a consultant for Avista and Point Therapeutics Inc. (now known as DaraBioSciences Inc.) from July 2007 to January 2008, the founder and former Chairman, President and Chief Executive Officer of Point Therapeutics,from 1996 to July 2007, and the President and Chief Executive Officer of Chartwell Home Therapies from 1989 to 1996. Prior to 1989, he held variousmanagement positions at Baxter Travenol, Inc. He holds a Master of Science in Clinical Pharmacy and a Bachelor of Science in Pharmacy from PurdueUniversity. He previously served on the board of Point Therapeutics Inc. Mr. Kiepert was chosen to serve as a Director because of his extensiveexperience in the healthcare industry in senior and entrepreneurial positions. As our President and Chief Executive Officer and the only managementrepresentative on our Board of Directors, Mr. Kiepert has significant knowledge of our products and market, and provides valuable insight into a varietyof business issues and challenges we face. Jeffrey E. Young was promoted to the role of Chief Financial Officer effective January 3, 2012 to succeed Robert Gaffey. Mr. Young waspreviously our Vice President-Finance, Chief Accounting Officer and Assistant Treasurer in 2011. Prior to becoming a Vice President in 2011, heserved as our Global Controller and Assistant Treasurer since November 2008. Prior to joining us, Mr. Young held various positions at CriticalTherapeutics, Inc., a biopharmaceutical company, from 2005 to 2008, most recently as Chief Accounting Officer, Vice President of Finance andTreasurer. Mr. Young also held positions of increasing responsibility at PerkinElmer Inc. from 2003 to 2005 and at PricewaterhouseCoopers LLP from1998 to 2002. Mr. Young is a certified public accountant and holds a Bachelor of Science in Business Administration from Georgetown University.129Name Age PositionDonald R. Kiepert 63 Director, President and Chief Executive OfficerJeffrey E. Young 39 Chief Financial Officer and TreasurerPeter Card 62 Vice President, Strategy and Corporate DevelopmentWilliam Dawes 40 Vice President, Manufacturing and OperationsMichael Duffy 51 Vice President, General Counsel and SecretaryPhilip Lockwood 63 Vice President, Human ResourcesSimon Robinson 52 Vice President, Research and Pharmaceutical DevelopmentCyrille Villeneuve 60 Chief Commercial OfficerDana Washburn 50 Chief Medical OfficerLarry Pickering 69 Director and ChairmanDavid Burgstahler 43 DirectorPatrick O'Neill 62 DirectorSriram Venkataraman 39 DirectorTable of Contents Peter Card is our Vice President, Strategy and Corporate Development, a position he has held since January 2008. Prior to that, Mr. Card has heldmultiple positions with us in the past 24 years, including Vice President, U.S. Marketing and Business Development, and most recently, Vice President,Strategy and Business Development. Mr. Card holds a Ph.D. in Organic Chemistry from Ohio State University and completed additional post-doctoralwork at Harvard University. William Dawes is our Vice President, Manufacturing and Operations since November 2010. Mr. Dawes held the position of Vice President,Manufacturing & Supply Chain from January 2008 to November 2010. From 2005 to 2008, Mr. Dawes served as General Manager, Medical ImagingTechnical Operations, Interim General Manager, Medical Imaging Technical Operations, and Director, Engineering and Maintenance for BMSMI.Mr. Dawes began his career with DuPont Merck Pharmaceuticals. He holds a bachelor's degree in Engineering from Hofstra University. Michael Duffy is our Vice President, General Counsel and Secretary, a position he has held since January 2008. From 2002 to 2008, he served asSenior Vice President, General Counsel and Secretary of Point Therapeutics, Inc., a Boston-based biopharmaceutical company. Between 1999 and2001, Mr. Duffy served as Senior Vice President, General Counsel and Secretary of Digital Broadband Communications, Inc., a competitive localexchange carrier which filed for protection under Chapter 11 of the United States Bankruptcy Code in December 2000. After the filing, Mr. Duffyserved as the court-appointed liquidating trustee of the bankruptcy estate. From 1996 to 1999, Mr. Duffy served as Senior Vice President, GeneralCounsel and Secretary of ETC w/tci, a sub-portfolio of TCI Ventures, Inc./Liberty Media Corporation. Mr. Duffy began his legal career with the lawfirm Ropes & Gray and holds law degrees from the University of Pennsylvania and Oxford University and a bachelor's degree in History of Sciencefrom Harvard College. Philip Lockwood is our Vice President, Human Resources, a position he has held since February 2008. Prior to that, he served as Vice President,HR, for Indevus Pharmaceuticals, Inc. and from 2003 through 2007, he held a senior HR position at EMD Serono and its predecessor, Serono Inc.Mr. Lockwood holds a Bachelor of Arts from Siena College. Simon Robinson is our Vice President, Research and Pharmaceutical Development, a position he has held since February 2010. Dr. Robinson wasour Senior Director Discovery Research from 2008 to 2010 and our Director Discovery Biology and Veterinary Sciences from 2001 to 2008. Prior tojoining us, he held research positions at BMS, Sphinx Pharmaceuticals, BASF and Dupont Pharmaceuticals. He holds a Ph.D. and B.Sc. inPharmacology from the University of Leeds, England and did post-doctoral training at the University of Wisconsin Clinical Cancer Center. Cyrille Villeneuve was promoted to the role of Chief Commercial Officer in October 2011, responsible for global sales and marketing. PreviouslyMr. Villeneuve was our Vice President and General Manager, International, a position he held since November 2008. Prior to joining us in 1985,Mr. Villeneuve held positions at the Montreal Heart Institute and Hospital Hotel-Dieu Montreal. He holds a Bachelor of Arts from Montreal Universityand a Master of Public Administration from the Ecole Nationale Administration Publique. Dana Washburn was promoted to Chief Medical Officer in July 2011 and is responsible for Clinical Development, Medical Affairs and GlobalRegulatory Affairs. Previously he held the position of Vice President, Clinical Development & Medical Affairs, a position he has held since April 2010.From 2002 to 2010, Dr. Washburn held positions of increasing responsibility at Boston Scientific Corporation, most recently as Vice President, ClinicalTrials and Safety, Medical Safety Officer. A board-certified nuclear cardiologist, Dr. Washburn practiced medicine in both an academic and privatesetting prior to joining us. Dr. Washburn holds a Bachelor of Arts from Dartmouth College and a Doctor of Medicine from the University ofMassachusetts Medical School.130Table of Contents Larry Pickering is the Chairman of Holdings' and our Board of Directors, a position he has held since January 2008. During the period of January2008 through January 2010, Mr. Pickering also served as our Executive Chairman. He is also a founding Partner of Avista, a position he has held since2005. Previously, he served as Chairman of DLJMB Global Healthcare Partners. He began his career in healthcare with Johnson & Johnson where heserved as President of Ortho Dermatology, President of Janssen Pharmaceuticals and Chairman of Janssen North America, Company Group Chairman,Worldwide OTC, Chairman of Johnson & Johnson Development Corporation and a Corporate Officer. Mr. Pickering retired from Johnson & Johnsonin 2005, after serving 32 years. He holds a Bachelor of Business Administration from the University of Missouri. He currently serves as Director ofNavilyst Medical, Inc. and Chairman of OptiNose, Inc. He previously served on the boards of BioReliance Holdings, Inc., Accellent Inc.,BioPartners GmbH and Point Therapeutics Inc. (now known as Dara BioSciences Inc.). Mr. Pickering was chosen as Chairman of Holdings' and ourBoard of Directors because of his extensive experience in the pharmaceutical industry in senior positions. His prior leadership roles at pharmaceuticalcompanies provides him with key experience in the pharmaceutical industry and contributes to his ability to make strategic decisions with respect to ourbusiness. In addition, his prior role as our Executive Chairman enabled him to acquire personal knowledge of the day-to-day business issues we face,which provides valuable insight to our Board of Directors. David Burgstahler is a Director of Holdings and LMI and the Chairman of our Audit Committee and Compensation Committee, serving on ourBoard of Directors since January 2008. He is a founding partner of Avista since 2005 and since 2009, has been President of Avista. Prior to formingAvista, he was a partner of DLJMB. He was at DLJ Investment Banking from 1995 to 1997 and at DLJMB from 1997 through 2005. Prior to that, heworked at Andersen Consulting (now known as Accenture) and McDonnell Douglas (now known as Boeing). He holds a Bachelor of Science inAerospace Engineering from the University of Kansas and a Master of Business Administration from Harvard Business School. He currently serves asa Director of Armored AutoGroup Inc., ConvaTec Inc., INC Research Holdings, Inc., Navilyst Medical, Inc., Visant Corporation andWideOpenWest, LLC. He previously served as a Director of Warner Chilcott plc and BioReliance Holdings, Inc. Mr. Burgstahler was chosen as aDirector because of his strong finance and management background, with over 17 years in banking and private equity finance. He has extensiveexperience serving as a director for a diverse group of private and public companies. Dr. Patrick O'Neill is a Director of Holdings and LMI, serving on our Board of Directors since February 2008. He is also an industry advisor forAvista, a position he has held since 2008. Prior to joining Avista, he was at Johnson & Johnson from 1976 to 2006, holding Research andDevelopment and New Business Development leadership positions in Johnson & Johnson's pharmaceutical business, their Medical Devices andDiagnostics Group, and the surgical and interventional cardiology/radiology business units until he retired in February 2006. He served as Executive inResidence at New Enterprise Associates from March 2006 through 2007. He holds a Bachelor of Science in Pharmacy and Ph.D. in Pharmacologyfrom The Ohio State University. He currently serves as Director of Navilyst Medical, Inc. and OptiNose US Inc. Dr. O'Neill was chosen as a Directorbecause of his experience in the pharmaceutical industry. He has participated directly in the development of pharmaceutical products for othercompanies, which provides valuable insight into strategic business decisions. Sriram Venkataraman is a Director of Holdings, serving on the Board of Directors since November 2010. He is also a Partner of Avista, havingjoined in May 2007. Prior to joining Avista, Mr. Venkataraman was a Vice President in the Healthcare Investment Banking group at Credit SuisseGroup AG from 2001 to 2007. Previously, he worked at GE Healthcare (formerly known as GE Medical Systems) from 1996 to 1999.Mr. Venkataraman holds a Master of Science in Electrical Engineering from the University of Illinois, Urbana-Champaign and a Master of BusinessAdministration with Honors from The Wharton School. He currently serves as a Director of Navilyst Medical, Inc. and OptiNose US Inc.Mr. Venkataraman was chosen as a Director because of his131Table of Contentsexperience in the healthcare industry and his strong finance and management background. He also has experience serving as a director of privatecompanies.Board of Directors The Board of Directors of Holdings is responsible for the management of our business. The Board of Directors of Holdings is comprised of fivedirectors. Directors who are elected to an annual meeting of stockholders serve in their position until the next annual meeting and until their successorsare elected and qualified. Pursuant to the management and employee Shareholders Agreements described in "Item 13—Certain Relationships andRelated Transactions, and Director Independence—Transactions with Related Persons—Shareholders Agreement," Avista has designation rights withrespect to the composition of the Holdings board of directors and Avista is entitled to majority representation on any committee that the board creates.Messrs. Pickering, Kiepert, Burgstahler, O'Neill and Venkataraman were appointed pursuant to these agreements. Although not formally considered by the Board of Directors of Holdings because our securities are not registered or traded on any nationalsecurities exchange, we do not believe that any of our directors would be considered independent for either Board of Directors or Audit Committeepurposes based upon the listing standards of the New York Stock Exchange. We believe none of our directors would be considered independentbecause of their relationships with Avista, which, through certain entities, owns approximately 99.5% of Holdings' issued and outstanding capital stock,as described further under "Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—PrincipalStockholders," and other relationships with us, as described further under "Item 13—Certain Relationships and Related Transactions, and DirectorIndependence."Board Committees The Audit Committee of Holdings is composed of Messrs. Burgstahler and Venkataraman. In light of our status as a closely held company and theabsence of a public trading market for our common stock, the Board of Directors of Holdings has not designated any member of the Audit Committeeas an "audit committee financial expert." The Compensation Committee of Holdings is composed of Messrs. Burgstahler and Pickering. Additionally,because we are a closely-held company with no public trading market for our common stock, the Board of Directors has not deemed it appropriate forus to have a standing nominating committee or committee performing a similar function. Presently, all directors participate in the consideration ofdirectors nominees.Code of Ethics We have a code of conduct and ethics for all of our employees, including our principal executive, financial and accounting officers and ourcontroller, or persons performing similar functions, and each of the non-employee directors on our Board of Directors. Our Company Code of Conductis currently available on our website, www.lantheus.com. The information on our web site is not part of, and is not incorporated into, this annual report.We intend to provide any required disclosure of any amendment to or waiver from such code that applies to our principal executive officer, principalfinancial officer, principal accounting officer or controller, or persons performing similar functions, in a Current Report on Form 8-K filed with theCommission.Item 11. Executive Compensation Compensation Discussion and Analysis The Compensation Committee is generally charged with the oversight of our executive compensation program. The Compensation Committee iscomposed of Messrs. Burgstahler and132Table of ContentsPickering. Responsibilities of the Compensation Committee include the review and approval of the following items:•executive compensation strategy and philosophy; •compensation arrangements for executive management; •design and administration of the annual incentive plan; •design and administration of our equity incentive plans; •executive benefits; and •any other compensation or benefits related items deemed appropriate by the Compensation Committee. In addition, the Compensation Committee considers the proper alignment of executive pay with our values and strategy by overseeing executivecompensation policies, measuring and assessing corporate performance and taking into account our Chief Executive Officer's performance assessmentof our company. While the Compensation Committee has not historically used the services of independent compensation consultants, it may retain suchservices in the future to assist in the strategic review of programs and arrangements relating to executive compensation and performance. The following executive compensation discussion and analysis describes the principles underlying our executive compensation policies anddecisions including material elements of compensation for our named executive officers. Our named executive officers for 2011 were:•Donald Kiepert, President and Chief Executive Officer; •Robert Gaffey, (former Chief Financial Officer and Treasurer(1)); •William Dawes, Vice President, Manufacturing & Operations; •Michael Duffy, Vice President and General Counsel; •Dr. Dana Washburn, Chief Medical Officer As discussed in more detail below, the material elements and structure of our executive compensation program were negotiated and determined inconnection with the Acquisition.Compensation Philosophy and Objectives The core philosophy of our executive compensation program is to support our primary objective of providing innovative medical imaging solutionsto improve the treatment of human disease while enhancing our long-term value to our stockholders. Specifically, the Compensation Committee believes the most effective executive compensation program for all executives, including namedexecutive officers:•reinforces our strategic initiatives; •aligns the economic interests of our executives with those of our stockholders; and •encourages attraction and long-term retention of key contributors. (1)Effective January 3, 2012, Mr. Gaffey retired from LMI and was succeeded by Mr. Young in the role of Chief Financial Officer. Mr. Gaffey iscontinuing to provide consulting services to us on a limited basis.133Table of Contents The Compensation Committee considers the following factors when determining compensation for our executive officers, including our namedexecutive officers:•the requirements of any applicable employment agreements; •the executive's individual performance during the year; •his or her projected role and responsibilities for the coming year; •his or her actual and potential impact on the successful execution of our strategy; •recommendations from our President and Chief Executive Officer and any independent compensation consultants, if used; •an officer's prior compensation, experience, and professional status; •relative pay among the executive officers; and •employment market conditions and compensation practices within our peer group. The weighting of these and other relevant factors is determined on an individual basis for each executive upon consideration of the relevant factsand circumstances. The Compensation Committee is committed to a strong, positive link between our objectives and our compensation practices. Our compensationphilosophy also allows for flexibility in establishing executive compensation based on an evaluation of information prepared by management or otheradvisors and other objective and subjective considerations deemed appropriate by the Compensation Committee, subject to any contractual agreementswith our executives. This flexibility is important to ensure our compensation programs are competitive and that our compensation decisionsappropriately reflect the unique contributions and characteristics of our executive officers.Compensation Benchmarking The Compensation Committee ensures executives' pay levels are materially consistent with our compensation philosophy and objectives describedabove by conducting annual assessments of competitive executive compensation. We utilize data from publicly traded, similarly-sized pharmaceutical,biopharmaceutical and other life science companies as our primary source for competitive pay levels. However, the Compensation Committee does notsupport rigid adherence to benchmarks or compensatory formulas and strives to make compensation decisions which effectively support ourcompensation objectives and reflect the unique attributes of our company and each executive. For 2011 compensation for our executive officers, including our named executive officers, the Compensation Committee reviewed executivecompensation data provided by Radford Life Sciences Survey, a nationally recognized survey source. The Compensation Committee looked atcompensation data for life sciences companies with 500 or greater employees, the closest approximation to our size, and, to the extent possible,comparable position matches and compensation components. For 2011 compensation for our President and Chief Executive Officer, data were also collected from a review of the following industry peers: Abraxis Bioscience, Inc, Affymetrix Inc., Alexion Pharmaceuticals Inc., American Oriental Bioengineering Inc., Angiotech Pharmaceuticals Inc.,Biomarin Pharmaceutical Inc., Caraco Pharmaceutical Laboratories Ltd., Crucell, Cubist Pharmaceuticals Inc., Emergent Biosolutions Inc., HumanGenome Sciences Inc., Impax Laboratories Inc., Kendle International Inc., KV Pharmaceutical, Mannatech Inc., Martek Biosciences Corp., MDS Inc.,The Medicines Company, Medicis Pharmaceutical Corp., Myriad Genetics Inc., Onyx Pharmaceuticals Inc., Regeneron Pharmaceuticals Inc., SalixPharmaceuticals Ltd., Techne Corp., and United Therapeutics Corp. The134Table of Contentsdata used was from the most recent proxy available as of March 2011. This peer group had mean revenue of $327 million and headcount of 684. Thispeer group selection included 25 life science and specialty pharmaceutical companies. It was selected to best reflect similar sized companies in ourindustry with mature products, and full field sales operations.Employment Agreements In connection with the Acquisition, we entered into employment agreements with Messrs. Kiepert and Duffy. Our other named executive officersare not subject to employment agreements. Among other things, these agreements set the executives' compensation terms, their rights upon a termination of employment and restrictivecovenants relating to non-competition, non-solicitation, and confidentiality. See "—Potential Payments Upon Termination or Change of Control—Employment Agreements and Arrangements."Elements of Compensation Our compensation program is heavily weighted towards performance based compensation, reflecting our philosophy of increasing our long-termvalue and supporting strategic imperatives, as discussed above. Total compensation and other benefits consist of the following elements:•base salary; •annual non-equity incentive compensation; and •long-term equity incentives in the form of stock options. We do not offer a defined benefit pension plan. The Compensation Committee supports a competitive employee benefit package, but does notsupport executive perquisites or other supplemental programs targeted to executives.Base Salary Base salaries are intended to provide reasonable and competitive fixed compensation for regular job duties. In April of 2011, the CompensationCommittee approved merit salary actions for our named executive officers comparable with competitive market practice. The average increase awardedwas 3.1% of base salary. The Committee deterimined the amount of increase for Mr. Kiepert after a discussion of his 2010 performance and a review ofthe market data for his position. The Committee approved merit increases for Messrs. Gaffey, Dawes, Duffy and Dr. Washburn after a discussion ofthe 2010 performance assessements as submitted by Mr. Kiepert on each respective executive and after reviewing the relative benchmark data for eachposition. On July 22, 2011 the Committee approved a subsequent salary adjustment for Dr. Washburn in recognition of contributions in advancingFlurpiridaz F 18 and a re-evaluation of his total compensation packaging including his salary, incentive and stock option position. Our general practice with respect to cash compensation is that executive base salaries and annual cash incentive compensation values shouldgenerally position total annual cash compensation at or below market median of similarly-sized life science companies. See "—CompensationDiscussion and Analysis—Compensation Benchmarking." Cash compensation is generally below the median for those who were awarded larger optionawards and more competitively aligned for recent hires. The salaries of all of our named executive officers were in the lowest quartile relative to ourbenchmarks. As of December 31, 2011, the base salaries of Messrs. Kiepert, Gaffey, Dawes, Duffy and Dr. Washburn were $426,420, $267,800, $242,413,$281,139, and $364,458, respectively.135Table of ContentsAnnual Cash Incentive Compensation Our 2011 Executive Leadership Team Incentive Bonus Plan (the "Bonus Plan") is intended to reward executive officers, including our namedexecutive officers, for annual financial performance, performance of other corporate goals that may be long-term in nature and meeting or exceedingcertain short-term objectives. Cash incentive compensation under the Bonus Plan is subject to the achievement of a certain EBITDA target. EBITDA is defined in the BonusPlan as earnings before interest, taxes, depreciation and amortization. The Bonus Plan provides for adjustments to the EBITDA targets by theCompensation Committee for extraordinary and unforeseen events. The Compensation Committee chose to structure annual incentives on EBITDA for a number of reasons:•it effectively measures our overall performance; •it can be considered an important surrogate for cash flow, a critical metric related to servicing our outstanding debt; •it is a key metric driving our valuation, consistent with the valuation approach used by industry analysts; and •it is consistent with the metric used for the vesting of the financial performance portion of our option grants. These EBITDA targets should not be understood as management's predictions of future performance or other guidance, and investors should notapply these in any other context. EBITDA targets were linked to our short-term and long-term business objectives to ensure incentives are provided forappropriate performance. The Compensation Committee believes our cash incentive compensation structure is consistent with competitive practice. The potential bonus payouts under various scenarios in 2011 for our named executive officers were as follows: For Mr. Kiepert, pursuant to his employment agreement, payout of the target level bonus is tied to the achievement of the EBITDA target and othercorporate performance goals established by the Compensation Committee within the first three months of a given year. Pursuant to the Bonus Plan, forour other named executive officers with the exception of Dr. Washburn, payout of the target level bonus is tied to the achievement of the EBITDA targetand the achievement of certain department performance and individual performance goals. The achievement of the EBITDA target accounts for 50% ofthe total bonus award; while the achievement of department performance and individual performance goals accounts for 30% and 20%, respectively.Department performance goals are recommended and approved by our Chief Executive Officer at the start of each year. Achievement of individualperformance goals are assessed by our Chief Executive Officer at the end of each year. These targets were intended to provide a meaningful incentivefor executives to achieve or exceed performance goals.136Named Executive Officer Threshold Bonus(1)(as % of Base Salary) Target Bonus(as % of Base Salary) Above Target Bonus(as % of Base Salary) Don Kiepert 50% 100% 200%Robert Gaffey 15% 30% 60%William Dawes 15% 30% 60%Michael Duffy 15% 30% 60%Dana Washburn 15% 30% 60%(1)Assuming that named executive achieved his/her department and individual performance goals.Table of Contents If we did not meet the EBITDA target, but we met a level equal to at least 90% of the EBITDA target, then pursuant to the Bonus Plan, theCompensation Committee has discretion to award any percentage of the target bonus, calculated relative to the achievement of the named executiveofficer's performance goals, including department, individual and corporate performance goals. For example, if we did meet 90% of the EBITDA targetand the executive achieved his or her department and individual performance goals, the executive would receive a threshold bonus equal to 50% of hisor her bonus target. If we did not meet at least 90% of the EBITDA target, then no bonus is awarded. If our EBITDA is above the EBITDA target, the Bonus Plan specifies a formula that would create a pool, or the Bonus Pool, not to exceed$2.0 million for discretionary allocation among the participants of the Bonus Plan, including our named executive officers. The Bonus Pool amount isset at approximately 4.5% of our incremental EBITDA for such year in excess of the EBITDA target. The maximum potential payout from the BonusPool for each participant, including our named executive officers, is 100% of their respective target bonus amount. As such, total maximum bonusawarded for above EBITDA target achievement would be double the target bonus amount of each participant, including our named executive officers. As Dr. Washburn joined us more recently (2010), his equity position is considerably lower than the other named executives and his role in 2011was highly focused on critical development activities. As a result, the Compensation Committee structured an incentive for him with 100% weighting onachieving his department goals, without regard to the EBITDA target. Our EBITDA target relative to the Bonus Plan for the fiscal year ended December 31, 2011 was established at $115 million. In the fiscal yearended December 31, 2011, our EBITDA was approximately $80.1 million. For Mr. Kiepert in 2011, performance goals included, in addition to ourEBITDA goal: revenue goals for select products; executing a collaboration/licensing agreement for flupiridaz F 18, achieving and maintaining globalregulatory and financial compliance, expanding DEFINITY opportunities including filing a sNDA and licensing agreements for China and Luminitydistribution in Europe, achieving technology transfer milestones to expand supply chain sourcing, completing our long-term strategic operating plan,and certain organizational objectives regarding employee engagement and retention. For Mr. Gaffey, performance goals included successfully completing the 2010 audit, supporting the 2011 New Notes offering, ensuring timelyquarterly filings, meeting all debt requirements, leading the capital restructuring, increasing the efficiency and effectiveness of the Treasury and Taxfunctions, improving cash flow reporting, optimizing the financial close performance, enhancing organizational capabilities, managing risk, becomingfully SOX compliant, meeting cost efficiency and client support objectives for the Information Technology function and driving overall expense controland contingency planning. For Mr. Dawes, performance goals included compliance and operational objectives including no new regulatory agency observations forManufacturing and Operations, achieving productivity and costs saving in capital expenses and third party arrangements, diversifying the supply chainfor "cold" products, initiating technology transfer activities with a new contract manufacturing partner, developing a commercial supply chain model forflurpiridaz F 18, minimizing Mo-99 supply disruption and addressing certain organizational objectives regarding communication and technical training. For Mr. Duffy, performance goals included successfully managing 2011 financing transactions, negotiating, documenting and closing, ifappropriate, one or more partnering transactions for flurpiridiaz F 18, managing Zurich litigation to obtain optimal results, advising on agreements andbusiness arrangements for supply chain, commercial, clinical and employee matters, supervising Securities and Exchange Commission reporting andcompliance and effectively managing the internal and external legal function.137Table of Contents For Dr. Washburn, performance goals included obtaining FDA approval for our Phase 3 clinical program for Flupiridaz F 18 and achieving initialPhase 3 milestones, filing a sNDA for DEFINITY, advancing development of our cardiac neuronal imaging agent, enrolling first patient in ABLAVARphase 4 trial, driving clinical quality improvements, meeting clinical field support metrics, implementing product safety risk management programs andaddressing certain organizational objectives regarding leadership development and recognition. While the Compensation Committee reviewed each executive's performance relative to the non-EBITDA goals set forth above and recognizedsignificant achievements and attainment of most individual objectives, the Compensation Committee concluded that no bonuses should be paid toMessrs. Kiepert, Gaffey, Dawes and Duffy because we did not meet our EBITDA target. Dr. Washburn achieved 99% of his individual objectives on aweighted basis and was awarded an incentive payment under his individual arrangement as reported in the 2011 Grant of Plan-Based Awards table.Long-Term Equity Incentive Awards In connection with the Acquisition, the Board of Directors approved and adopted the Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan, orthe 2008 Equity Plan, which allows grants of equity awards and options for shares of Holdings. The purpose of the 2008 Equity Plan is to:•promote our long-term financial interests and growth by attracting and retaining management and other personnel and key serviceproviders with the training, experience and abilities to enable them to make substantial contributions to the success of our business; •motivate management personnel by means of growth-related incentives to achieve long range goals; and •further the alignment of interests of participants with those of our stockholders through opportunities for increased stock or stock-basedownership in us. Although we look at competitive long-term equity incentive award values when assessing our compensation programs, as described above under "—Compensation Discussion and Analysis—Compensation Benchmarking," we do not make annual executive option grants because, following theAcquisition, we issued large upfront stock option grants that vest over time and with the achievement of certain performance goals in lieu of annualgrants. The Compensation Committee believes these stock option grants establish performance objectives and incentives and help align our executives'interests with the interests of the stockholders in fostering long-term value. They also motivate sustained increases in our financial performance and helpensure that the investors have received an appropriate return on their invested capital before executive officers receive significant value from theseoptions. In 2008, the Compensation Committee approved grants of options to Messrs. Kiepert, Gaffey, Dawes and Duffy under the 2008 Equity Plan. Theterms of these grants were consistent with the grants granted after the Acquisition. During 2011, the Committee approved a supplemental grant ofoptions to Dr. Washburn. The options have an exercise price equivalent to fair market value on the date of grant. Since our common stock is not currently traded on a nationalsecurities exchange, fair market value is determined reasonably and in good faith by the Board of Directors. These options have a ten-year term and are generally issued either as time based options, or the Time Vesting Options or EBITDA-basedperformance options, or the Performance Vesting Options. The combination of time and performance based vesting of these awards is designed tocompensate our executive officers, including our named executive officers, for their long-term commitment to us. They are also designed to motivatesustained increases in our financial performance and help ensure that the138Table of Contentsinvestors have received an appropriate return on their invested capital before executive officers receive significant value from these options. EBITDA is defined in the award agreements as the sum of net income (or loss) of the business or entity for such period; plus interest expense,income taxes, depreciation expenses, amortization expenses, all fees paid by us or any of our subsidiaries pursuant to the Advisory ServicesAgreements with Avista, dated as of January 8, 2008, non-recurring expenses for executive severance, relocation, recruiting and one-timecompensation, the aggregate amount of all other non-cash charges reducing net income including stock-based compensation expense, retention bonusespaid in fiscal year 2008; all extraordinary losses; less all extraordinary gains in each case determined in accordance with GAAP. The Time Vesting Options are granted to aid in retention. Consistent with this goal, the Time Vesting Options granted to Messrs. Kiepert, Gaffey,Dawes and Duffy in 2008 and to Dr. Washburn in 2010 and 2011, vest ratably on the grant date over the following five years. The Performance Vesting Options are intended to motivate financial performance in line with investors' outlook for performance during our firstfive years. We chose EBITDA as the performance metric since it is a key driver of our valuation and for the reasons described above in "Annual CashIncentive Compensation." The Performance Vesting Options granted to Messrs. Kiepert, Gaffey, Dawes and Duffy and to Dr. Washburn in 2010 and2011, are eligible to vest ratably in five equal installments if certain annual EBITDA targets are achieved. The EBITDA targets were established at thetime of the Acquisition and can be adjusted by the Board of Directors in consultation with our Chief Executive Officer as described below. Due to the number of events that can occur within our industry in any given year that are beyond the control of management but may significantlyimpact EBITDA and our financial performance, such as significant fluctuations in the cost of raw materials and unit sales volume, and regulatory andreimbursement changes, we have incorporated certain vesting provisions into each stock option grant agreement that allow such Performance VestingOptions to vest later than the date specified. Performance Vesting Options that were eligible to vest but failed to vest due to our failure to achieve anEBITDA target in any given year may vest if we exceed the annual EBITDA target in a subsequent year. Consistent with the EBITDA targets under the Bonus Plan, pursuant to the terms of the 2008 Equity Plan and the individual Stock OptionAgreements governing each option grant, the Board of Directors, in consultation with our Chief Executive Officer, has the ability to adjust the EBITDAtargets for significant events, changes in accounting rules and other customary adjustment events. We believe these adjustments may be necessary inorder to effectuate the intents and purposes of our compensation plans and to avoid unintended consequences that are inconsistent with these intents andpurposes. If our EBITDA is below the EBITDA target but is equal to at least 90% of the EBITDA target, then a percentage of the Performance VestingOptions vests in that year, calculated as follows: Our EBITDA target relative to performance vesting of options in 2011 was $127.4 million. In the fiscal year ended December 31, 2011, our actualEBITDA was approximately $80.1 million. As a result, none of the Performance Vesting Options vested in 2011 out of a possible 20%. We set our future EBITDA targets to reflect our initial outlook for annual EBITDA which progressively increased as we approached the expectedlaunch dates of pipeline products. Thus, while139(10% of possiblevested PerformanceVesting Options) × (Incremental EBITDA over90% of EBITDA target)(EBITDA target—90% ofEBITDA target) + (90% of possiblevested PerformanceVesting Options)Table of Contentsdesigned to be attainable, EBITDA targets for these years would require strong performance with our existing and acquired marketed products, as wellas the execution of our clinical pipeline program and cost control. For additional information concerning the options awarded in 2009, 2010 and 2011, see "—2011 Grants of Plan-Based Awards" and "—Outstanding Equity Awards at 2011 Fiscal Year-End."Dividend Equivalent Rights (DERs) In March of 2011, we successfully completed a capital restructuring with an additional offering of New Restricted Notes and the repurchase of alloutstanding Series A Preferred Stock. The Board of Directors declared a dividend of approximately $1.93 per common share, substantially similar toeach shareholders' initial investment. Given the potential impact of this capital restructuring on the underlying share value of stock options, the Board ofDirectors also awarded a dividend equivalent right (DER) on all outstanding stock options. All option holders, including certain of our named executiveofficers, were paid a cash dividend of approximately $1.93 for each vested option. The values of the DER cash payments paid in 2011 forMessrs Kiepert, Gaffey, Dawes, and Duffy were $1,190,844, $332,904, $309,125 and $237,788, respectively. Dr. Washburn did not have vestedoptions at the time that the DERs were awarded. DERs on all unvested options as of March 21, 2011 were placed in escrow at Holdings, are subject toforfeiture and will vest only if the corresponding stock options vest in the future. The values of the DERs held in escrow as of December 31, 2011 forMessrs Kiepert, Gaffey, Dawes, Duffy and Dr. Washburn were $1,224,661, $342,357, $317,903, $244,541 and $241,165, respectively.Other BenefitsRetirement Plans We offer a 401(k) qualified defined contribution retirement plan for U.S.-based employees, including named executive officers, with a 4.5%company match of the contributor's base salary.Personal Benefits Except as otherwise discussed herein, other welfare and employee-benefit programs are the same for all of our eligible employees, including ournamed executive officers. Our other named executive officers do not receive additional benefits outside of those offered to our other employees.Ownership Guidelines In the event of exercise of an option grant, the resulting shares are subject to the provisions of the Employee Shareholder Agreement whichrestricts transfer and voting rights to ensure alignment with the initial investors. For example, Employee Shareholders (as defined in the EmployeeShareholder Agreement) are restricted from transferring any of our securities, subject to certain exceptions outlined in the Employee ShareholderAgreement. We do not maintain formal ownership guidelines.Severance and Change in Control Benefits As noted above, Messrs. Kiepert and Duffy have entered into employment agreements which detail, among other things, each executive's rightsupon a termination of employment in exchange for non-competition, non-solicitation and confidentiality covenants. See "—Potential Payment UponTermination or Change in Control." Messrs. Gaffey and Dawes and Dr. Washburn were covered under Lantheus' Severance Plan or the terms of their employment offer for sixmonths for salary continuation if involuntarily terminated by us other than for cause. Mr. Gaffey elected to retire as of January 3, 2012 with noseverance. However,140Table of Contentsthe options granted to Mr. Gaffey under the 2008 Equity Plan will continue to vest for so long as he continues to serve as a consultant of ours in goodstanding through the vesting period. We believe that reasonable severance benefits are appropriate in order to be competitive in our executive retention efforts. These benefits reflect thefact that it may be difficult for such executives to find comparable employment within a short period of time. We also believe formalized severancearrangements are at times a competitive requirement to attract the required talent for the role.Recoupment of Compensation Information regarding our policy with respect to the recovery of incentive compensation is provided under "—Compensation Discussion andAnalysis—Elements of Compensation—Annual Cash Incentive Compensation."Tax and Accounting Implications We were not subject to Section 162(m) of the Internal Revenue Code, as amended in 2011. For 2012 and beyond, the Compensation Committeewill consider the impact of Section 162(m) in the design of its compensation strategies. Under Section 162(m), compensation paid to executive officersin excess of $1,000,000 cannot be taken by us as a tax deduction unless the compensation qualifies as performance-based compensation. We havedetermined, however, that we will not necessarily seek to limit executive compensation to amounts deductible under Section 162(m) if such limitation isnot in the best interests of our stockholders. While considering the tax implications of its compensation decisions, the Compensation Committee believesits primary focus should be to attract, retain and motivate executives and to align the executives' interests with those of our stockholders. The Compensation Committee operates its compensation programs with the good faith intention of complying with Section 409A of the InternalRevenue Code. We account for stock based payments with respect to our long-term equity incentive award programs in accordance with therequirements of ASC 718.Compensation Risk Assessment In consultation with the Compensation Committee, members of Human Resources, Legal and Finance groups conducted an annual assessment ofwhether our compensation policies and practices encourage excessive or inappropriate risk taking by our employees, including employees other than ournamed executive officers. This assessment included a review of the risk characteristics of our business and the design of our incentive plans andpolicies. Although a significant portion of our executive compensation program is performance-based, the Compensation Committee has focused onaligning our compensation policies with our long-term interests and avoiding rewards or incentive structures that could create unnecessary risks to us. Management reported its findings to the Compensation Committee, which agreed with management's assessment that our plans and policies do notencourage excessive or inappropriate risk taking and determined such policies or practices are not reasonably likely to have a material adverse effect onus.141Table of ContentsSummary Compensation Table The following table sets forth certain information with respect to compensation for the years ended December 31, 2011, 2010 and 2009 earned byor paid to our named executive officers.Name and Principal Position Year Salary($) Bonus($)(1) OptionAwards($)(2)(3) Non-EquityIncentive PlanCompensation($)(4) All OtherCompensation($)(5)(6) Total($) Donald Kiepert 2011 $422,538 — — — $1,206,074 $1,628,612 President and ChiefExecutive 2010 $401,308 — — — $15,049 $416,357 Officer 2009 $400,000 $50,000 — $200,000 $12,346 $662,346 Robert Gaffey 2011 $265,700 — — — $343,934 $609,634 Former VP, ChiefFinancial 2010 $252,692 — — — $11,039 $263,731 Officer 2009 $250,000 $37,500 — $37,500 $9,361 $334,361 William Dawes 2011 $240,821 — — — $319,543 $560,364 Vice President, Mfgand 2010 $226,990 — — — $10,215 $237,205 Operations 2009 $215,000 $47,750 — $32,250 $14,141 $309,141 Michael Duffy 2011 $278,934 — — — $249,854 $528,788 Vice President,General 2010 $265,866 — — — $11,964 $277,830 Counsel & Secretary 2009 $265,000 $15,250 — $39,750 $11,466 $331,466 Dana Washburn, M.D. 2011 $332,292 — $100,250 $108,244 $14,323 $555,109 Chief Medical Officer 2010 $211,149 — $443,000 — $1,793 $655,942 2009 — — — — — — (1)The amounts reflect the cash incentive compensation awarded above the threshold bonus target by the Compensation Committee.See "—Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Compensation." (2)Dr. Washburn received an initial stock option grant in conjunction with his employment offer in 2010. On January 5, 2011,Mr. Washburn was granted a supplemental grant of stock options in recognition of his first year contributions and to increase hisalignment with shareholder's interests. (3)Includes the grant date fair value of the stock option awards granted during the fiscal years ended December 31, 2011, 2010 and2009, in accordance with ASC 718 with respect to options to purchase shares of our common stock awarded to the namedexecutive officers in 2011, 2010 and 2009 under our 2008 Equity Plan. See "Item 7—Management's Discussion and Analysis ofFinancial Condition and Results of Operations—Critical Accounting Policies—Accounting for Stock-Based Compensation." (4)For 2011, Messrs. Kiepert, Gaffey, Dawes and Duffy did not earn bonuses under the Bonus Plan. Dr. Washburn earned anincentive payment under the Bonus Plan based on achievement his department goals. For 2010, no bonuses were earned underthe Bonus Plan. For 2009, the amounts reflect the cash incentive compensation earned for the year ended December 31, 2009under the 2009 Executive Leadership Team Incentive Bonus Plan, which were paid in the first quarter of 2010. (5)Effective March 21, 2011, the Board of Directors declared a dividend of approximately $1.93 per common share and awarded adividend equivalent right on all outstanding stock options. All option holders, including our named executive officers, were paida cash dividend of approximately $1.93 for each vested option. DERs on all unvested options as of March 21, 2011 were placedin escrow, are subject to forfeiture and will only vest if the corresponding stock options vest in the142Table of Contents2011 Grants of Plan-Based Awards The following table sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 2011 with respectto the named executive officers.143future. Dr. Washburn did not have vested options at the time of that the DER was awarded. Included in the All OtherCompensation column above is the value of DERs of Time-Vesting Options (and the value of DERs associated withPerformance Vesting Options. These values for Messrs Kiepert, Gaffey, Dawes, and Duffy were $ 1,190,844, $332,904,$309,125, $237,788.(6)For Messrs. Kiepert, Gaffey, Dawes and Duffy and Dr. Washburn, the amounts reflect matching contributions to our definedcontribution retirement plans in 2011 of $15,230, $11,030, $10,418, $12,066 and $14,323, respectively. For Messrs. Kiepert,Gaffey, Dawes and Duffy and Dr. Washburn, the amounts reflect matching contributions to our defined contribution retirementplans in 2010 of $15,049, $11,039, $10,215 and $11,964 and $1,793, respectively. For Messrs. Kiepert, Gaffey, Dawes andDuffy, the amounts reflect matching contributions to our defined contribution retirement plans in 2009 of $12,346, $9,361,$14,141, and $11,466, respectively. All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions(#) Estimated Future PayoutsUnder Non-Equity IncentivePlan Awards Estimated Future PayoutsUnder Equity IncentivePlan Awards Exerciseor BasePrice ofOptionAwards($/Sh) Name GrantDate Threshold($)(1) Target($)(2) Maximum($)(3) Threshold(#) Target(#) Maximum(#) DonaldKiepert — $213,210 $426,420 $852,840 — — — — — RobertGaffey — $40,170 $80,340 $160,680 — — — — — WilliamDawes — $36,362 $72,724 $145,448 — — — — — MichaelDuffy — $42,171 $84,342 $168,684 — — — — — DanaWashburnM.D.(4) — $54,669 $109,337 $218,675 — — — — — 01/05/11 2,500 12,500 12,500 12,500 $10.26 (1)The amounts shown in the "Threshold" column reflect the threshold payment, which is 50% of the amount shown in the "Target" column. See "—Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Compensation." (2)The amount show in the "Target" column is the potential cash incentive award given to our named executive officers if the EBITDA target is hit in 2011. ForMr. Kiepert that amount is 100% of his respective 2011 base salary. For Messrs. Gaffey, Dawes and Duffy and Dr. Washburn, that amount is 30% of theirrespective 2011 base salaries. See "—Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Compensation." (3)The amount shown in the "Maximum" column is 200% of the amount shown in the "Target" column. Pursuant to the Bonus Plan, if we achieve an EBITDAthat is greater than the EBITDA target, the Bonus Plan specified a formula that would create a pool not to exceed $2.0 million in the aggregate for discretionaryallocation among the eligible participants of the Bonus Plan. The maximum payment from the Bonus Pool for Mr. Kiepert is 200% of his base salary. Themaximum for all other participants, including our other named executive officers, is 60% of their respective base salaries. See "—Compensation Discussion andAnalysis—Elements of Compensation—Annual Cash Incentive Compensation." (4)Dr. Washburn was granted a supplemental grant of 25,000 stock options with a ten-year term in recognition of his first year contribution and to increase hisalignment with shareholders' interest. 12,500 of these options are Time Vesting Options and 12,500 are Performance Vesting Options. See "—CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Awards."Table of ContentsOutstanding Equity Awards at 2011 Fiscal Year-End The following table includes certain information with respect to options held by the named executive officers as of December 31, 2011.144 Option Awards Name Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable Equity IncentivePlan Awards:Securities ofUnderlyingUnexercisedUnearnedOptions (#) OptionExercisePrice ($) OptionExpirationDate Don Kiepert: Stock Options(1) 617,236 250,400 384,364 $2.00 2/24/18 Robert Gaffey: Stock Options(1)(4) 172,550 70,000 107,450 $2.00 4/3/18 William Dawes: Stock Options(1) 160,225 65,000 99,775 $2.00 4/3/18 Michael Duffy: Stock Options(1) 123,250 50,000 76,750 $2.00 4/3/18 Dana Washburn M.D: Stock Options(2) 10,000 40,000 50,000 $10.26 4/11/20 Stock Options(3) — 12,500 12,500 $10.26 1/4/21 (1)60% of the Time Vesting Options were vested as of December 31, 2011 having 20% in each of January 2009, 2010 and 2011.Upon the Compensation Committee's determination that we achieved the EBITDA performance targets, 20% of the PerformanceVesting Options vested on April 16, 2009 and 18.6% vested in April 2010. The remaining shares subject to the Time VestingOptions will vest ratably over the next two years and will vest in full in January 2013. We did not meet our EBITDA targets in2010 or 2011, and as such, none of the Performance Vesting Options vested for those years. Assuming the EBITDA targets aremet in each applicable fiscal year, the remaining shares subject to the Performance Vesting Options will vest ratably over the nexttwo years. (2)20% of the Time Vesting Options vested on April 11, 2011. The remaining shares subject to the Time Vesting Options will vestratably over the next four years and will vest in full as of April 11, 2015 for Dr. Washburn. The first 20% tranche ofperformance did not vest on schedule as the EBITDA target for 2010 was not attained. Assuming the EBITDA targets are met ineach applicable fiscal year, the remaining shares subject to the Performance Vesting Options will vest ratably over the next fouryears. (3)The shares subject to the Time Vesting Options will vest ratably over the next five years and will vest in full as of January 5,2016 for Dr. Washburn. Assuming the EBITDA targets are met in each applicable fiscal year, the remaining shares subject to thePerformance Vesting Options will vest ratably over the next five years. (4)Mr. Gaffey's option awards were amended as part of his retirement agreement with the Company effective January 3, 2012.Under the terms of the agreement, Mr. Gaffey's existing stock options were modified to allow for continued vesting andexercisability of his existing options for up to the full original term, or until 2018.Table of ContentsOption Exercises and Stock Vested in 2011 The named executive officers did not exercise any options during 2011. We do not offer any stock awards, other than stock options, from whichvesting would occur.2011 Pension Benefits We do not offer our executives or others a pension plan. Retirement benefits are limited to participation in our 401(k) plan with a 4.5% employermatch of the contributor's salary and a corresponding international plan.Potential Payment Upon Termination or Change in Control The information below describes and quantifies certain compensation that would become payable under certain named executive officer'semployment agreements if, as of December 31, 2011, his employment had terminated or there was a change in control. Due to the number of factors thataffect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factorsthat could affect these amounts include the timing during the year of any such event.Employment Agreements and Arrangements The only named executive officers for which we have employment agreements are Messrs. Kiepert and Duffy. We have also included below thedetails of Mr. Gaffey's retirement agreement with us which became effective January 3, 2012 and the details of Mr. Young's current compensation ournew Chief Financial Officer effective January 3, 2012.Don Kiepert On January 8, 2008, we entered into an employment agreement with Don Kiepert, our President and Chief Executive Officer. Pursuant to hisemployment agreement, Mr. Kiepert currently receives $426,420 in annual base salary, subject to any increases in base salary as may be determinedfrom time to time in the sole discretion of our Board of Directors. In addition, the employment agreement allows Mr. Kiepert to be eligible to receive anannual bonus award of up to 100% of his base salary based upon the achievement of certain performance targets. Mr. Kiepert is also eligible toparticipate in our health, life and disability insurance, and retirement and fringe employee benefit plans on the same basis as those benefits are generallymade available to our other executives. If we terminate Mr. Kiepert with cause or Mr. Kiepert resigns without good reason, then he is entitled to receive his base salary through the date oftermination and reimbursement for any unreimbursed business expenses properly incurred by Mr. Kiepert prior to his termination or resignation,provided that these claims are submitted within 30 days of termination. In the event of Mr. Kiepert's resignation without good reason, he is also entitledto such vested or accrued employee benefits as to which he is entitled under our employee benefit plans ($15,581 for accrued vacation as ofDecember 31, 2011). If Mr. Kiepert's employment terminates as a result of his death or if we terminate Mr. Kiepert due to his physical or mental illness, injury orinfirmity which is reasonably likely to prevent or prevents him from performing his essential job functions for 90 consecutive calendar days or anaggregate of 120 calendar days out of any consecutive twelve month period, then Mr. Kiepert or his estate is entitled to receive: (a) his base salarythrough the date of termination; (b) reimbursement for any unreimbursed business expenses properly incurred; (c) any vested or accrued employeebenefits as to which he is entitled under our employee benefit plans ($15,581 for accrued vacation as of December 31, 2011); and (d) a pro rata portionof his target annual bonus amount in the year he was terminated (up to $426,420 for bonus), based upon the percentage of the fiscal year that haselapsed through the date of his145Table of Contentstermination, contingent upon an effective release of claims against us and payable at such time as the annual bonus would have otherwise been payablehad he not been terminated. If we terminate Mr. Kiepert without cause or Mr. Kiepert resigns with good reason, then he is entitled to receive: (a) his base salary through thedate of termination; (b) reimbursement for any unreimbursed business expenses properly incurred; (c) any vested or accrued employee benefits as towhich he is entitled under our employee benefit plans; (d) a pro rata portion of his target annual bonus amount in the year he was terminated, basedupon the percentage of the fiscal year that has elapsed through the date of his termination, contingent upon an effective release of claims against us andpayable at such time as the annual bonus would have otherwise been payable had he not been terminated; (e) subject to Mr. Kiepert's continuedcompliance with the non-competition and confidentiality clauses within his employment agreement and his effective release of claims against us,continued payment of his base salary in accordance with our normal payroll practices for twelve months after the date of termination, provided that anysuch payment is reduced by the present value of any other cash severance or termination benefits payable to Mr. Kiepert under any other plans,arrangements or programs; and (f) for twelve months after the date of termination, continued life insurance and group medical coverage for Mr. Kiepertand his eligible dependents upon the same terms as provided to our other senior executive officers and at the same coverage levels, provided that suchcoverage shall cease upon Mr. Kiepert becoming employed by another employer and eligible for life insurance and/or medical coverage with such otheremployer. If we terminated Mr. Kiepert without cause or Mr. Kiepert resigned with good reason on December 31, 2011, he would have been entitled toreceive an aggregate of $889,433 ($426,420 for salary, $426,420 for bonus, $21,013 for benefits and $15,581 for accrued vacation), payable asdescribed above, plus any accrued and unpaid base salary and bonus and unreimbursed business expenses.Robert Gaffey On January 3, 2012, we entered into a retirement agreement with Mr. Gaffey in conjunction with his retirement. Mr. Gaffey had providedLantheus and its predecessors with 37 years of service. Under the terms of the agreement, Mr. Gaffey is continuing to provide limited consultingservices at a rate of $200 per hour for up to 24 hours per week through March 30, 2012. After March 31, 2012, Mr. Gaffey will paid at an hourly rate$150 per hour on an independent consultant basis as required by us. Mr. Gaffey's existing stock options were modified to allow for continued vesting,continued eligibility for payment of DERs and exercisability of his existing options for up to the full original term in 2018. Mr. Gaffey is not eligible forany company benefits or other severance payments. Mr. Gaffey had not previously entered into an employment agreement with us.Michael Duffy On March 10, 2008, we entered into an employment agreement with Michael Duffy, our Vice President, General Counsel and Secretary. Pursuantto his employment agreement, Mr. Duffy currently receives $281,139 in annual base salary (an increase of $16,139 from the base salary originally setforth in his employment agreement), subject to any increases in base salary as may be determined from time to time in the sole discretion of ourCompensation Committee. In addition, the employment agreement allows Mr. Duffy to be eligible to receive an annual bonus award of up to 30% of hisbase salary based upon the achievement of certain performance targets. Mr. Duffy is also eligible to participate in our health, life and disabilityinsurance, and retirement and fringe employee benefit plans on the same basis as those benefits are generally made available to our other executives. If we terminate Mr. Duffy with cause or Mr. Duffy resigns for any reason, then he is entitled to receive his base salary through the date oftermination and reimbursement for any unreimbursed business expenses properly incurred by Mr. Duffy prior to his termination or resignation,provided that these claims are submitted within 30 days of termination. In the event of Mr. Duffy's resignation for146Table of Contentsany reason, he is also entitled to such vested or accrued employee benefits as to which he is entitled under our employee benefit plans ($1,081 foraccrued vacation as of December 31, 2011). If Mr. Duffy's employment terminates as a result of his death or if we terminate Mr. Duffy due to his physical or mental illness, injury or infirmitywhich is reasonably like to prevent or prevents him from performing his essential job functions for 90 consecutive calendar days or an aggregate of 120calendar days out of any consecutive twelve month period, then Mr. Duffy or his estate is entitled to receive: (a) his base salary through the date oftermination; (b) reimbursement for any unreimbursed business expenses properly incurred, provided that these claims are submitted within 30 days oftermination; and (c) any vested or accrued employee benefits as to which he is entitled under our employee benefit plans ($1,081 for accrued vacation asof December 31, 2011). If we terminate Mr. Duffy without cause, then he is entitled to receive: (a) his base salary through the date of termination; (b) reimbursement forany unreimbursed business expenses properly incurred, provided that these claims are submitted within 30 days of termination; (c) any vested oraccrued employee benefits as to which he is entitled under our employee benefit plans; (d) a pro rata portion of his target annual bonus amount in theyear he was terminated, based upon the percentage of the fiscal year that has elapsed through the date of his termination, contingent upon an effectiverelease of claims against us and payable at such time as the annual bonus would have otherwise been payable had he not been terminated; (e) subject toMr. Duffy's continued compliance with the non-competition and confidentiality clauses within his employment agreement and his effective release ofclaims against us, continued payment of his base salary in accordance with our normal payroll practices for twelve months after the date of termination,provided that any such payment is reduced by the present value of any other cash severance or termination benefits payable to Mr. Duffy under anyother plans, arrangements or programs; and (f) subject to Mr. Duffy's continued compliance with the non-competition and confidentiality clauses withinhis employment agreement and his effective release of claims against us, for twelve months after the date of termination, continued life insurance andgroup medical coverage for Mr. Duffy and his eligible dependents upon the same terms as provided to our other senior executive officers and at thesame coverage levels, provided that such coverage shall cease upon Mr. Duffy becoming employed by another employer and eligible for life insuranceand/or medical coverage with such other employer. If we terminated Mr. Duffy without cause or Mr. Duffy resigned with good reason on December 31, 2011, he would have been entitled to receivean aggregate of $376,159 ($281,139 for salary, $84,342 for bonus, $9,597 for benefits and $1,081 for accrued vacation), payable as described above,plus any accrued and unpaid base salary and bonus and unreimbursed business expenses.Jeffrey Young On January 3, 2012, Mr. Young was promoted to the position of Chief Financial Officer and Treasurer to succeed Mr. Gaffey who retired.Mr. Young is paid an annualized salary of $264,000 and is eligible for annual bonus award of up to 30% of his base salary based upon the achievementof certain performance targets. Mr. Young is eligible to participate in our health, life and disability insurance, and retirement and fringe employee benefitplans on the same basis as those benefits are generally made available to our other executives. Mr. Young has received four grants of stock optionsduring his employment with Lantheus in aggregate 100,000 stock options of which 50% are Time Vesting Options and 50% are Performance VestingOptions. Mr. Young is not covered by a formal employment contract, but would be eligible for six months salary continuance if terminated by us otherthan for cause.2008 Equity Plan and Unvested Dividend Equivalent Rights (DERs) The 2008 Equity Plan and each individual Stock Option Agreement provides for accelerated vesting of both Time Vesting Options andPerformance Vesting Options granted under the 2008 Equity147Table of ContentsPlan upon a change of control if net cumulative cash proceeds received by our investors exceed certain multiples of their initial investment. If such achange in control occurred on December 31, 2011, each named executive officer's unvested Time Vesting Options and Performance Vesting Optionswould immediately vest and become exercisable. The aggregate dollar value of unvested stock options held by such named executive officer onDecember 31, 2011 as listed below. The value of any unvested dividend equivalent rights held in escrow associated with those options at the time of theoption vesting acceleration would also be distributed as listed below:Director Compensation The compensation paid to Mr. Kiepert, our President & CEO and Director, is reported in the Summary Plan Compensation Table as he was paidonly as named executive officer. We do not compensate our board members with per meeting fees. Our directors are reimbursed for any expensesincurred in connection with their services and as detailed in the table and notes below.148Name Aggregate DollarValue of Options(1) DER Value Don Kiepert $4,532,215 $1,224,661 Robert Gaffey $1,266,993 $342,357 William Dawes $1,176,494 $317,903 Michael Duffy $904,995 $244,541 Dana Washburn(2) $0 $241,165 (1)The aggregate dollar value is the difference between the fair market value of shares of common stock on December 31,2011 based upon an internal valuation model and the per share exercise price of each option, multiplied by the number ofshares subject to the unvested option. (2)All of Dr. Washburn's options as of December 31, 2011 had a fair value less than their exercise price.Name Fees Earned orPaid in Cash($) All OtherCompensation($) Total($) Larry Pickering(1) $200,000 $1,052,600 $1,252,600 Dr. Patrick O'Neill(2) $50,000 $57,880 $107,880 David Burgstahler(3) $0 $0 $0 Sriram Venkataraman(3) $0 $0 $0 (1)Mr. Pickering initially served as our Executive Chairman from January 2008 to January 2010 and functioned as an officerof the Company with direct oversight of Research & Development activities. On March 4, 2008, we entered into anemployment agreement with Mr. Pickering, which was subsequently amended on October 19, 2008 and effective as ofJanuary 1, 2009, and also amended on January 4, 2010. Pursuant to the terms of his amended agreement, under which heis no longer an executive officer, Mr. Pickering currently receives $200,000 in annual base salary. Mr. Pickering is noteligible for bonus, benefits or other perquisites. Mr. Pickering's employment can be terminated at any time and for anyreason, and he shall not be entitled to any severance or termination benefits. On March 4, 2008 in recognition of Mr. Pickering's role with Avista in leading the Acquisition, Mr. Pickering wasgranted 751,200 stock options. These options vest 40% on the first year and ratably on the grant date over the followingthree years. 50% of these options are Time Vesting Options and 50% of these options are Performance Vesting Options.On April 20, 2009, Mr. Pickering received a supplemental grant of 50,000Table of ContentsCompensation Committee Interlocks and Insider Participation During 2010, the members of our compensation committee were Messrs. Burgstahler and Pickering. Mr. Burgstahler is the President of Avista.Mr. Pickering is a Partner of Avista and used to be our Executive Chairman, a role he relinquished effective January 8, 2010. Avista provides us withadvisory services pursuant to the Advisory Services and Monitoring Agreement (as defined below) and has entered into other transactions with us. See"Item 13—Certain Relationships and Related Person Transactions, and Director Independence—Transactions with Related Persons—Advisory andMonitoring Services Agreement."Compensation Committee Report Our compensation committee has reviewed and discussed the "Item 11—Executive Compensation—Compensation Discussion and Analysis"section with our management. Based upon this review and discussion, the compensation committee recommended to the Board of Directors that the"Item 11—Executive Compensation—Compensation Discussion and Analysis" section be included in this Annual Report on Form 10-K for the fiscalyear ended December 31, 2011. Respectfully submitted by the Compensation Committee of the Board of Directors.David BurgstahlerLarry Pickering149options to purchase shares of Holdings in recognition of his contributions in connection with the Acquisition, pursuingan extension of the marketing exclusivity of Cardiolite and exceeding the EBITDA targets established for 2008.Anticipating Mr. Pickering's current executive role to evolve to a non-employee director in the future, Mr. Pickering'ssecond award was granted in the form of 100% Time Vesting Options, vesting ratably in four equal installments. InMarch of 2011, in the same manner as all other stock option holders at the time, Mr. Pickering received a dividendequivalent right of approximately $1.93 per option on his outstanding options of which $1,052,600 was paid in cash onhis vested options and $493,169 was held in escrow subject to the future vesting of his then unvested options. The totalvalue of Mr. Pickering's time-based DERs and vested performance-based (EBITDA) DERs is $1,245,763.(2)Dr. Patrick O'Neill is compensated with an annual retainer for his services on the Board of Director of $50,000, paid inquarterly increments. Dr. O'Neill received a grant of 50,000 stock options in Holdings in 2008. These options have a ten-year term and are Time Vesting Options. 20% of the shares subject to the Time Vesting Options vested on January 8,2009, 20% on January 8, 2010 and 20% on January 8, 2011. The remaining shares subject to the Time Vesting Optionswill vest ratably over the next two years and will vest in full on January 8, 2013. In March of 2011, in the same manner as all other stock option holders at the time, Dr. O'Neill received a dividendequivalent right of approximately $1.93 per option on his outstanding options of which $57,880 was paid in cash on hisvested options and $38,586 was held in escrow subject to the future vesting of his then unvested options.(3)Messrs. Burgstahler and Venkataraman are Principals of Avista and do not receive any direct compensation for theirservices as Directors. We pay Avista a management fee of $1,000,000 annually pursuant to the Advisory Services andManagement Agreement, dated as of January 8, 2008. See "Item 13—Certain Relationships and Related PartyTransactions, and Director Independence—Transactions with Related Persons—Advisory and Monitoring ServicesAgreement."Table of Contents The information contained in the foregoing report shall not be deemed to be "filed" or to be "soliciting material" with the Commission, nor shallsuch information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act, except to the extent that wespecifically incorporate it by reference in a filing.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Principal Stockholders Holdings indirectly owns all of our issued and outstanding capital stock through its direct subsidiary and our direct parent, Lantheus Intermediate.Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P. and ACP-Lantern Co-Invest, LLC, or, together, the Avista Entities collectivelyown approximately 99.5% of Holdings' issued and outstanding capital stock. Avista Capital Partners GP, LLC ultimately exercises voting anddispositive power over the shares held by Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P. and ACP-Lantern Co-Invest, LLC.Voting and disposition decisions at Avista Capital Partners GP, LLC with respect to such shares are made by an investment committee, the members ofwhich are Thompson Dean, Steven Webster, David Burgstahler, David Durkin, OhSang Kwon, Robert Cabes and Newton Aguiar. In connection withthe Acquisition, certain members of management purchased shares of Holdings' common stock equaling approximately 0.5% of Holdings' issued andoutstanding capital stock.Securities Authorized for Issuance Under Equity Compensation Plans The following table gives information as of December 31, 2011 about the common stock that may be issued under all of our existing equitycompensation plans.Item 13. Certain Relationships and Related Transactions, and Director Independence The Board of Directors has the responsibility to review and approve all transactions or series of related financial transactions, arrangements orrelationships between us and any related party if the amount involved exceeds $120,000. We do not otherwise have any policies or procedures for thereview, approval or ratification of such transactions.Transactions with Related PersonsShareholders Agreements In connection with the Acquisition, Holdings entered into (i) a Shareholders Agreement with the Avista Entities and Don Kiepert, as ManagementShareholder, dated January 8, 2008 and subsequently amended on February 26, 2008, or the Management Shareholders Agreement and (ii) anEmployee Shareholders Agreement with the Avista Entities and certain employee shareholders named therein,150Plan Category Number of Securitiesto be Issued UponExercise ofOutstanding Options,Warrants and Rights Weighted AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Available forFuture Issuance UnderEquity CompensationPlans (Excluding SecuritiesReflected in Column (a)) Equity compensation plansapproved by securityholders 4,475,200 $2.84 520,250 Equity compensation plansnot approved by securityholders(1) — — — Total 4,475,200 $2.84 520,250 (1)Represents the 2008 Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan.Table of Contentsdated as of May 30, 2008, or the Employee Shareholders Agreement and, collectively with the Management Shareholders Agreement, the ShareholdersAgreements. The Shareholders Agreements govern the parties' respective rights, duties and obligations with respect to the ownership of Holdingssecurities. Pursuant to the Shareholders Agreements, Avista has designation rights with respect to the composition of the Holdings board of directorsand Avista is entitled to majority representation on any committee that the board creates. In addition, the Management Shareholder and the employeeshareholders must vote their shares in such a manner that is consistent with the composition of the board designed by the Avista Entities.Advisory and Monitoring Services Agreement In connection with the closing of the Acquisition, we entered into an advisory services and monitoring agreement with Avista CapitalHoldings, L.P., or Avista Capital Holdings, dated as of January 8, 2008, or the Advisory Services and Monitoring Agreement, pursuant to which ACPLantern Acquisition, Inc. (a corporation which was merged into us as part of the Acquisition), paid Avista Capital Holdings a one time fee equal to$10 million for the consulting and advisory and monitoring services to us, our subsidiaries and our parent companies, in connection with theAcquisition. In addition, the agreement provides for the payment of an annual fee equal to $1 million as consideration for ongoing advisory services. Tothe extent of any future transaction entered into by us or our affiliates, Avista Capital Holdings will receive an additional fee that is reasonable andcustomary for the services it provides in connection with such future transaction. In addition, we will pay directly, or reimburse Avista Capital Holdingsfor, its out-of-pocket expenses in connection with its performance of services under the Advisory Services and Monitoring Agreement.Quintiles Master Services Agreement Effective as of June 30, 2009, we entered into a Master Services Agreement with Quintiles Commercial US, Inc., or Quintiles, (formerly known asInnovex Inc.) to provide a contract sales force in connection with the launch and promotion of Ablavar. As of December 31, 2010, we have incurredcosts associated with this contract of approximately $4.3 million. The Statement of Work under the Master Services Agreement relating to the contractsales force was extended on June 11, 2010 and terminated on December 31, 2010. John Pickering, a son of Larry Pickering, our Chairman of theBoard, was a Director of Business Development for Quintiles during part of the term of the agreement. He left Quintiles in June 2010 prior to theStatement of Work extension.McGladrey Engagement In March 2010, we engaged RSM McGladrey, Inc., or McGladrey, (formerly known as Caturano & Company), a tax and financial servicesconsulting firm, to advise us about compliance requirements under the Sarbanes-Oxley Act. As of December 31, 2011 and December 31, 2010, wehave incurred costs associated with this engagement of approximately $117,000 and $176,000, respectively. Dan Gaffey, a son of Robert Gaffey, ourformer Chief Financial Officer, is a partner of McGladrey but has no other relationship with us and will not be working on the engagement in anycapacity.Director Independence As disclosed in "Item 10—Directors, Executive Officers and Corporate Governance," although not formally considered by the Board of Directorsof Holdings because our securities are not registered or traded on any national securities exchange, we do not believe that any of our directors would beconsidered independent for either Board of Directors or Audit Committee purposes based upon the listing standards of the New York Stock Exchange.We believe none of our directors would be considered independent because of their relationships with Avista, which, through certain entities, ownsapproximately 99.5% of Holdings' issued and outstanding capital stock, as described further under "Item 12—Security Ownership of Certain BeneficialOwners and Management and Related Stockholder151Table of ContentsMatters—Principal Stockholders," and other relationships with us, as described further under "—Transactions with Related Persons"Item 14. Principal Accountant Fees and Services Deloitte & Touche LLP, or Deloitte, serves as our independent registered public accounting firm. The following table presents fees paid for theaudit of our annual consolidated financial statements and all other professional services rendered by Deloitte for the years ended December 31, 2011 and2010:Audit Fees These are fees related to professional services rendered in connection with the audit of our annual financial statements, the reviews of the interimfinancial statements included in each of our quarterly reports on Form 10-Q, and other professional services provided by our independent registeredpublic accounting firm in connection with statutory or regulatory filings or engagements.Audit-Related Fees These are fees for assurance and related services that are reasonably related to performance of the audit and review of our financial statements, andwhich are not reported under "Audit Fees." These services consisted primarily of consultations regarding accounting and financial reporting andattestation services for such matters as required for consents related to financings, registration statements and other filings with the Commission.Tax Fees These are fees billed for professional services for tax compliance, tax advice and tax planning services.All Other Fees All other fees consist primarily of the reimbursement of expenses associated with completion of services noted above.Pre-Approval Policies The services provided by Deloitte were pre-approved by the Audit Committee. The Audit Committee has considered whether the provision of theabove-noted services is compatible with maintaining the independence of the independent registered public accounting firm and has determined that theprovision of such services has not adversely affected Deloitte's independence. The Audit Committee approved 100% of the services covered by audit-related fees, tax fees and all other similar fees.152 Year Ended December 31, 2011 2010(1) Audit Fees $1,201,840 $1,023,789 Audit-Related Fees 722,200 1,045,682 Tax Fees 8,414 145,202 All Other Fees 11,970 14,557 Total Fees $1,944,424 $2,229,230 (1)The 2010 fees include an additional $277,587 that we paid in 2011 related to the 2010 services.Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements Included in Part II of this annual report:(a)(2) Schedules None.153 PageReport of Independent Registered Public Accounting Firm 85Consolidated Balance Sheets as of December 31, 2011 and 2010 86Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2011, 2010 and2009 87Consolidated Statements of Stockholder's (Deficit) Equity for the Years Ended December 31, 2011, 2010 and2009 88Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009 89Notes to Consolidated Financial Statements as of and for the Years Ended December 31, 2011, 2010 and 2009 90Table of Contents(a)(3) Exhibits154Exhibit Description 3.1 Certificate of Incorporation of Lantheus Medical Imaging, Inc., as amended (incorporated by reference toExhibit 3.1 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 3.2 Second Amended and Restated By-Laws of Lantheus Medical Imaging, Inc (incorporated by reference toExhibit 3.2 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 4.1 Indenture, dated as of May 10, 2010, among Lantheus Medical Imaging, Inc., Lantheus MIIntermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee(incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.2 First Supplemental Indenture, dated as of March 14, 2011, among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington TrustFSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s CurrentReport on Form 8-K filed with the Commission on March 16, 2011 (file number 333-169785)). 4.3 Second Supplemental Indenture, dated as of March 21, 2011, among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington TrustFSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s CurrentReport on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). 4.4 Registration Rights Agreement, dated May 10, 2010, by and among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC, as guarantors, and Jefferies &Company, Inc. (incorporated by reference to Exhibit 4.2 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.3 Registration Rights Agreement, dated March 21, 2011, by and among Lantheus Medical Imaging, Inc.,Jefferies & Company, Inc., as representative of the initial purchasers and the guarantors party thereto(incorporated by reference to Exhibit 4.2 to Lantheus Medical Imaging, Inc.'s Current Report on Form 8-Kfiled with the Commission on March 21, 2011 (file number 333-169785)). 4.5 Form of 9.750% Senior Notes due 2017 (included in Exhibit 4.1). 10.1 Credit Agreement, dated May 10, 2010, by and among Lantheus Medical Imaging, Inc., Lantheus MIIntermediate, Inc., Lantheus MI Real Estate LLC, the lenders from time to time party hereto, Harris N.A.,as collateral agent, Bank of Montreal, as administrative agent, Bank of Montreal and NATIXIS as jointbookrunners, Bank of Montreal and NATIXIS as joint lead arrangers, NATIXIS as syndication agent andJefferies Finance LLC as documentation agent (incorporated by reference to Exhibit 10.1 to LantheusMedical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6,2010 (file number 333-169785)). Table of Contents155Exhibit Description 10.2 Amendment No. 1 to Credit Agreement, dated as of March 21, 2011, by and among Lantheus MedicalImaging, Inc., as borrower, Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate LLC, asguarantors, Bank of Montreal, as administrative agent, Harris N.A., as collateral agent and the otherlenders party thereto (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.'sCurrent Report on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). 10.3 Pledge and Security Agreement, dated as of May 10, 2010, by and among Lantheus MedicalImaging, Inc., Lantheus MI Intermediate, Inc., Lantheus MI Real Estate, LLC and Harris N.A. as collateralagent (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.4 Advisory Services and Monitoring Agreement, dated January 8, 2007, by and between ACP LanternAcquisition, Inc. (now known as Lantheus Medical Imaging, Inc.) and Avista Capital Holdings, L.P.(incorporated by reference to Exhibit 10.3 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.5 Amended and Restated Shareholders Agreement, dated as of February 26, 2008 among Lantheus MIHoldings, Inc., Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain management shareholders named therein (incorporated by reference toExhibit 10.4 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.6 Employee Shareholders Agreement, dated as of May 8, 2008, among Lantheus MI Holdings, Inc., AvistaCapital Partners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certainemployee shareholders named therein (incorporated by reference to Exhibit 10.5 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (filenumber 333-169785)). 10.7 Employment Agreement, dated January 8, 2008 by and between ACP Lantern Acquisition Inc. (nowknown as Lantheus Medical Imaging, Inc.) and Donald Kiepert (incorporated by reference to Exhibit 10.6to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.8 Employment Agreement, dated March 4, 2008 by and between Lantheus Medical Imaging, Inc. and LarryPickering (incorporated by reference to Exhibit 10.7 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.9 Letter Amendment to Employment Agreement, dated January 4, 2010 by and between Lantheus MedicalImaging, Inc. and Larry Pickering (incorporated by reference to Exhibit 10.8 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 1, 2010 (filenumber 333-169785)). 10.10†Sales Agreement, dated as of April 1, 2009, between Lantheus Medical Imaging, Inc. and NTPRadioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.9 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). Table of Contents156Exhibit Description 10.11†Amendment No. 1 to Sales Agreement, dated as of January 1, 2010, between Lantheus MedicalImaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.10 to LantheusMedical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 1,2010 (file number 333-169785)). 10.12†Amendment No. 2 to Sales Agreement, dated as of January 1, 2010, between Lantheus MedicalImaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.1 to LantheusMedical Imaging, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011(file number 333-169785)). 10.13†Manufacturing and Service Contract for Commercial and Developmental Products, dated August 1, 2008,between Lantheus Medical Imaging, Inc. and Ben Venue Laboratories, Inc. (incorporated by reference toExhibit 10.11 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 1, 2010 (file number 333-169785)). 10.14†Purchase and Supply Agreement, dated as of April 1, 2010, between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (formerly known as MDS Nordion, a division of MDS (Canada) Inc.)(incorporated by reference to Exhibit 10.12 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). 10.15†Amendment No. 1 to the Purchase and Supply Agreement, dated as of December 1, 2010, betweenLantheus Medical Imaging, Inc. and Nordion (Canada) Inc. (incorporated by reference to Exhibit 10.13 toLantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31,2010 (file number 333-169785)). 10.16†Amended and Restated Cardiolite License and Supply Agreement, dated January 1, 2004, by and betweenLantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.13to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onDecember 23, 2010 (file number 333-169785)). 10.17†Amendment No. 1 to the Amended and Restated Supply Agreement (Thallium and Generators), dated asof December 29, 2009 (incorporated by reference to Exhibit 10.26 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.18†Amended and Restated Supply Agreement (Thallium and Generators), dated October 1, 2004, by andbetween Lantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference toExhibit 10.14 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 23, 2010 (file number 333-169785)). 10.19†Agreement Concerning Cardiolite and Technelite Generator Supply, Pricing and Rebates, dated as ofFebruary 1, 2008, by and between Lantheus Medical Imaging, Inc. and UPPI (incorporated by reference toExhibit 10.15 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 29, 2010 (file number 333-169785)). 10.20†Amendment No. 1 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of April 1, 2008 (incorporated by reference to Exhibit 10.29 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010(file number 333-169785)). Table of Contents157Exhibit Description 10.21†Amendment No. 2 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of August 1, 2008 (incorporated by reference to Exhibit 10.30 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010 (filenumber 333-169785)). 10.22†Amendment No. 3 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of May 1, 2009 (incorporated by reference to Exhibit 10.31 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010(file number 333-169785)). 10.23†Amendment No. 4 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of April 1, 2011 (incorporated by reference to Exhibit 10.2 to Lantheus MedicalImaging, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (filenumber 333-169785)). 10.24†Extension to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing and Rebates,dated as of January 1, 2011, between Lantheus Medical Imaging, Inc. and UPPI (incorporated byreference to Exhibit 10.21 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscalyear ended December 31, 2010 (file number 333-169785)). 10.25*†Amendment No. 5 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of December 14, 2011. 10.26†Distribution Agreement, dated as of October 31, 2001, by and between Bristol-Myers Squibb PharmaCompany (now known as Lantheus Medical Imaging, Inc.) and Medi-Physics Inc., doing business asAmersham Health (incorporated by reference to Exhibit 10.16 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 29, 2010 (file number 333-169785)). 10.27†First Amendment to Distribution Agreement, dated as of January 1, 2005, by and between Bristol-MyersSquibb Medical Imaging, Inc. (formerly known as Bristol-Myers Squibb Pharma Company and nowknown as Lantheus Medical Imaging, Inc.) and Medi-Physics Inc., doing business as G.E. Healthcare(incorporated by reference to Exhibit 10.17 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.28†Manufacturing and Supply Agreement, dated as of April 6, 2009, by and between Lantheus MedicalImaging, Inc., and Mallinckrodt Inc. (a subsidiary of Covidien PLC) (incorporated by reference toExhibit 10.27 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 23, 2010 (file number 333-169785)). 10.29†Amendment No. 1 to the Manufacturing and Supply Agreement, dated as of August 2, 2010, by andbetween Lantheus Medical Imaging, Inc. and Mallinckrodt Inc. (a subsidiary of Covidien PLC)(incorporated by reference to Exhibit 10.28 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.30†Amendment No. 2 to the Manufacturing and Supply Agreement, dated as of August 2, 2010, by andbetween Lantheus Medical Imaging, Inc. and Mallinckrodt Inc. (a subsidiary of Covidien PLC)(incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.'s Quarterly Report onForm 8-K for the quarterly period ended September 30, 2011 (file number 333-169785)).Table of Contents158Exhibit Description 10.31 Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.18 toLantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.32 Amendment No. 1 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by referenceto Exhibit 10.19 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.33 Amendment No. 2 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by referenceto Exhibit 10.20 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.34 Form of Option Grant Award Agreement (incorporated by reference to Exhibit 10.21 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (filenumber 333-169785)). 10.35 Lantheus Medical Imaging, Inc. Employee Bonus Plan—2009 (incorporated by reference to Exhibit 10.22to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.36 Lantheus Medical Imaging, Inc. 2010 Executive Leadership Team Incentive Bonus Plan (incorporated byreference to Exhibit 10.31 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscalyear ended December 31, 2010 (file number 333-169785)). 10.37 Lantheus Medical Imaging, Inc. Severance Plan Policy (incorporated by reference to Exhibit 10.24 toLantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.38 Letter Amendment to Employment Agreement, dated October 19, 2008 and effective as of January 1, 2009by and between Lantheus Medical Imaging, Inc. and Larry Pickering (incorporated by reference toExhibit 10.25 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 1, 2010 (file number 333-169785)). 10.39*Employment Agreement, dated March 10, 2008, by and between Lantheus Medical Imaging, Inc. andMichael Duffy. 10.40*Retirement Agreement, dated January 3, 2012, by and between Lantheus Medical Imaging, Inc. and RobertGaffey. 12.1*Statements re: Computation of Ratio of Earnings to Fixed Charges. 14.1 Lantheus Medical Imaging, Inc. Company Code of Conduct and Ethics (incorporated by reference toExhibit 14.1 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the year endedDecember 31, 2010 (file number 333-169785)). 14.2 Lantheus Medical Imaging, Inc. Compliance Code. (incorporated by reference to Exhibit 14.2 to LantheusMedical Imaging, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2010 (filenumber 333-169785)). 21.1 Subsidiaries of Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. (incorporated byreference to Exhibit 21.1 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the yearended December 31, 2010 (file number 333-169785)).Table of Contents159Exhibit Description 24.1*Power of Attorney (included as part of the signature page hereto). 31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a)and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002. 31.2*Certification of Chief Financial Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a)and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002. 32.1**Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350,as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS*XBRL Instance 101.SCH*XBRL Taxonomy Extension Schema 101.CAL*XBRL Taxonomy Extension Calculation 101.DEF*XBRL Taxonomy Extension Definition 101.LAB*XBRL Taxonomy Extension Labels 101.PRE*XBRL Taxonomy Extension Presentation*Filed herewith. **Furnished herewith. †Confidential treatment requested as to certain portions, which portions have been filed separately with the Securities andExchange Commission.Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. We, the undersigned directors and officers of Lantheus Medical Imaging, Inc., hereby severally constitute and appoint Donald R. Kiepert, JeffreyE. Young and Michael P. Duffy, and each of them individually, with full powers of substitution and resubstitution, our true and lawful attorneys, withfull powers to them and each of them to sign for us, in our names and in the capacities indicated below, any and all amendments to this Annual Reporton Form 10-K filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power andauthority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents andpurposes as he might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes,may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. LANTHEUS MEDICAL IMAGING, INC. By: /s/ DONALD R. KIEPERT Name: Donald R. Kiepert Title: President and Chief Executive Officer Date: March 30, 2012Signature Title Date /s/ DONALD R. KIEPERTDonald R. Kiepert President, Chief Executive Officer andDirector (Principal Executive Officer) March 30, 2012/s/ JEFFREY E. YOUNGJeffrey E. Young Chief Financial Officer and Treasurer(Principal Financial Officer) March 30, 2012/s/ LARRY PICKERINGLarry Pickering Director March 30, 2012/s/ DAVID BURGSTAHLERDavid Burgstahler Director March 30, 2012Table of ContentsEXHIBIT INDEX Exhibit Description 3.1 Certificate of Incorporation of Lantheus Medical Imaging, Inc., as amended (incorporated by reference toExhibit 3.1 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 3.2 Second Amended and Restated By-Laws of Lantheus Medical Imaging, Inc (incorporated by reference toExhibit 3.2 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 4.1 Indenture, dated as of May 10, 2010, among Lantheus Medical Imaging, Inc., Lantheus MIIntermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee(incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.2 First Supplemental Indenture, dated as of March 14, 2011, among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington TrustFSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s CurrentReport on Form 8-K filed with the Commission on March 16, 2011 (file number 333-169785)). 4.3 Second Supplemental Indenture, dated as of March 21, 2011, among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC as guarantors, and Wilmington TrustFSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.'s CurrentReport on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). 4.4 Registration Rights Agreement, dated May 10, 2010, by and among Lantheus Medical Imaging, Inc.,Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate, LLC, as guarantors, and Jefferies &Company, Inc. (incorporated by reference to Exhibit 4.2 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.3 Registration Rights Agreement, dated March 21, 2011, by and among Lantheus Medical Imaging, Inc.,Jefferies & Company, Inc., as representative of the initial purchasers and the guarantors party thereto(incorporated by reference to Exhibit 4.2 to Lantheus Medical Imaging, Inc.'s Current Report on Form 8-Kfiled with the Commission on March 21, 2011 (file number 333-169785)). 4.5 Form of 9.750% Senior Notes due 2017 (included in Exhibit 4.1). 10.1 Credit Agreement, dated May 10, 2010, by and among Lantheus Medical Imaging, Inc., Lantheus MIIntermediate, Inc., Lantheus MI Real Estate LLC, the lenders from time to time party hereto, Harris N.A.,as collateral agent, Bank of Montreal, as administrative agent, Bank of Montreal and NATIXIS as jointbookrunners, Bank of Montreal and NATIXIS as joint lead arrangers, NATIXIS as syndication agent andJefferies Finance LLC as documentation agent (incorporated by reference to Exhibit 10.1 to LantheusMedical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6,2010 (file number 333-169785)). 10.2 Amendment No. 1 to Credit Agreement, dated as of March 21, 2011, by and among Lantheus MedicalImaging, Inc., as borrower, Lantheus MI Intermediate, Inc. and Lantheus MI Real Estate LLC, asguarantors, Bank of Montreal, as administrative agent, Harris N.A., as collateral agent and the otherlenders party thereto (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.'sCurrent Report on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). Table of ContentsExhibit Description 10.3 Pledge and Security Agreement, dated as of May 10, 2010, by and among Lantheus MedicalImaging, Inc., Lantheus MI Intermediate, Inc., Lantheus MI Real Estate, LLC and Harris N.A. as collateralagent (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.4 Advisory Services and Monitoring Agreement, dated January 8, 2007, by and between ACP LanternAcquisition, Inc. (now known as Lantheus Medical Imaging, Inc.) and Avista Capital Holdings, L.P.(incorporated by reference to Exhibit 10.3 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.5 Amended and Restated Shareholders Agreement, dated as of February 26, 2008 among Lantheus MIHoldings, Inc., Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain management shareholders named therein (incorporated by reference toExhibit 10.4 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.6 Employee Shareholders Agreement, dated as of May 8, 2008, among Lantheus MI Holdings, Inc., AvistaCapital Partners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certainemployee shareholders named therein (incorporated by reference to Exhibit 10.5 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6, 2010(file number 333-169785)). 10.7 Employment Agreement, dated January 8, 2008 by and between ACP Lantern Acquisition Inc. (nowknown as Lantheus Medical Imaging, Inc.) and Donald Kiepert (incorporated by reference to Exhibit 10.6to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.8 Employment Agreement, dated March 4, 2008 by and between Lantheus Medical Imaging, Inc. and LarryPickering (incorporated by reference to Exhibit 10.7 to Lantheus Medical Imaging, Inc.'s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.9 Letter Amendment to Employment Agreement, dated January 4, 2010 by and between Lantheus MedicalImaging, Inc. and Larry Pickering (incorporated by reference to Exhibit 10.8 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 1, 2010 (filenumber 333-169785)). 10.10†Sales Agreement, dated as of April 1, 2009, between Lantheus Medical Imaging, Inc. and NTPRadioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.9 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). 10.11†Amendment No. 1 to Sales Agreement, dated as of January 1, 2010, between Lantheus MedicalImaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.10 to LantheusMedical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 1,2010 (file number 333-169785)). 10.12†Amendment No. 2 to Sales Agreement, dated as of January 1, 2010, between Lantheus MedicalImaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated by reference to Exhibit 10.1 to LantheusMedical Imaging, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011(file number 333-169785)). Table of ContentsExhibit Description 10.13†Manufacturing and Service Contract for Commercial and Developmental Products, dated August 1, 2008,between Lantheus Medical Imaging, Inc. and Ben Venue Laboratories, Inc. (incorporated by reference toExhibit 10.11 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 1, 2010 (file number 333-169785)). 10.14†Purchase and Supply Agreement, dated as of April 1, 2010, between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (formerly known as MDS Nordion, a division of MDS (Canada) Inc.)(incorporated by reference to Exhibit 10.12 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). 10.15†Amendment No. 1 to the Purchase and Supply Agreement, dated as of December 1, 2010, betweenLantheus Medical Imaging, Inc. and Nordion (Canada) Inc. (incorporated by reference to Exhibit 10.13 toLantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31,2010 (file number 333-169785)). 10.16†Amended and Restated Cardiolite License and Supply Agreement, dated January 1, 2004, by and betweenLantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.13to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onDecember 23, 2010 (file number 333-169785)). 10.17†Amendment No. 1 to the Amended and Restated Supply Agreement (Thallium and Generators), dated asof December 29, 2009 (incorporated by reference to Exhibit 10.26 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.18†Amended and Restated Supply Agreement (Thallium and Generators), dated October 1, 2004, by andbetween Lantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference toExhibit 10.14 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 23, 2010 (file number 333-169785)). 10.19†Agreement Concerning Cardiolite and Technelite Generator Supply, Pricing and Rebates, dated as ofFebruary 1, 2008, by and between Lantheus Medical Imaging, Inc. and UPPI (incorporated by reference toExhibit 10.15 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 29, 2010 (file number 333-169785)). 10.20†Amendment No. 1 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of April 1, 2008 (incorporated by reference to Exhibit 10.29 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010(file number 333-169785)). 10.21†Amendment No. 2 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of August 1, 2008 (incorporated by reference to Exhibit 10.30 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010 (filenumber 333-169785)). 10.22†Amendment No. 3 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of May 1, 2009 (incorporated by reference to Exhibit 10.31 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on December 23, 2010(file number 333-169785)). 10.23†Amendment No. 4 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of April 1, 2011 (incorporated by reference to Exhibit 10.2 to Lantheus MedicalImaging, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (filenumber 333-169785)). Table of ContentsExhibit Description 10.24†Extension to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing and Rebates,dated as of January 1, 2011, between Lantheus Medical Imaging, Inc. and UPPI (incorporated byreference to Exhibit 10.21 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscalyear ended December 31, 2010 (file number 333-169785)). 10.25*†Amendment No. 5 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing andRebates, dated as of December 14, 2011. 10.26†Distribution Agreement, dated as of October 31, 2001, by and between Bristol-Myers Squibb PharmaCompany (now known as Lantheus Medical Imaging, Inc.) and Medi-Physics Inc., doing business asAmersham Health (incorporated by reference to Exhibit 10.16 to Lantheus Medical Imaging, Inc.'sRegistration Statement on Form S-4 filed with the Commission on December 29, 2010 (file number 333-169785)). 10.27†First Amendment to Distribution Agreement, dated as of January 1, 2005, by and between Bristol-MyersSquibb Medical Imaging, Inc. (formerly known as Bristol-Myers Squibb Pharma Company and nowknown as Lantheus Medical Imaging, Inc.) and Medi-Physics Inc., doing business as G.E. Healthcare(incorporated by reference to Exhibit 10.17 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.28†Manufacturing and Supply Agreement, dated as of April 6, 2009, by and between Lantheus MedicalImaging, Inc., and Mallinckrodt Inc. (a subsidiary of Covidien PLC) (incorporated by reference toExhibit 10.27 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 23, 2010 (file number 333-169785)). 10.29†Amendment No. 1 to the Manufacturing and Supply Agreement, dated as of August 2, 2010, by andbetween Lantheus Medical Imaging, Inc. and Mallinckrodt Inc. (a subsidiary of Covidien PLC)(incorporated by reference to Exhibit 10.28 to Lantheus Medical Imaging, Inc.'s Registration Statement onForm S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.30†Amendment No. 2 to the Manufacturing and Supply Agreement, dated as of August 2, 2010, by andbetween Lantheus Medical Imaging, Inc. and Mallinckrodt Inc. (a subsidiary of Covidien PLC)(incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.'s Quarterly Report onForm 8-K for the quarterly period ended September 30, 2011 (file number 333-169785)). 10.31 Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.18 toLantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.32 Amendment No. 1 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by referenceto Exhibit 10.19 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.33 Amendment No. 2 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by referenceto Exhibit 10.20 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on October 6, 2010 (file number 333-169785)). 10.34 Form of Option Grant Award Agreement (incorporated by reference to Exhibit 10.21 to Lantheus MedicalImaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (filenumber 333-169785)). Table of ContentsExhibit Description 10.35 Lantheus Medical Imaging, Inc. Employee Bonus Plan—2009 (incorporated by reference to Exhibit 10.22to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.36 Lantheus Medical Imaging, Inc. 2010 Executive Leadership Team Incentive Bonus Plan (incorporated byreference to Exhibit 10.31 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the fiscalyear ended December 31, 2010 (file number 333-169785)). 10.37 Lantheus Medical Imaging, Inc. Severance Plan Policy (incorporated by reference to Exhibit 10.24 toLantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 10.38 Letter Amendment to Employment Agreement, dated October 19, 2008 and effective as of January 1, 2009by and between Lantheus Medical Imaging, Inc. and Larry Pickering (incorporated by reference toExhibit 10.25 to Lantheus Medical Imaging, Inc.'s Registration Statement on Form S-4 filed with theCommission on December 1, 2010 (file number 333-169785)). 10.39*Employment Agreement, dated March 10, 2008, by and between Lantheus Medical Imaging, Inc. andMichael Duffy. 10.40*Retirement Agreement, dated January 3, 2012, by and between Lantheus Medical Imaging, Inc. and RobertGaffey. 12.1*Statements re: Computation of Ratio of Earnings to Fixed Charges. 14.1 Lantheus Medical Imaging, Inc. Company Code of Conduct and Ethics (incorporated by reference toExhibit 14.1 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the year endedDecember 31, 2010 (file number 333-169785)). 14.2 Lantheus Medical Imaging, Inc. Compliance Code. (incorporated by reference to Exhibit 14.2 to LantheusMedical Imaging, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2010 (filenumber 333-169785)). 21.1 Subsidiaries of Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. (incorporated byreference to Exhibit 21.1 to Lantheus Medical Imaging, Inc.'s Annual Report on Form 10-K for the yearended December 31, 2010 (file number 333-169785)). 24.1*Power of Attorney (included as part of the signature page hereto). 31.1*Certification of Chief Executive Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a)and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002. 31.2*Certification of Chief Financial Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a)and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002. 32.1**Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350,as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS*XBRL Instance 101.SCH*XBRL Taxonomy Extension Schema 101.CAL*XBRL Taxonomy Extension Calculation 101.DEF*XBRL Taxonomy Extension Definition 101.LAB*XBRL Taxonomy Extension Labels 101.PRE*XBRL Taxonomy Extension Presentation*Filed herewith. **Furnished herewith. †Confidential treatment requested as to certain portions, which portions have been filed separately with the Securities andExchange Commission.Exhibit 10.25 CONFIDENTIAL TREATMENT REQUESTED INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND NOTED WITH “****”. ANUNREDACTED VERSION OF THIS DOCUMENT HAS ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGECOMMISSION. AMENDMENT NO. 5 TO THE AGREEMENT CONCERNING CARDIOLITE® AND TECHNELITE® GENERATOR SUPPLY, PRICINGAND REBATES This Amendment No. 5 (“Amendment”) to the Agreement Concerning Cardiolite® and Technelite® Generator Supply, Pricing and Rebates dated asof February 1, 2008 (as amended, the “Agreement”) is made by and between Lantheus Medical Imaging, Inc., with its principal place of business at 331Treble Cove Road, North Billerica, Massachusetts 01862 (“Medical Imaging”), and United Pharmacy Partners, Inc., with its principal place of business at5400 Laurel Springs Parkway, Suite 405, Suwanee, GA 30024 (“UPPI”), and is effective as of January 1, 2012 (the “Amendment Effective Date”). RECITALS WHEREAS, Medical Imaging and UPPI are parties to the Agreement and desire to further amend the Agreement, as provided herein; NOW, THEREFORE, in consideration of the premises and agreements set forth in this Amendment and intending to be legally bound, MedicalImaging and UPPI hereby agree as follows: AMENDMENT 1. Section I. - Section I. Defined Terms is amended by deleting such section in its entirety and replacing therewith the following: “I. Defined Terms A. Capitalized terms not otherwise defined herein shall have the meanings specified in the Standard Cardiolite® Terms. B. “Agreements” means collectively the Agreement, the Individual Pharmacy Agreements, and the Standard Cardiolite® Terms, each as ineffect from time to time. C. “Good Standing” means the status of having obtained and retained all federal, state and local licenses and other requirements necessary forthe lawful conduct of business as a commercial radiopharmacy. D. “Individual Pharmacy Agreements” means the Cardiolite® License and Supply Agreements between Medical Imaging and a Member orMember Radiopharmacy Family, each as in effect from time to time.  E. “Member” means a Member of UPPI in Good Standing. F. “Member Radiopharmacy Family” means **** (****) or more commercially established radiopharmacies in Good Standing and which aredirectly or indirectly Controlled by or under common Control with the same Member. G. “Month” means a calendar month. H. “Radiopharmaceutical Reference Month” means for Technelite® and Thallium pricing, in any then-current Month, the immediatelypreceding Month. I. “Radiopharmaceutical Reference Quarter” means for Sestamibi Product pricing, in any then-current calendar Quarter, the immediatelypreceding Quarter. J. “Quarter” means a calendar quarter. K. “Technelite® Generators” means technetium Tc99m generators sold under the trademark Technelite®. L. “Technelite® Generator Unshipped Curies” means the number of curies that are not shipped if a Technelite® Generator order, accepted byMedical Imaging, is not filled as ordered resulting in no shipment or a shipment of fewer curies than originally specified on the order. M. “**** Sestamibi Product” means ****. 2. Section II. A. Section II. A, “Pricing”, is amended by deleting such section in its entirety and replacing therewith the following: “II. Sestamibi Product Supply and Pricing A. Pricing. Pursuant to Section 2.11 of the Standard Cardiolite® Terms, the Parties hereby agree that the current Exhibit I of theStandard Cardiolite® Terms is hereby amended as set forth in Exhibit 1 hereto.” 3. Section II. D. Section II. D, “Administrative Fee”, is amended by deleting such section in its entirety and replacing therewith the following: “D. Administrative Fee. Commencing as of ****, Medical Imaging shall pay to UPPI an Administrative Fee in the amount of ****percent (****%) of the aggregate dollars billed in the immediately 2 preceding **** for Sestamibi Product and Technelite® Generators by Medical Imaging to Members pursuant to this Agreement. The Administrative Fee will be paid no later than **** days after the close of any given Quarter during the Term of the Agreement.” 4. Section III. B. Section III. B, “Purchase Price”, is amended by deleting such section in its entirety and replacing therewith the following: “B. Purchase Price. The Parties agree that each Member shall pay to Medical Imaging the Technelite® Generator pricing set forth inExhibit 1 for Technelite® Generators and agree to the terms set forth on Exhibit 1. Such payment is due and payable as set forth inMedical Imaging’s invoices. The Members will be responsible for any and all federal, state, county or municipal sales or use tax,healthcare tax, excise, customs charges, duties or similar charges, or any other tax assessment (other than that assessed againstMedical Imaging’s income), license, fee or other charge lawfully assessed or charged on the sale, transportation, or otherdisposition of Technelite® Generators.” 5. Section V. Section V. (A)(1) “Term” is amended by deleting such section in its entirety and replacing therewith the following: “1. The term of this Agreement (“Term”) shall commence on the Effective Date and shall expire upon the earlier of (i) December 31,2013, or (ii) termination of the Agreement pursuant to Section V(A)(2) below.” 6. Exhibit 1. Exhibit 1 is amended by deleting such exhibit in its entirety and replacing therewith Exhibit 1 attached hereto. 7. General. Except as specifically modified hereby, the terms and provisions of the Agreement remain in full force and effect and otherwiseunmodified. This Amendment shall be effective from and after the Amendment Effective Date and is governed by and construed in accordance withthe laws of the State of New York, without giving effect to the conflict of laws provisions thereof. The Agreement, as amended hereby, constitutes theentire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior or contemporaneous agreementsbetween the parties relating to the subject matter hereof (whether written or oral). This Amendment may be executed in one or more counterparts, andby the different parties in separate counterparts, each of which when executed is deemed to be an original but all of which when taken together shallconstitute one and the same agreement. [Signature page follows.] 3 IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized officers as of the date first set forth above. UNITED PHARMACY PARTNERS, INC.LANTHEUS MEDICAL IMAGING, INC. By:/s/ Perry PolsinelliBy:/s/ Donald R. Kiepert Name:Perry PolsinelliName:Donald R. Kiepert Title:President/CEOTitle:President & CEO Date:12/7/11Date:12/14/11 4 Exhibit 1 NOTICE OF INCENTIVE PROGRAMS AND PRICINGFOR SESTAMIBI PRODUCT AND TECHNELITE® GENERATORS Lantheus Medical Imaging, Inc. (“Medical Imaging”) is pleased to make the following Program for Technelite® Generators, Sestamibi Product, andThallium available to all Members (each, a “Member”) of United Pharmacy Partners, Inc. (“UPPI”). All capitalized terms used but not otherwise definedherein will have the meanings set forth in Schedule A. The terms of this notice are confidential and are subject to the confidentiality provisions of Section 5.11of your Standard Cardiolite® Terms as in effect from time to time. I TechneLite® Generators A. The initial pricing for TechneLite® Generators, effective as of the Amendment Effective Date, for the Month of January 2012 is set forth in ColumnA of the TechneLite® Pricing Grid attached hereto as Schedule B (the “TechneLite® Pricing Grid”). B. Except as otherwise set forth herein, thereafter and for the balance of the Term, pricing for the then-current Month will be determined in accordancewith the TechneLite® Pricing Grid based on the average number of curies per week purchased by Members in the then applicableRadiopharmaceutical Reference Month, as follows: a. if Members purchase a weekly average of **** curies of TechneLite®, as measured over the then applicable Radiopharmaceutical ReferenceMonth, the pricing for TechneLite® Generators for the Month immediately following such Radiopharmaceutical Reference Month (the “then-current Month”) shall be as set forth in Column A of the TechneLite® Pricing Grid; b. if Members purchase a weekly average of **** curies of TechneLite®, as measured over the then applicable Radiopharmaceutical ReferenceMonth, the pricing for TechneLite® Generators for the then-current Month shall be as set forth in Column B of the TechneLite® PricingGrid; and c. if Members purchase a weekly average of more than **** curies of TechneLite®, as measured over the then applicableRadiopharmaceutical Reference Month, the pricing for TechneLite® Generators for the then-current Month shall be as set forth in Column Cof the TechneLite® Pricing Grid. C. Medical Imaging shall have the right to increase pricing set forth in the TechneLite® Pricing Grid on ****, provided that such increases will belimited to no more than **** percent (****%). In addition, if Members purchase less than a weekly average of **** curies of TechneLite®, asmeasured over the then applicable Radiopharmaceutical Reference Month, Medical Imaging shall have the right to increase pricing for **** for thethen-current Month to the then-effective supply pricing for **** (the “Current Supply Pricing”). The Current 5 Supply Pricing for January 2012 is attached hereto as Schedule C. Medical Imaging reserves the right to change such pricing upon **** (****)days prior written notice. D. In calculating the monthly purchases of TechneLite® Generators, Medical Imaging will take into consideration the total number of curies purchasedplus the number of Technelite® Generator Unshipped Curies, provided, however, that curies of TechneLite® purchased from Medical Imagingduring an industry shortfall or supply shortage which are incrementally greater than UPPI’s run rate during the last Radiopharmaceutical ReferenceMonth in a period of normal supply conditions shall not be measured for purposes of determining the price reductions set forth herein. II Sestamibi Product A. Members will purchase a minimum aggregate amount of **** of Sestamibi Product during each Quarter (the “Sestamibi Quarterly Minimum”)commencing **** and at all times thereafter. For purposes of clarity, the Parties acknowledge that all of the purchases of Sestamibi Product byUPPI’s Members from Medical Imaging in the applicable Radiopharmaceutical Reference Quarter will be included in the calculation to determine ifthe Sestamibi Quarterly Minimum has been achieved regardless of whether such purchases of Sestamibi Product are made as spot or standingorders. B. Pricing for Sestamibi Product effective as of **** will be as follows: a. **** will be $****; and b. **** will be $****. C. If Members fail to purchase the Sestamibi Quarterly Minimum in the Radiopharmaceutical Reference Quarter, in addition to any other remedy itmay have, Medical Imaging shall have the right to change each Member’s **** pricing for the Quarter immediately following suchRadiopharmaceutical Reference Quarter (the “then-current Quarter”) to the **** for ****, effective as of the first day of the then-current Quarter,regardless of UPPI’s then-current **** volume, unless UPPI purchases the shortfall in the Sestamibi Quarterly Minimum no later than **** (****)days after the Radiopharmaceutical Reference Quarter. III Thallium A. Commencing as of ****, Members will pay a price for Thallium of $**** per millicurie. B. Thereafter and for the balance of the Term, Members will pay a price of $**** per millicurie for Thallium provided that the number of millicuriesof Thallium purchased by Members, in aggregate, in the Radiopharmaceutical Reference Month is greater than **** millicuries (the “ThalliumMonthly Minimum”). If in any Radiopharmaceutical Reference Month the number of Thallium millicuries purchased falls below the ThalliumMonthly Minimum, the price per millicurie for Thallium will be changed to $**** per millicurie in the then-current Month. 6 IV Combo Pack Pricing for Standing Orders A. Notwithstanding the pricing described in Articles I and II of this Exhibit 1, each Member and Member Radiopharmacy Family (on behalf of eachMember within such Member Radiopharmacy Family) that places a **** standing order for TechneLite® Generators on **** of each week, togetherwith a **** standing order of at least **** (****) **** of Sestamibi Product, for a period of at least **** (****) **** shall be entitled to thefollowing pricing for such standing orders: a. the pricing for TechneLite® Generators for such orders shall be as set forth in Column D of the TechneLite® Pricing Grid; and b. **** will be $****. Medical Imaging reserves the right, in its reasonable discretion, to change the number or size of TechneLite® Generators set forth in Column D of theTechneLite® Pricing Grid or change the manufacturing days available for such standing orders of TechneLite® Generators, upon **** (****) daysprior written notice. B. The pricing for such standing orders will be available to all Members from **** to ****. Thereafter and for the balance of the Term, Memberswill be entitled to this pricing for standing orders in the then-current Month only if Members purchase a **** average of at least **** curies ofTechneLite®, as measured over the then applicable Radiopharmaceutical Reference Month (i.e., the volumes required for Columns C and D of theTechneLite® Pricing Grid). If Members purchase less than a **** average of **** curies of TechneLite®, as measured over the then applicableRadiopharmaceutical Reference Month, the pricing for TechneLite® Generators and Sestamibi Product for the then-current Month (includingstanding orders) will be as described in Articles I and II of this Exhibit 1. Members will be able to participate in this pricing program for standingorders in the then-current Month only when the **** average volume of TechneLite® in the then applicable Radiopharmaceutical Reference Month isat least **** curies. V Other Terms A. The terms of the existing Exhibit I of the Standard Cardiolite® Terms are being modified as set forth herein. All references to Exhibit I to theStandard Cardiolite® Terms will be understood to reference and incorporate the terms contained herein. For purposes of clarity, the Partiesacknowledge and agree that all related rebate or incentive programs offered by Medical Imaging to Members or between Medical Imaging andindividual Members or Member Radiopharmacy Families are no longer applicable and have no further force and effect. B. All standing orders will be subject to a **** cancellation policy. Members will continue to provide Medical Imaging with the Required MonthlyVial and Unit Dose Report for **** (as described in Section 2.07(b)(i) of the Standard Cardiolite® Terms and Conditions). C. Any and all terms and conditions, if any, contained within the Standard Cardiolite® Terms that are inconsistent with this notice are hereby deemedto be amended and modified to be consistent with and governed by the provisions hereof. 7 D. Notwithstanding any other provision herein to the contrary, Medical Imaging may increase the Technelite® Generator purchase prices to reflect anymaterial change in costs of molybdenum. A change in such costs is considered material if the increase in the cost of molybdenum over any ****(****) day period (a “Moly Cost Increase Period”) is more than **** percent (****%). In the event of such a material increase, Medical Imagingshall be entitled to increase the Technelite® Generator purchase prices to reflect the incremental increase in such costs over **** percent (****%)starting as of when such costs are actually incurred by Medical Imaging, provided that Medical Imaging provides UPPI **** (****) days writtennotice and reasonable documentation supporting such change in costs. Medical Imaging shall not implement the type of price increase detailed in thisparagraph more than **** per calendar year. E. Each Member hereby represents and warrants that it will properly store, use and dispose of all materials provided by Medical Imaging inaccordance with any instructions set forth on the applicable product labels, the rules and regulations promulgated by the U.S. Nuclear RegulatoryCommission and all other applicable local, state and federal government regulations. F. Notwithstanding anything in Agreements to the contrary, the Agreement may be freely assigned by Medical Imaging. G. In accordance with Section 5.04 of the Standard Cardiolite® Terms, each Member shall report all AEs, Product Quality Complaints and SpecialSituations to Medical Imaging within 24 hours of the date that Member first becomes aware of an AE, Product Quality Complaint or SpecialSituation associated with a Sestamibi Product, TechneLite® Generator or any other product of Medical Imaging that is reported to Member or ofwhich Member or any of its agents, including local radiopharmacists, are otherwise made aware. In addition, Member shall provide MedicalImaging with immediate (or as soon as practicable) notification of any fatal or life-threatening Serious AE. The report for AEs and Special Situations should contain as much information as is available concerning such event to permit Medical Imaging tofile a MedWatch Form 3500A report that satisfies regulatory guidelines for content and timeliness. The reports for Product Quality Complaints shallinclude the following information: name and contact information of reporter; product/material name or description; lot number; number of defectiveunits; number of complaint samples available for return; indication of whether a patient was dosed; and description of the complaint condition. Member shall insure prompt follow-up as necessary to provide Medical Imaging with reasonably complete information known or otherwise availableto Member with respect to any Serious AE, AEs, Product Quality Complaints or Special Situations. If follow-up information is received afterreporting a Serious AE, AE, Product Quality Complaint or Special Situation, Member also must report such information. 8 All reports and any related communications made hereunder shall be made as follows (or to such other address, contact person, telephone number,facsimile number or e mail address as may be specified by Medical Imaging): United StatesOutside US/CanadaPhone: 1-800-343-7851Phone: 978-667-9531 ·Press Option 2 for Adverse Events or SpecialSituations· Press Option 2 for Adverse Events or Special Situations ·Press Option 3 for Product Quality Complaints· Press Option 3 for Product Quality Complaints Fax: 1-866-880-9343Fax: 734-929-6688 E-Mail: lantheussafety@i3global.com i3 Drug Safety is the pharmacovigilance partner of Lantheus Medical Imaging. “AE” means any untoward medical occurrence in a patient or clinical investigation subject, which results in any unfavorable and unintended sign,symptom, or disease temporally associated with the use of a medicinal product, whether or not considered, related to the medicinal product. Allnoxious and unintended responses to a medicinal product related to any dose should be considered adverse drug reactions. Responses to a medicinalproduct means that a causal relationship between the product and AE is at least a reasonable possibility (i.e., the relationship cannot be ruled out orcannot be determined). The failure of a Sestamibi Product to localize as expected shall not be deemed an adverse experience, whereas a significantfailure of expected pharmacologic action would be considered an adverse event. “Product Quality Complaint” means an oral or written report, originating from an external or internal source, stating that a product marketed byMedical Imaging is not meeting the customer’s expectations in relation to identity, quality, effectiveness or performance of the product. “Serious AE” means any untoward medical occurrence that at any dose: results in death; is life-threatening (defined as an event in which the subjector patient was at risk of death at the time of the event; it does not refer to an event which hypothetically might have caused death if it were moresevere); requires inpatient hospitalization or causes prolongation of existing hospitalizations; results in persistent or significant disability/incapacity;results in a congenital anomaly/birth defect; is an important medical event (defined as a medical event(s) that may not be immediately life-threateningor result in death or hospitalization, but based upon appropriate medical and scientific judgment, may jeopardize the patient/subject or may requireintervention, e.g., medical surgical, to prevent one of the other serious outcomes listed in the definition above). Examples of such events include, butare not limited to, intensive treatment in an emergency room or at home for allergic bronchospasm; blood dyscrasias or convulsions that do not resultin hospitalization. For reporting purposes, Medical Imaging also considers the occurrences of cancer, pregnancy, or overdose (accidental orintentional and regardless of adverse outcome) as events that must be expeditiously reported as important medical events. 9 “Special Situation” means any outcomes of pregnancies of patients exposed to product, AE during breastfeeding, data on use of product in children,lack of efficacy (effect), transmission of an infectious disease with product, overdose, misuse, or abuse, medication errors or AE in compassionateuse/named patient use. For reporting purposes, Medical Imaging considers Special Situations to be AEs that must be reported within 24 hours. H. Except as set forth above, notwithstanding anything in the Individual Pharmacy Agreements to the contrary, upon any amendment, modification orsupplement to the Standard Cardiolite® Terms, Medical Imaging shall be required at any time to provide written notice thereof solely to UPPI at thefollowing address: United Pharmacy Partners, Inc.5400 Laurel Springs Parkway, Suite 405Suwanee, GA 30024Attn: Perry Polsinelli, President & CEO All notices to be provided to Medical Imaging hereunder shall be delivered to: Lantheus Medical Imaging, Inc.331 Treble Cove Road,North Billerica, MassachusettsAttn: Cyrille Villeneuve, Vice President, Chief Commercial Officer 10 Schedule A Defined Terms A.Capitalized terms not otherwise defined herein shall have the meanings specified in the Standard Cardiolite® Terms. B.“Agreements” means collectively the Agreement, the Individual Pharmacy Agreements, and the Standard Cardiolite® Terms, each as in effectfrom time to time. C.“Good Standing” means the status of having obtained and retained all federal, state and local licenses and other requirements necessary forthe lawful conduct of business as a commercial radiopharmacy. D.“Individual Pharmacy Agreements” means the Cardiolite® License and Supply Agreements between Medical Imaging and a Member orMember Radiopharmacy Family, each as in effect from time to time. E.“Member” means a Member of UPPI in Good Standing. F.“Member Radiopharmacy Family” means **** (****) or more commercially established radiopharmacies in Good Standing and which aredirectly or indirectly Controlled by or under common Control with the same Member. G.“Month” means a calendar month. H.“Radiopharmaceutical Reference Month” means for Technelite® and Thallium pricing, in any then-current Month, the immediately precedingMonth. I.“Radiopharmaceutical Reference Quarter” means for Sestamibi Product pricing, in any then-current calendar Quarter, the immediatelypreceding Quarter. J.“Quarter” means a calendar quarter. K.“Technelite® Generators” means technetium Tc99m generators sold under the trademark Technelite®. L.“Technelite® Generator Unshipped Curies” means the number of curies that are not shipped if a Technelite® Generator order, accepted byMedical Imaging, is not filled as ordered resulting in no shipment or a shipment of fewer curies than originally specified on the order. M.“**** Sestamibi Product” means ****. 11 Schedule B TechneLite® Pricing Grid **** TechneLite® Generators manufactured on Sunday are denoted with a “-U” above.* Pricing currently available for certain standing orders on ****. 12 Schedule C **** TechneLite® Generators manufactured on Sunday are denoted with a “-U” above. Medical Imaging reserves the right to change such Supply pricing upon **** (****) days prior written notice. 13Exhibit 10.39 EXECUTION COPY EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT (the “Agreement”) dated March 10, 2008 by and between Lantheus Medical Imaging, Inc., a Delawarecorporation (the “Company”) and Michael Duffy (“Executive”). The Company desires to employ Executive and to enter into an agreement embodying the terms of such employment; Executive desires to accept such employment and enter into such an agreement; In consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows: 1. At-Will Employment. Executive’s employment with the Company commenced as of January 16, 2008 (the “Effective Date”). Such employment shall be “at-will” employment. Subject to the terms of this Agreement, the Company may terminate Executive’s employment and thisAgreement for any reason at any time, with or without prior notice and with or without Cause (as defined herein), but subject to certain terms set forth inSection 8 below. Similarly, subject to the terms of this Agreement, Executive may terminate his employment at any time, subject to Section 8 below. 2. Position. a. Commencing as of the Effective Date, Executive shall serve as the Company’s Vice President and General Counsel andshall report to the Chief Executive Officer of the Company (the “CEO”). Executive shall have such duties and responsibilities as are consistent with such titleand position and/or such other duties and responsibilities as may be assigned from time to time by the CEO or the Board of Directors of Lantheus MIHoldings, Inc. (the “Board”). If requested, Executive shall serve as an officer or a member of the Board of Directors of any of the Company’s subsidiaries oraffiliates without additional compensation. b. Executive will devote Executive’s full business time and best efforts to the performance of Executive’s duties hereunderand will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of suchservices either directly or indirectly, without the prior written consent of the Board; provided that nothing herein shall preclude Executive, subject to the priorapproval of the Board, from accepting appointment to or continuing to serve on any board of directors or trustees of any business corporation or any charitableorganization; provided in each case, and in the aggregate, that such activities do not conflict or interfere with the performance of Executive’s duties hereunderor conflict with Section 9.  3. Base Salary. During Executive’s employment hereunder, the Company shall pay Executive a base salary at the annual rate of$265,000, payable in regular installments in accordance with the Company’s payment practices from time to time. Executive shall be entitled to annualperformance and salary review, and any increase in base salary shall be in the sole discretion of the Compensation Committee of the Board. Executive’sannual base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary”. 4. Annual Bonus. With respect to each fiscal year ending during Executive’s employment hereunder, Executive shall be eligible toearn an annual bonus award of up to thirty percent (30%) of Executive’s Base Salary (the “Target”) based upon achievement of annual EBITDA and/or otherperformance targets established by the Compensation Committee of the Board within the first three months of each fiscal year (the “Annual Bonus”). TheAnnual Bonus, if any, shall be paid to Executive at the same time as an annual bonus is paid to other similarly situated executives; provided, that Executive isan active employee in good standing with the Company on such date of payment. 5. Equity. Executive shall be eligible to receive equity awards from time to time pursuant to the Lantheus MI Holdings, Inc. 2008Equity Incentive Plan, commensurate with Executive’s level of responsibilities and the level of awards for similarly situated executives, as determined by theCompensation Committee of the Board in its sole discretion. The terms and conditions of any such equity awards shall be set forth in a separate awardagreement. 6. Employee Benefits. During Executive’s employment hereunder, Executive shall be entitled to participate in the Company’shealth, life and disability insurance, and retirement and fringe employee benefit plans as in effect from time to time (collectively “Employee Benefits”), on thesame basis as those benefits are generally made available to other similarly situated executives of the Company. 7. Business Expenses. During Executive’s employment hereunder, reasonable business expenses incurred by Executive in theperformance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies. 8. Termination. Executive’s employment hereunder may be terminated by either party at any time and for any reason; provided thatExecutive will be required to give the Company at least 60 days advance written notice of any resignation of Executive’s employment. Notwithstanding anyother provision of this Agreement, the provisions of this Section 8 shall exclusively govern Executive’s rights upon termination of employment with theCompany and its affiliates. 2 a. By the Company For Cause or By Executive Resignation. (i) Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) and shall terminateautomatically upon Executive’s resignation; provided that Executive will be required to give the Company at least 60 days advance written notice of aresignation. (ii) For purposes of this Agreement, “Cause” shall mean (A) Executive’s breach of any fiduciary duty or material legal orcontractual obligation to the Company or any of its affiliates (including, without limitation, pursuant to a Company or affiliate policy or the restrictivecovenants set forth in Section 9 or Section 10 of this Agreement or any other applicable restrictive covenants between the Executive and the Company or any ofits affiliates), or the Company’s direct or indirect equity holders, (B) Executive’s failure to follow the reasonable instructions of the CEO or the Board, whichare consistent with Section 2(a) hereof (other than as a result of total or partial incapacity due to physical or mental illness), which breach, if curable, is notcured within 30 days after notice to Executive specifying in reasonable detail the nature of such breach, or, if cured, recurs within 180 business days,(C) Executive’s gross negligence, willful misconduct, fraud, insubordination, acts of dishonesty or conflict of interest relating to the Company or any of itsaffiliates or direct or indirect equityholders or (D) Executive’s commission of any misdemeanor which has a material impact on the affairs, business orreputation of the Company or any of its affiliates or Executive’s indictment for, or plea of nolo contendere to, a crime constituting a felony under the laws ofthe United States or any state thereof. (iii) If Executive’s employment is terminated by the Company for Cause, or if Executive resigns, Executive shall be entitledto receive (A) the Base Salary through the date of termination and (B) reimbursement, within 30 days following submission by Executive to the Company ofappropriate supporting documentation, for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior tothe date of Executive’s termination; provided claims for such reimbursement (accompanied by appropriate supporting documentation) are submitted to theCompany within 30 days following the date of Executive’s termination of employment. In the event of Executive’s resignation (but, for the avoidance of doubt,not upon a termination of employment by the Company for Cause), Executive shall also be entitled to such vested or accrued Employee Benefits, if any, as towhich Executive may be entitled under the employee benefit plans of the Company (the amounts described in clauses (A) and (B) hereof, together with allaccrued Employee Benefits, if any, being referred to as the “Accrued Rights”). Following such termination of Executive’s employment by the Company for Cause or resignation by Executive, except as set forth in thisSection 8(a)(iii), Executive shall have no further rights to any compensation or any other benefits under this Agreement. 3 b. Disability or Death. (i) Executive’s employment hereunder shall terminate upon Executive’s death and may be terminated by the Company dueto Executive’s physical or mental illness, injury or infirmity which is reasonably likely to prevent and/or prevents Executive from performing his essential jobfunctions for a period of (A) ninety (90) consecutive calendar days or (B) an aggregate of one hundred twenty (120) calendar days out of any consecutivetwelve (12) month period (such illness, injury or infirmity is hereinafter referred to as “Disability”). Any question as to the existence of the Disability ofExecutive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable toExecutive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician andthose two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company andExecutive shall be final and conclusive for all purposes of the Agreement. (ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (asthe case may be) shall be entitled to receive the Accrued Rights. Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 8(b)(ii), Executive shall have nofurther rights to any compensation or any other benefits under this Agreement. c. By the Company Without Cause. (i) If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability),Executive shall be entitled to receive: (A) the Accrued Rights; (B) subject to Executive’s continued compliance with the provisions of Sections 9, 10 and 11 and contingent uponExecutive executing an effective release of claims against the Company and its affiliates (i.e., not revoked), in the form provided as Exhibit A hereto(the “Release”), a pro rata portion of the Target Annual Bonus amount that Executive would have been eligible to receive pursuant to Section 4 hereofin such year of termination, based upon the percentage of the fiscal year that shall have elapsed through the date of Executive’s termination ofemployment, payable at such time as the Annual Bonus would have otherwise been payable to Executive pursuant to Section 4 had Executive’semployment not terminated; (C) subject to Executive’s continued compliance with the provisions of Sections 9, 10 and 11 and contingent uponExecutive’s 4 execution of an effective Release (i.e., not revoked), continued payment of the Base Salary in accordance with the Company’s normal payrollpractices for (x) six (6) months after the date of termination if such termination occurs on or prior to the second anniversary of the Effective Date and(y) twelve (12) months after the date of termination if such termination occurs after the second anniversary of the Effective Date (such six- or twelve-month period, as applicable, being the “Severance Period”); provided that the aggregate amount described in this clause (C) shall be reduced by thepresent value of any other cash severance or termination benefits payable to Executive under any other plans, programs or arrangements of theCompany or its affiliates or applicable law; provided, further, each payment of Base Salary is intended to constitute a separate payment within themeaning of Section 409A of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder (collectively, the “Code”);and (D) subject to Executive’s continued compliance with the provisions of Sections 9, 10 and 11 and contingent uponExecutive’s execution of an effective Release (i.e., not revoked), continued life insurance and group medical coverage during the Severance Period forExecutive and Executive’s eligible dependents upon the same terms as provided to similarly situated executive officers of the Company and at thesame coverage levels as in effect for active employees during the Severance Period; provided that such continued life insurance and/or group medicalcoverage shall cease upon Executive becoming eligible for life insurance and/or medical coverage, as applicable, from a prior employer or Executivebecoming employed by another employer and eligible for life insurance and/or medical coverage, as applicable, with such other employer. (ii) Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’sdeath or Disability), except as set forth in Section 8(c)(i), Executive shall have no further rights to any compensation or any other benefits under thisAgreement. d. Notice of Termination. Any purported termination of employment by the Company or by Executive (other than due toExecutive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13(j) hereof. For purposes ofthis Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shallset forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. e. Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign,as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committeesthereof) of any of the Company’s subsidiaries or affiliates. 5 9. Non-Competition. a. Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and itsaffiliates and accordingly agrees as follows: (1) During Executive’s employment with the Company and, for a period of one year following the date Executive ceases to beemployed by the Company (the “Restricted Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with anyperson, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly orindirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client: (i) with whom Executive had personal contact or dealings on behalf of the Company during the one-year period precedingExecutive’s termination of employment; (ii) with whom employees reporting to Executive had personal contact or dealings on behalf of the Company during the oneyear immediately preceding the Executive’s termination of employment; or (iii) for whom Executive had direct or indirect responsibility during the one year immediately preceding Executive’stermination of employment. (2) During the Restricted Period, Executive will not directly or indirectly: (i) engage in any business that competes with the business or businesses of the Company or any of its affiliates, namely inthe testing, development and manufacturing services for the development, manufacture, distribution, marketing or saleof radiopharmaceutical products, contrast imaging agents and/or radioactive generators for the global medical imagingand pharmaceutical industries, and including, without limitation, businesses which the Company or its affiliates havespecific plans to conduct in the future and as to which Executive is aware of such planning (a “CompetitiveBusiness”); (ii) enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of anyPerson) who or which engages in a Competitive Business; 6 (iii) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly orindirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or (iv) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of thisAgreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members orinvestors of the Company or its affiliates. (3) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly, own, solely as an investment,securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on theover-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly orindirectly, own 5% or more of any class of securities of such Person. (4) During the Restricted Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with anyPerson, directly or indirectly: (i) solicit or encourage any employee or consultant of the Company or its affiliates to leave the employment of, or ceaseproviding services to, the Company or its affiliates; or (ii) hire any such employee or consultant who was employed by or providing services to the Company or its affiliates as ofthe date of Executive’s termination of employment with the Company or who left the employment of or ceased providingservices to the Company or its affiliates coincident with, or within one year prior to or after, the termination ofExecutive’s employment with the Company. b. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained inthis Section 9 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restrictioncontained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemedamended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be 7 amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. c. The provisions of this Section 9 shall survive the termination of this Agreement and Executive’s employment for anyreason. 10. Non-Disparagement. The Executive shall not at any time (whether during or after Executive’s employment with the Company)make, or cause to be made, any statement or communicate any information (whether oral or written) that disparages or reflects negatively on the Company orany of its affiliates, except for truthful statements that may be made pursuant to legal process, including without limitation in litigation, arbitration or similardispute resolution proceedings. This Section 10 shall survive the termination of this Agreement and Executive’s employment for any reason. 11. Confidentiality; Intellectual Property. a. Confidentiality. (i) Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use forthe benefit, purposes or account of Executive or any other Person; or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to anyPerson outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidentialinformation — including, without limitation, trade secrets, know-how, research and development, software, databases, inventions, processes, formulae,technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors,customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatoryactivities and approvals — concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or anythird party that has disclosed or provided any of same to the Company on a confidential basis (“Confidential Information”) without the prior writtenauthorization of the Board. (ii) Confidential Information shall not include any information that is (A) generally known to the industry or the publicother than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties; (B) made legitimately availableto Executive by a third party without breach of any confidentiality obligation; or (C) required by law to be disclosed; provided that Executive shall giveprompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by theCompany to obtain a protective order or similar treatment. (iii) Except as required by law, Executive will not disclose to anyone, other than Executive’s immediate family and legal orfinancial advisors, the 8 existence or contents of this Agreement; provided that Executive may disclose to any prospective future employer the provisions of Sections 9, 10 and 11 ofthis Agreement provided they agree to maintain the confidentiality of such terms. (iv) Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and notthereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret,trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately return tothe Company all Company property and destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium(including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing storedor located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate tothe business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diariesthat do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any otherConfidential Information of which Executive is or becomes aware and promptly return any other Company property in Executive’s possession. b. Intellectual Property. (i) If Executive has created, invented, designed, developed, contributed to or improved any works of authorship,inventions, intellectual property, materials, documents or other work product (including without limitation, research, reports, software, databases, systems,applications, presentations, textual works, content, or audiovisual materials) (“Works”), either alone or with third parties, prior to Executive’s employmentby the Company, that are relevant to or implicated by such employment (“Prior Works”), Executive hereby grants the Company a perpetual, non-exclusive,royalty-free, worldwide, assignable, sublicensable license under all rights and intellectual property rights (including rights under patent, industrial property,copyright, trademark, trade secret, unfair competition and related laws) therein for all purposes in connection with the Company’s current and futurebusiness. A list of all such material Works as of the date hereof is attached hereto as Exhibit B. (ii) If Executive creates, invents, designs, develops, contributes to or improves any Works, either alone or with thirdparties, at any time during Executive’s employment by the Company and within the scope of such employment and/or with the use of any Company resources(“Company Works”), Executive shall promptly and fully disclose such works to the Company and hereby irrevocably assigns, transfers and conveys, tothe maximum extent permitted by applicable law, all rights and intellectual property rights therein (including rights under patent, industrial property,copyright, trademark, trade secret, unfair competition and related laws) to the Company to the extent ownership of any such rights does not vest originally inthe Company. 9 (iii) Executive agrees to keep and maintain adequate and current written records (in the form of notes, sketches, drawings,and any other form or media requested by the Company) of all Company Works. The records will be available to and remain the sole property and intellectualproperty of the Company at all times. (iv) Executive shall take all requested actions and execute all requested documents (including any licenses or assignmentsrequired by a government contract) at the Company’s expense (but without further remuneration) to assist the Company in validating, maintaining, protecting,enforcing, perfecting, recording, patenting or registering any of the Company’s rights in the Prior Works and Company Works. If the Company is unable forany other reason to secure Executive’s signature on any document for this purpose, then Executive hereby irrevocably designates and appoints the Companyand its duly authorized officers and agents as Executive’s agent and attorney-in-fact, to act for and on Executive’s behalf to execute any documents and to doall other lawfully permitted acts in connection with the foregoing. (v) Executive shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal,transfer or provide access to, or share with the Company any confidential, proprietary or non-public information or intellectual property relating to a formeremployer or other third party without the prior written permission of such third party. Executive hereby indemnifies, holds harmless and agrees to defend theCompany and its officers, directors, partners, employees, agents and representatives from any breach of the foregoing covenant. Executive shall comply withall relevant policies and guidelines of the Company, including regarding the protection of confidential information and intellectual property and potentialconflicts of interest. Executive acknowledges that the Company may amend any such policies and guidelines from time to time, and that Executive remains atall times bound by their most current version. c. The provisions of this Section 11 shall survive the termination of this Agreement and Executive’s employment for anyreason. 12. Specific Performance. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breachof any of the provisions of Section 9, Section 10 or Section 11 would be inadequate and the Company would suffer irreparable damages as a result of suchbreach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies atlaw, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreementand obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedywhich may then be available. 10 13. Miscellaneous. a. Governing Law. This Agreement shall be governed by, construed and interpreted in all respects, in accordance with thelaws of the State of New York, without regard to conflicts of laws principles thereof. b. Entire Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to theemployment of Executive by the Company and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether writtenor oral between the Executive and the Company or any of its affiliates with respect to the Executive’s employment, including, without limitation, the Offer ofEmployment by and between the Company and the Executive, dated as of January 11, 2008. There are no restrictions, agreements, promises, warranties,covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not bealtered, modified, or amended except by written instrument signed by the parties hereto. c. No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shallnot be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term ofthis Agreement. d. Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal orunenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. e. Assignment. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegableby Executive. Any purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. This Agreement may be assigned by the Company to a person or entity which is an affiliate or a successor in interest to substantially all of the businessoperations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of suchaffiliate or successor person or entity. f. Set Off. The Company’s obligation to pay Executive the amounts provided and to make the arrangements providedhereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates. g. Dispute Resolution. Except with respect to Sections 9, 10, 11 and 12 hereof, any controversy or claim arising out of orrelated to any provision of this Agreement that cannot be mutually resolved by the parties hereto shall be settled by final, binding and nonappealable arbitrationin New York, NY by a single arbitrator. 11 Subject to the following provisions, the arbitration shall be conducted in accordance with the applicable rules of American Arbitration Association then ineffect. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance withapplicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority tomodify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or byvirtue of the Agreement. Each party shall be responsible for its own expenses relating to the conduct of the arbitration or litigation (including attorney’s feesand expenses) and shall share the fees of the American Arbitration Association and the arbitrator equally. h. Compliance with Section 409A of the Code. The parties acknowledge and agree that the interpretation of Section 409Aof the Code and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations becomeavailable. Anything to the contrary herein notwithstanding, all benefits or payments provided by the Company to the Executive that would be deemed toconstitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code are intended to comply with Section 409A of the Code. If,however, any such benefit or payment is deemed to not comply with Section 409A of the Code, the Company and the Executive agree to renegotiate in goodfaith any such benefit or payment (including, without limitation, as to the timing of any severance payments payable hereof), if possible, so that either(i) Section 409A of the Code will not apply or (ii) compliance with Section 409A of the Code will be achieved. The Company shall consult with Executive ingood faith regarding the implementation of the provisions of this Section 13(h); provided that neither the Company nor any of its employees or representativesshall have any liability to Executive with respect to thereto. i. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legalrepresentatives, executors, administrators, successors, heirs, distributees, devisees and legatees. j. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall bein writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United Statesregistered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address aseither party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 12 If to the Company:Lantheus Medical Imaging, Inc.331 Treble Cove Rd.Bldg. 600-2 N.Billerica, MA 01862Attention: Don Kiepert With a copy to:Lantheus MI Holdings, Inc.c/o Avista Capital Partners, LP65 East 55th Street, 18th FloorNew York, New York 10022Attention: Ben Silbert, Esq. If to Executive:To Executive’s address on file with theCompany k. Executive Representation. Executive hereby represents to the Company that (i) Executive has been provided withsufficient opportunity to review this Agreement and has been advised by the Company to conduct such review with an attorney of his choice and (ii) theexecution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitutea breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. l. Cooperation. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (orany appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder. This provision shall survive anytermination of this Agreement or Executive’s employment. m. Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, stateand local taxes as may be required to be withheld pursuant to any applicable law or regulation. n. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effectas if the signatures thereto and hereto were upon the same instrument. [Signatures on following page] 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. Lantheus Medical Imaging, Inc.MICHAEL DUFFY /s/ Donald Kiepert/s/ Michael P. DuffyBy:Donald KiepertTitle:President and Chief Executive Officer [Signature Page to Duffy Employment Agreement]  EXHIBIT A RELEASE This RELEASE (“Release”) dated as of , 20 between Lantheus Medical Imaging, Inc., a Delaware corporation (the “Company”), andMichael Duffy (the “Executive”). WHEREAS, the Company and the Executive previously entered into an employment agreement dated March , 2008 (the “EmploymentAgreement”); and WHEREAS, the Executive’s employment with the Company has terminated effective , 20 ; NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Employment Agreement, the Companyand the Executive agree as follows: 1. Executive agrees to and does waive any claims he may have for employment by the Company and agrees not to seek such employment orreemployment by the Company in the future. The Executive, on his own behalf and on behalf of his heirs, estate and beneficiaries, further does hereby releasethe Company, and in such capacities, any of its subsidiaries or affiliates, and each of their respective past, present and future officers, directors, agents,employees, shareholders, investors, employee benefit plans and their administrators or fiduciaries, insurers of any such entities, and its and their successorsand assigns and others related to such entities from any and all claims made, to be made, or which might have been made of whatever nature, whether knownor unknown, from the beginning of time, including those that arose as a consequence of his employment with the Company, or arising out of the separationfrom the Company, the severance of such employment relationship, or any act committed or omitted during or after the existence of such employmentrelationship, all up through and including the date on which this Release is executed, including, but not limited to, those which were, could have been or couldbe the subject of an administrative or judicial proceeding filed by the Executive or on his behalf under federal, state or local law, whether by statute, regulation,in contract or tort, and including, but not limited to, every claim for front pay, back pay, wages, bonus, fringe benefit, any form of discrimination, wrongfultermination, tort, emotional distress, pain and suffering, breach of contract, fraud, defamation, compensatory or punitive damages, interest, attorney’s fees,reinstatement or reemployment, and any rights or claims under the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans withDisabilities Act, the Family and Medical Leave Act, the Civil Rights Act of 1964, Title VII, as amended, the Civil Rights Act of 1991, the EmployeeRetirement Income Security Act of 1974, as amended, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the New York State HumanRights Law, the New York City Human Rights Law, the Massachusetts Civil Rights Act, the Massachusetts Equal Pay and Maternity Benefits Law, theMassachusetts Equal Rights for Elderly and Disabled Law, the Massachusetts Small Necessities Leave Act, the Massachusetts Age Discrimination Law, orany other federal, state or local law relating to employment, discrimination in employment, termination of employment, wages, benefits or otherwise. TheExecutive acknowledges and agrees that even though claims and facts in addition to those now known or believed by him to exist may subsequently bediscovered, it is his intention to fully settle and release all claims he may have against the Company and the persons and entities described above, whetherknown, unknown or suspected. Employee does not waive his right to file a charge with the Equal Employment Opportunity Commission (“EEOC”) orparticipate in an investigation conducted by the EEOC; however, Employee expressly waives his right to 15 monetary or other relief should any administrative agency, including but not limited to the EEOC, pursue any claim on Employee’s behalf. 2. The Company and the Executive acknowledge and agree that the release contained in Paragraph 1 does not, and shall not be construed to, release orlimit the scope of any existing obligation of the Company and/or any of its subsidiaries or affiliates (i) to indemnify the Executive for his acts as an officer ordirector of the Company and/or its subsidiaries or affiliates in accordance with their respective charters or bylaws or under an indemnification agreement towhich the Executive and the Company or any of its subsidiaries are parties or under any applicable Directors and Officers insurance policies or under anyapplicable law or (ii) to the Executive and his eligible, participating dependents or beneficiaries under any existing group welfare (excluding severance), equity,or retirement plan of the Company in which the Executive and/or such dependents are participants. 3. The Executive acknowledges that before entering into this Release, he has had the opportunity to consult with any attorney or other advisor of theExecutive’s choice, and the Executive is hereby advised to do so if he chooses. The Executive further acknowledges that by signing this Release, he does so ofhis own free will and act, that it is his intention to be legally bound by its terms, and that no promises or representations have been made to the Executive byany person to induce the Executive to enter into this Release other than the express terms set forth herein. The Executive further acknowledges that he hascarefully read this Release, knows and understands its contents and its binding legal effect, including the waiver and release of claims set forth in Paragraph 1above. 4. The Executive acknowledges that he has been provided at least 21 days to review the Release. In the event the Executive elects to sign this Releaseprior to this 21 day period, he agrees that it is a knowing and voluntary waiver of his right to wait the full 21 days. The Executive further understand that hehas 7 days after the signing hereof to revoke this Release by so notifying the Company ([ADDRESS], Attn: [NAME]) in writing, such notice to be received bythe Company within the 7 day period. This Release shall not become effective or enforceable, and no payments or benefits under Sections 8(c)(i)(B),(C) and(D) of the Employment Agreement, as applicable, shall be made or provided, until this seven (7) day revocation period expires without the Executive havingrevoked this Release. IN WITNESS WHEREOF, the parties have executed this Release on the date first above written. Lantheus Medical Imaging, Inc. By:Name:Title: 16 MICHAEL DUFFY 17 EXHIBIT B PRIOR WORKS [None] 18Exhibit 10.40 December 7, 2011 PERSONAL AND CONFIDENTIAL Mr. Robert Gaffey32 Amherst RoadBelmont, MA 02478 Re: Continued Services and General Release Dear Bob, This letter is intended to summarize the terms of your service with Lantheus Medical Imaging, Inc. (the “Company”) as a consultant following your retirementas an employee of the Company on the Transition Date (as defined below). Please read this agreement and general release (this “Agreement”) carefully. If youagree to its terms, please sign in the space provided below and return it to me on or before January 21, 2012 as provided in Section 5.c. below. 1. Retirement; Continued Consulting Services. Unless otherwise modified or terminated prior to the Transition Date, you will be retiring as an employee ofthe Company effective as of the close of business on January 3, 2012 (the “Transition Date”). Your employment with the Company shall continue until yourretirement on the Transition Date, at which time your employment with the Company shall cease and end in all respects. Following the Transition Date andthrough March 30, 2012, you shall be a consultant to the Company and shall provide consulting services to the Company equal to an average of 24 hours perweek at an hourly rate described below, generally present at the Company’s offices. Beginning April 1, 2012 and through April 8, 2018, you shall remain as aconsultant to the Company providing consulting services at an hourly rate described below as may be determined, if at all, from time to time by the Companyin its sole discretion and mutually agreed to by you; provided, however, that such services shall not exceed an aggregate of 120 hours per calendar year (and inthe case of 2012 only, the calendar year shall be measured from April 1, 2012 through December 31, 2012). For the purposes of this Agreement, the term“Term” shall mean the period of time from the Transition Date through April 8, 2018 or such earlier date as is specified below. After April 1, 2012 you willnot be required to be present at the Company’s offices unless requested by the Company for the performance of such consulting services; it being understoodthat the Term shall automatically end on any Breach Date or the date on which the Company terminates your services hereunder for “Cause” (as defined underthe Employee Shareholders Agreement (as defined below)). 2. Compensation; Benefits. In consideration of you agreeing to provide consulting services to the Company hereunder, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, during the Term you shall receive or be entitled to the following: a. Hourly rate. You shall be entitled to compensation at the rate (the “Hourly Rate”) of (i) $200 per hour for the period from the Transition Datethrough March 31, 2012, to be paid bi-weekly in accordance with the Company’s customary pay practices, and (ii) $150.00 per hour for all periodsthereafter, to be paid within 30 days after such services are rendered subject to the confirmation thereof by the Company. b. Options. Notwithstanding the cessation of your employment with the Company on the Transition Date or anything to the contrary contained inthe Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (the “Plan”) and that certain Lantheus MI Holdings, Inc. 2008 Equity 1 Incentive Plan Option Grant Award Agreement dated as of April 8, 2008 (the “Option Agreement”), during the Term you shall be eligible to continueto vest in your outstanding options to purchase Company common stock (“Options”) pursuant to, and in accordance with, the terms of the Planand the Option Agreement, as amended hereby. c. Dividend Equivalent Rights. For the avoidance of doubt, you shall be eligible to continue to vest in your outstanding dividend equivalent rights(“Dividend Equivalent Rights”) granted to you pursuant to the terms of the Plan and that certain Lantheus MI Holdings, Inc. 2008 Equity IncentivePlan Dividend Equivalent Right Award Agreement (Time Options) dated as of March 21, 2011 and that certain Lantheus MI Holdings, Inc. 2008Equity Incentive Plan Dividend Equivalent Right Award Agreement (EBITDA Options) dated as of March 21, 2011 (collectively, the “DERAgreements”), subject to, and in accordance with, the terms and conditions of the Plan, the DER Agreements and the Option Agreement (asamended and modified by Section 3 b. of this Agreement). d. Expenses Reimbursement. During the Term, the Company shall reimburse you for reasonable and necessary expenses actually incurred by youdirectly in connection with the performance of any consulting services hereunder upon presentation of proper receipts or other proof of expenditureand in accordance with the guidelines and limitations established by the Company from time to time; provided, however, that you shall present allsuch proper receipts or other proof of expenditure promptly following the date the expense was incurred, but in no event later than one (1) week afterthe date the expense was incurred, and reimbursement shall be made promptly thereafter. e. No Other Compensation. You hereby acknowledge and agree that, except as set forth in this Agreement or as otherwise required by applicablelaw, you shall not be entitled to any other compensation or benefits from the Company as a result of the cessation of your employment with theCompany on the Transition Date, your provision of services during the Term, or the termination of the Term or your services at any time, other thanany 401(k), pension or post-retirement benefits with respect to which you are vested as of the Transition Date; it being understood that you will notbe entitled nor have any right to receive any severance as a result of the cessation of your employment with the Company or at the end of the Termunder any benefit plan or severance policy generally available to the Company’s employees or otherwise. f. Unemployment Benefits. The Company agrees that it will not contest any application you may make for unemployment benefits. TheCompany makes no promise or representation regarding your eligibility for unemployment compensation. 3. Clawback. Notwithstanding anything to the contrary contained in this Agreement, the Option Agreement or the DER Agreements, should you breach theterms and conditions of the restrictive covenants as set forth in Exhibit A attached hereto (each, a “Restrictive Covenant Breach”), then: a. Any Options that (i) vested on or after the Transition Date and that are outstanding and unexercised as of the date of any such breach (the“Breach Date”), or (ii) are outstanding and unvested as of the Breach Date, in each case, shall immediately be forfeited by you withoutconsideration; b. You may exercise any Options that vested prior to the Transition Date and that are outstanding and unexercised as of the Breach Date,subject to, and in accordance with, the terms and conditions provided in the Option Agreement and subject to the terms of the Employee 2 Shareholders Agreement (as defined below) (including the repurchase rights in favor of Lantheus MI Holdings, Inc. (“Holdings”) thereunder); and c. Any outstanding and unvested Dividend Equivalent Rights, together with any vested Dividend Equivalent Rights that have not yet beenpaid to you as of the Breach Date, in each case, shall immediately be forfeited by you without consideration. You hereby acknowledge and agree that a Restrictive Covenant Breach shall be considered a “Termination Event” for the purposes of Section 4.03 ofthe Employee Shareholders Agreement and a Breach Date shall be the “Termination Date” under the Employee Shareholders Agreement. For the purposes hereof, “Employee Shareholders Agreement” shall mean the Employee Shareholders Agreement, dated as of May 30, 2008, amongLantheus MI Holdings, Inc., Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest LLC and the employeeshareholders party thereto, as the same may be amended or modified from time to time. 4. Independent Contractor Status. a. Relationship of Parties. Both parties intend and agree that the relationship between you and the Company established by this Agreementfollowing the Transition Date is that of independent contractor, and nothing contained in this Agreement shall be construed to: (i) give the Company theauthority to direct and control your day-to-day activities; or (ii) allow you to create or assume obligations on behalf of or otherwise bind the Company. b. Independent and Discretion. The manner, means, details or methods by which you perform your obligations under this Agreement during theTerm shall be solely within your discretion. The Company shall not have the authority to, nor shall it, supervise, direct or control the manner, means, detailsor methods utilized by you to perform your obligations under this Agreement during the Term, and nothing in this Agreement shall be construed to grant theCompany any such authority. Subject to Exhibit A attached hereto, you shall be free to dispose of such portion of your time, energy and skill during the Termas you are not obligated to devote under this Agreement in such a manner as you see fit and to such persons, firms or companies as you deem advisable,limited only by the terms contained herein. Nothing in this Agreement shall be construed to interfere with or otherwise affect the rendering of services by youduring the Term in accordance with your independent judgment. You shall perform your services during the Term substantially in accordance with generallyaccepted practices and principles of the industry. c. No Benefits. The parties acknowledge and agree that, pursuant to this Agreement, during the Term, you, as an independent contractor, are notentitled to participate in any employee benefit arrangements provided by the Company to its employees, except as otherwise provided under COBRA. d. No Company Liability for Taxes. During the Term, you accept the exclusive and sole responsibility and liability for payment of any and alltaxes and insurance (including but not limited to unemployment insurance and/or disability insurance) you may owe to any governmental authority, withrespect to or on account of any payments made or actions taken by the Company during the Term under this Agreement. You shall indemnify and holdharmless the Company from any liability, claims and demands for payment of taxes, penalties or interest, social security, disability benefits and otherwithholdings, deductions and/or payments that may be imposed by any governmental authority, or otherwise authorized from, based upon or required byreason of the payments made to you during the Term as provided in this Agreement. 3 5. General Release. a. In consideration of the pay and benefits set forth in this Agreement and other valuable consideration, the sufficiency of which you herebyacknowledge, you agree to and do waive any claims you may have for employment by the Company following the Transition Date. You, on yourown behalf and on behalf of your heirs, estate and beneficiaries, further do hereby release the Company, any of its subsidiaries, parent companies oraffiliates, and each of their respective past, present and future officers, directors, agents, employees, shareholders, investors, employee benefit plansand their administrators or fiduciaries, insurer or any such entities, and its and their successors and assigns and others related to such entities(collectively, the “Company Releasees”), from any and all claims made, to be made, or that might have been made of whatever nature, whetherknown or unknown, from the beginning of time, including, but not limited to, those that arose as a consequence of your employment with theCompany, any act committed or omitted during the existence of such employment relationship, or arising out of the separation from the Company, allup through and including the date of your execution of this Agreement, including, but not limited to, those that were, could have been or could be thesubject of an administrative or judicial proceeding filed by you or on your behalf under federal, state or local law, whether by statute, regulation, incontract or tort, and including, but not limited to, every claim for back pay, front pay, wages, bonus, fringe benefits, any form of discrimination,wrongful termination, tort, emotional distress, pain and suffering, breach of contract, fraud, defamation, compensatory or punitive damages,interest, attorney’s fees, reinstatement or reemployment, and any rights or claims under the Civil Rights Act of 1866, the Age Discrimination inEmployment Act of 1967, as amended, 29 U.S.C. § 621 et seq., the Americans with Disabilities Act, the Family and Medical Leave Act, the CivilRights Act of 1964, Title VII, as amended, the Civil Rights Act of 1991, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the Massachusetts Fair Employment Practice Act, theMassachusetts Civil Rights Act, the Massachusetts Equal Pay and Maternity Benefits Law, the Massachusetts Equal Rights for Elderly andDisabled Law, the Massachusetts Small Necessities Leave Act, the Massachusetts Age Discrimination Law, or any other federal, state or local lawrelating to employment, discrimination in employment, termination of employment, wages, benefits or otherwise. You acknowledge and agree thateven though claims and facts in addition to those now known or believed by you to exist may subsequently be discovered, it is your intention to fullysettle and release all claims you may have against the Company and the persons and entities described above, whether known, unknown orsuspected. Notwithstanding the foregoing: (i) You do not waive your right to file a charge with the Equal Employment Opportunity Commission (the“EEOC”) or participate in an investigation conducted by the EEOC; however, you expressly waive your right to monetary relief should anyadministrative agency, including, but not limited to, the EEOC, pursue any claim on your behalf, (ii) you do not waive any claims and/or rights toindemnification pursuant to the Company’s certificate of incorporation, charter or bylaws, applicable law, and under any Company D&O policy,and (iii) you do not waive any claims and/or rights to vested benefits (including to any vested ERISA benefits) or any claims that may not be waivedby applicable law, including, but not limited to, claims of retaliation under Section 806 of the Sarbanes-Oxley Act, Section 23 of the CommodityExchange Act, Section 21F of the Securities Exchange Act of 1934 or Section 1057 of the Dodd-Frank Wall Street Reform and Consumer ProtectionAct, or a claim challenging the validity of this waiver and release paragraph brought under the Age Discrimination in Employment Act of 1967, asamended. You also understand that this general release does not extend to any rights or claims that may arise out of acts or events that occur after thedate on which you sign this Agreement. 4 b. You acknowledge that by signing this Agreement, (i) you do so of your own free will, (ii) it is your intention to be legally bound by its terms and(iii) no promises or representations have been made to you by any person to induce you to enter into this Agreement other than the express terms setforth herein. You further acknowledge that you have carefully read this Agreement and know and understand its contents and its binding legaleffect, including the waiver and release of claims set forth above. c. You shall have up to 45 days from the date of this Agreement (i.e., until January 21, 2012) to consider the meaning and effect of this Agreement(including, without limitation, the general release contained herein), although you may sign the Agreement sooner, if that is your wish. You may alsowish to consult with an attorney and acknowledge both that you have had the opportunity to do so and that we are advising you to do so. You haveseven (7) days following the date you sign this Agreement to revoke this Agreement by delivering a written notice of such revocation as provided inSection 11 below. Notwithstanding anything to the contrary contained in this Agreement, if you do not sign this Agreement by January 21, 2012, orif you revoke this Agreement within the applicable seven (7) day period, this Agreement shall have no force and effect and shall be void ab initio. 6. Restrictive Covenants. You acknowledge and recognize that the services you provided to the Company were extraordinary and unique and that you wereprivy to highly confidential and proprietary information that would be valuable to a competitor of the Company and that any employment or services renderedby you to a competitor of the Company would inevitably require you to use the Company’s highly confidential and proprietary information, and, accordingly,in consideration of the compensation and benefits set forth herein, including, but not limited to, the extension of vesting under the Option Agreement and theDER Agreements, the tolling during the Term of Holdings’ repurchase rights under the Employee Shareholders Agreement with respect to the equity interestsyou hold in Holdings, and other valuable consideration, you agree to be bound by the terms and conditions of the restrictive covenants as set forth in Exhibit Aattached hereto. 7. Cooperation. Upon prior request, you agree to cooperate with the Company or its affiliates in connection with any present or future litigation or regulatoryproceeding brought or threatened against the Company or any of its affiliates to the extent the Company or any affiliate deems your cooperation necessary. Such cooperation may include, but shall not be limited to, meeting with counsel for the Company or its affiliate at mutually convenient times and providingtestimony if so requested. The Company or its affiliate shall compensate you at the Hourly Rate for your cooperation under this paragraph other than fortestifying at a deposition, at trial or in an administrative hearing and shall reimburse you for reasonable pre-approved out-of-pocket expenses (including,without limitation, legal fees and disbursements) incurred by you or on your behalf as a result of such cooperation. 8. No Admission; Affirmations. Neither by offering to make nor by making this Agreement does either party admit any failure of performance, wrongdoingor violation of law. You affirm that: a. You have not filed or caused to be filed and are not presently a party to any claim against the Company, unless noted below under yoursignature; b. You have been paid and/or have received all compensation, wages, bonuses, commissions, and/or benefits to which you may be entitled fromthe Company; c. You have been granted by the Company any leave to which you were entitled under the Family and Medical Leave Act or related state or localleave or disability accommodation laws; 5 d. You have no known workplace injuries or occupational diseases regarding your employment at the Company, unless previously reported; e. You have not divulged any proprietary or confidential information of the Company and shall continue to maintain the confidentiality of suchinformation consistent with the Company’s policies and your agreement(s) with the Company and/or common law; and f. You have not been retaliated against for reporting any allegations of wrongdoing by the Company or its officers, including any allegations ofcorporate fraud. In addition, you affirm by your signature below that you are not aware of any wrongdoing, regulatory violations or corporate fraud committed by theCompany or its employees unless previously reported to the Company in writing. 9. Miscellaneous; Employee Shareholders Agreement. a. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all other prioragreements, oral or written, relating to your employment by the Company or the termination thereof, except for: (a) your rights to indemnification, asset forth in the Company’s and/or the Company’s parent company’s charter, articles of incorporation and/or bylaws, and in any applicable D&Oliability insurance policy, which rights remain in full force and effect (i.e., notwithstanding anything to the contrary herein, nothing in thisAgreement shall negatively impact or otherwise negatively affect your eligibility for indemnification coverage under any charter, article ofincorporation, bylaw, D&O liability policy or employment practices liability policy), (b) any agreements you have signed concerning non-competition, assignment of invention and the protection and non-disclosure of the company’s confidential information and trade secrets, which shallremain in full force and effect in accordance with the terms of any such agreements; provided, however, that the restrictive covenants contained inthis Agreement and Exhibit A supersede those set forth in any previous agreement signed by you to the extent inconsistent therewith, (c) the OptionAgreement and the DER Agreements, each as amended and modified hereunder, and (d) the Employee Shareholders Agreement. You acknowledgeand agree that you have not relied on any representations, promises, or agreements of any kind made to you in connection with your decision to signthis Agreement and general release, except those stated in this Agreement. This Agreement may not be modified except in writing, signed by you andby a duly authorized officer of the Company. This Agreement may be signed in counterparts, each of which shall be an original, with the sameeffect as if the signatures thereto and hereto were upon the same instrument. b. You agree and acknowledge that, with respect to the shares of capital stock of Holdings, the Options you hold and the shares of Holdings Stockissuable upon the exercise of such Options, you continue to be subject to the terms of the Employee Shareholders Agreement. Furthermore,notwithstanding anything to the contrary in the Employee Shareholders Agreement, herein or otherwise, a Restrictive Covenant Breach, a terminationof your employment with the Company prior to the Transition Date, your breach of this Agreement, the termination of your service hereunder by theCompany for “Cause” (as defined in the Employee Shareholders Agreement) or the expiration of the Term, shall be a Termination Event, and the dateon which any of the foregoing occurs shall be the Termination Date, under the Employee Shareholders Agreement, including but not limited toSection 4.03 thereof. 6 c. Notwithstanding the foregoing or anything to the contrary herein or in the Employee Shareholders Agreement, the cessation of your employmentwith the Company on the Transition Date, in and of itself, shall not be considered a Termination Event under the Employee Shareholders Agreement. 10. Enforceability. In the event that any one or more of the provisions of this agreement is held to be invalid, illegal or unenforceable, the validity, legality andenforceability of the remaining provisions shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained inthis Agreement, including Exhibit A, is held to be excessively broad as to duration, scope or activity or subject, such provisions shall be construed by limitingand reducing them so as to be enforceable to the maximum extent compatible with applicable law. The foregoing shall be in addition to and not in limitation ofSection 6 of Exhibit A. 11. Waiver. A failure of either you or the Company to insist on strict compliance with any provision of this Agreement shall not be deemed a waiver of suchprovision or any other provision hereof. 12. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed tohave been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receiptrequested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may havefurnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. If to the Company:Lantheus Medical Imaging, Inc.331 Treble Cove Rd.Bldg. 600-1N. Billerica, MA 01862Attention: Philip Lockwood,Vice President Human Resources If to you, to your last known address on file with the Company. 13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Massachusetts without regard to itschoice-of-law rules. 14. Dispute Resolution. Any controversy or claim arising out of or related to any provision of this Agreement that cannot be mutually resolved by the partieshereto shall be settled by final, binding and nonappealable arbitration in Boston, Massachusetts by a single arbitrator. Subject to the following provisions, thearbitration shall be conducted in accordance with the Employment Rules of American Arbitration Association then in effect. Any award entered by thearbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court ofcompetent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority to modify any provision of thisAgreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. Eachparty shall be responsible for its own expenses relating to the conduct of the arbitration or litigation (including attorney’s fees and expenses). Notwithstandinganything in this paragraph to the contrary, the Company shall be entitled to seek temporary and preliminary injunctive relief in a court of competentjurisdiction as set forth in Exhibit A. 7 15. Section 409A. Notwithstanding anything to the contrary contained in this Agreement: a. The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986,as amended (the “Code”), and the regulations and authoritative guidance promulgated thereunder to the extent applicable (collectively“Section 409A”), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes orpenalties under Section 409A. b. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted bySection 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amountof expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible forreimbursement, or in-kind benefits, to be provided in any other taxable year, provided, however, that this clause (i) shall not be violated withregard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limitrelated to the period during which the arrangement is in effect and (ii) such payments shall be made on or before the last day of you taxable yearfollowing the taxable year in which the expense occurred. 16. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors,administrators, successors, heirs, distributees, devisees and legatees. 17. Assignment. This Agreement, and all of your rights and duties hereunder, shall not be assignable or delegable by you. Any purported assignment ordelegation by you in violation of the foregoing shall be null and void and of no force or effect. This Agreement may be assigned by the Company to a personor entity that is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights andobligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity. On behalf of the Company, I look forward to your continued service. Very truly yours, Lantheus Medical Imaging, Inc. /s/ Philip C. Lockwood By:Philip C. LockwoodVice President, Human Resources [employee’s signature page follows] 8 I hereby acknowledge that (1) I have read this Agreement and general release, (2) I have knowingly and voluntarily decided to sign this Agreement in order toreceive the additional employment continuation terms and compensation being offered to me, (3) I fully understand and agreed to be bound by the covenantscontained in Exhibit A, and (4) I have been advised by the Company to take counsel from an attorney of my choosing prior to executing this Agreement. Signature:/s/ Robert P. Gaffey Name:Robert P. Gaffey Date:January 3, 2012 9 EXHIBIT A RESTRICTIVE COVENANTS Re: Robert Gaffey 1 Confidentiality. (a) You will not at any time (x) retain or use for the benefit, purposes or account of yourself or any other Person; or (y) disclose, divulge,reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound byconfidentiality obligations), any non-public, proprietary or confidential information — including, without limitation, trade secrets, know-how, research anddevelopment, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances,investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training,advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activitiesand operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on aconfidential basis (“Confidential Information”) without the prior written authorization of the Board of Directors of the Company. (b) Confidential Information shall not include any information that is (A) generally known to the industry or the public other than as a resultof your breach of this covenant or any breach of other confidentiality obligations by third parties; (B) made legitimately available to you by a third partywithout breach of any confidentiality obligation; or (C) required by law to be disclosed; provided that you shall give prompt written notice to the Company ofsuch requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similartreatment. (c) Except as otherwise agreed to in writing by the Company, on the last day of the Term, or sooner upon the request and instruction of theCompany, you shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, anypatent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, itssubsidiaries or affiliates; (y) immediately return to the Company all Company property and destroy, delete, or return to the Company, at the Company’soption, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in yourpossession or control (including any of the foregoing stored or located in your office, home, laptop or other computer, whether or not Company property) thatcontain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that you may retain only thoseportions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Companyregarding the delivery or destruction of any other Confidential Information of which you are or become aware and promptly return any other Companyproperty in your possession. (d) The provisions of this Section 1 shall survive the termination of the Agreement for any reason. 2 Non-Disparagement. You agree that you shall not make, or cause to be made, any statement or communicate any information (whether oral orwritten) that disparages or reflects negatively on the Company or its subsidiaries or parent entities, the Company’s officers or directors, or Holding’sshareholders, except for truthful statements that may be made pursuant to legal process, including without 10 limitation in litigation, arbitration or similar dispute resolution proceedings. The Executive Leadership Team of the Company shall not make, or cause to bemade, any statement or communicate any information (whether oral or written) that disparages or reflects negatively on you, except for truthful statements thatmay be made pursuant to legal process, including, without limitation, in litigation, arbitration or similar dispute resolution proceedings. This Section 2 shallsurvive the termination of the Agreement for any reason. 3 Non-Competition. You agree that during the Term, you will not, as an individual, proprietor, partner, stockholder, officer, employee, director,consultant, joint venturer, investor, lender, or in any other capacity whatsoever, become financially interested in, or become employed by, receive anyeconomic benefit from, render services to or advise any entity engaged in any business that competes with the Company (including the contrast media andnuclear medicine business), including, but not limited to, any of following competitors of the Company: General Electric division that includes contrastmedia and nuclear medicine businesses, Covidien business units that compete with Lantheus, Pharmalucence, Cardinal Health Nuclear Pharmacy Services,Bayer Schering, Bracco and Draximage. Notwithstanding the foregoing, this provision shall not prohibit any possible investment in publicly traded stock ofa company representing less than two percent of the stock of such company. 4 Non-Solicitation. You agree that you shall not: a) during the Term, (i) induce or attempt to induce (including, without limitation, by solicitingbusiness from or performing services for) any customer, supplier, licensee or business relation of the Company to cease doing business with the Company, or(ii) in any way interfere with the relationship between the Company and any of its customers, suppliers, licensors, or other business relations; or b) during theTerm, (i) solicit, hire, offer employment to, or in any manner encourage employees of the Company to leave its employ, or (ii) solicit, hire, or offeremployment to any former employee of the Company within the first six months after such former employee’s departure from the Company. 5 Specific Performance. You acknowledge and agree that the Company’s remedies at law for a breach or threatened breach of any of the provisionsof this Exhibit A would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition ofthis fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shallbe entitled to cease making any payments or providing any benefit otherwise required by the Agreement and obtain equitable relief in the form of specificperformance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. You agree that,notwithstanding the dispute resolution provision in paragraph 14 of the Agreement, the Company shall be entitled to bring suit in a court of competentjurisdiction located in the State of Massachusetts to obtain temporary and preliminary injunctive relief, and you irrevocably consent to the exclusivejurisdiction of such court to enter temporary and preliminary injunctive relief with respect to your breach or threatened breach of any covenant contained inthis Exhibit A. This Section shall survive the termination of the Agreement for any reason. 6 Severability. If a provision of this Exhibit A is, or but for this Section 6 would be, held to be illegal, invalid or unenforceable, in whole or in part,in the jurisdiction to which it pertains but would be legal, valid and enforceable if the time period, geographic scope, business limitation or other relevantfeature of that provision were reduced, or part of the provision were deleted, such provision will apply with the minimum modification necessary to make itlegal, valid and enforceable in that jurisdiction and any such illegality, invalidity or unenforceability in any jurisdiction will not invalidate or render invalid orunenforceable such provisions in any other jurisdiction. 11QuickLinks -- Click here to rapidly navigate through this documentExhibit 12.1 STATEMENTS RE: COMPUTATION OF RATIO OFEARNINGS TO FIXED CHARGES Successor Predecessor Year-Ended December 31, (in thousands) 2011 2010 2009 2008 2007(1) Earnings Income (loss) from continuing operations $(52,371)$7,435 $42,304 $91,392 $248,378 Fixed charges 37,753 22,767 13,539 31,113 — Total earnings $(14,618)$30,202 $55,843 $122,505 $248,378 Fixed Charges Interest Expense $37,658 $20,395 $13,458 $31,038 $— Estimated interest portion within rental expense 95 94 81 75 — Write-off of deferred financing costs — 2,278 — — — Total fixed charges $37,753 $22,767 $13,539 $31,113 $— Ratio of earnings to fixed charges(2) — 1.3x 4.1x 3.9x — (1)The financial statements of BMSMI as of and for the year ended December 31, 2007 were prepared in connection with Avista'sacquisition of Lantheus on January 8, 2008 and contain expense allocations for corporate functions historically provided toBMSMI by BMS and not costs that we would have necessarily incurred as a stand-alone entity. These statements have beenprepared using the Predecessor's bases in the assets and liabilities and the historical results of operations. As a result, the financialstatements of BMSMI as of and for the year ended December 31, 2007 are not comparable to our financial statements forsubsequent periods. (2)Earnings were insufficient to cover fixed charges by $52.4 million.QuickLinksExhibit 12.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TOSECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald R. Kiepert, certify that:1.I have reviewed this yearly report on Form 10-K of Lantheus Medical Imaging, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 30, 2012 /s/ DONALD R. KIEPERT Name: Donald R. Kiepert Title: President and Chief Executive OfficerQuickLinksExhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TOSECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey E. Young, certify that:1.I have reviewed this yearly report on Form 10-K of Lantheus Medical Imaging, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 30, 2012 /s/ JEFFREY E. YOUNG Name: Jeffrey E. Young Title: Chief Financial OfficerQuickLinksExhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), ASADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDBY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned hereby certifies that to his knowledge the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 ofLantheus Medical Imaging, Inc. (the "Company") filed with the Securities and Exchange Commission on the date hereof fully complies with therequirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in allmaterial respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company andfurnished to the Securities and Exchange Commission or its staff upon request.Dated: March 30, 2012 /s/ DONALD R. KIEPERT Name: Donald R. Kiepert Title: President and Chief Executive OfficerDated: March 30, 2012 /s/ JEFFREY E. YOUNG Name: Jeffrey E. Young Title: Chief Financial OfficerQuickLinksExhibit 32.1CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Continue reading text version or see original annual report in PDF format above