Lantheus
Annual Report 2014

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 333-169785 LANTHEUS MEDICAL IMAGING, INC.(Exact name of registrant as specified in its charter) Delaware 51-0396366(State of incorporation) (IRS Employer Identification No.)331 Treble Cove Road, North Billerica, MA 01862(Address of principal executive offices) (Zip Code)(978) 671-8001(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: NoneSecurities 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 ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x 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 of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ¨ No xIndicate 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 such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨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, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment tothis form 10-K ¨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. Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes ¨ No xThe registrant is a privately-held corporation, and accordingly, as of June 30, 2014, there is no public market for its common stock. The registrant hadone thousand shares of common stock, $0.01 par value per share, issued and outstanding as of March 4, 2015. Table of ContentsEXPLANATORY NOTEThe registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding12 months but is not subject to such filing requirements.Table of ContentsTABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 26 Item 1B. Unresolved Staff Comments 51 Item 2. Properties 51 Item 3. Legal Proceedings 52 Item 4. Mine Safety Disclosures 52 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 53 Item 6. Selected Financial Data 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83 Item 8. Financial Statements and Supplementary Data 85 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 129 Item 9A. Controls and Procedures 129 Item 9B. Other Information 129 PART III Item 10. Directors, Executive Officers and Corporate Governance 130 Item 11. Executive Compensation 135 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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 STATEMENTSSome of the statements contained in this annual report are forward-looking statements. These forward-looking statements, including, in particular,statements about our plans, strategies, prospects and industry estimates are subject to risks and uncertainties. These statements identify prospectiveinformation and include words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “should,” “could,” “predicts,” “hopes”and similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding: (i) outlook and expectationsrelated to products manufactured at Jubilant HollisterStier, or JHS, and Pharmalucence and global isotope supply; (ii) our outlook and expectationsincluding, without limitation, in connection with continued market expansion and penetration for our commercial products, particularly DEFINITY in theface of increased competition; (iii) our outlook and expectations related to our intention to seek to engage strategic partners to assist in developing andpotentially commercializing development candidates; and (iv) our liquidity, including our belief that our existing cash, cash equivalents, anticipatedrevenues and availability under our revolving credit facility are sufficient to fund our existing operating expenses, capital expenditures and liquidityrequirements for at least the next twelve months. Forward-looking statements are based on our current expectations and assumptions regarding our business,the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks andchanges in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements.They are neither statements of historical fact nor guarantees or assurances of future performance. The matters referred to in the forward-looking statementscontained in this annual report may not in fact occur. We caution you therefore against relying on any of these forward-looking statements. Important factorsthat could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic,business, competitive, market and regulatory conditions and the following: • our dependence upon third parties for the manufacture and supply of a substantial portion of our products; • risks associated with the technology transfer programs to secure production of our products at alternate contract manufacturer sites; • risks associated with the manufacturing and distribution of our products and the regulatory requirements related thereto; • the instability of the global Molybdenum-99, or Moly, supply; • our ability to continue to increase segment penetration for DEFINITY in suboptimal echocardiograms and the increased segment competitionfrom other echocardiography contrast agents, including Optison from GE Healthcare and the newly approved Lumason (known as SonoVueoutside of the U.S.) from Bracco Diagnostics, Inc., or Bracco; • risks associated with supply and demand for Xenon; • our dependence on key customers and group purchasing organization arrangements for our medical imaging products, and our ability tomaintain and profitably renew our contracts and relationships with those key customers and group purchasing organizations including ourrelationship with Cardinal Health, or Cardinal; • our ability to compete effectively, including in connection with pricing pressures and new market entrants; • the dependence of certain of our customers upon third party healthcare payors and the uncertainty of third party coverage and reimbursementrates; • uncertainties regarding the impact of U.S. healthcare reform on our business, including related reimbursements for our current and potentialfuture products; 1Table of Contents • our being subject to extensive government regulation and our potential inability to comply with those regulations; • potential liability associated with our marketing and sales practices; • the occurrence of any side effects with our products; • our exposure to potential product liability claims and environmental liability; • risks associated with our lead agent in development, flurpiridaz F 18, including our ability to: • attract strategic partners to successfully complete the Phase 3 clinical program and possibly commercialize the agent; • obtain U.S. Food and Drug Administration, or FDA, approval; and • gain post-approval market acceptance and adequate reimbursement; • risks associated with being able to negotiate in a timely manner relationships with potential strategic partners to advance our other developmentprograms on acceptable terms, or at all; • the extensive costs, time and uncertainty associated with new product development, including further product development relying on externaldevelopment partners; • our inability to introduce new products and adapt to an evolving technology and diagnostic landscape; • our inability to protect our intellectual property and the risk of claims that we have infringed on the intellectual property of others; • risks related to our outstanding indebtedness and our ability to satisfy those obligations; • risks associated with prevailing economic conditions and financial, business and other factors beyond our control; • risks associated with our international operations; • our inability to adequately protect our facilities, equipment and technology infrastructure; • our inability to hire or retain skilled employees and key personnel; • costs and other risks associated with the Sarbanes-Oxley Act and the Dodd-Frank Act; and • other factors that are described in “Risk Factors,” beginning on page 22.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 cause ouractual 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 publicly update anyforward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.TrademarksWe own or have the rights to various trademarks, service marks and trade names, including, among others, the following: DEFINITY®, TechneLite®,Cardiolite®, Neurolite®, Ablavar®, Vialmix®, Quadramet® (United States only) and Lantheus Medical Imaging® referred to in this annual report. Solely forconvenience, we refer to trademarks, service marks and trade names in this annual report without the TM, SM and ® symbols. Those references are notintended to indicate, in any way, that we will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks, service marks andtrade names. Each trademark, trade name or service mark of any other company appearing in this annual report, such as Lumason®, Myoview®, Optison® andSonoVue® are, to our knowledge, owned by that other company. 2Table of ContentsItem 1. BusinessUnless 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., the parentof Lantheus, and references to “Holdings” refer only to Lantheus Holdings, Inc., the parent of Lantheus Intermediate.OverviewWe are a global leader in developing, manufacturing, selling and distributing innovative diagnostic medical imaging agents and products that assistclinicians in the diagnosis of cardiovascular and other diseases. Our agents are routinely used to diagnose coronary artery disease, congestive heart failure,stroke, peripheral vascular disease and other diseases. Clinicians use our imaging agents and products across a range of imaging modalities, including nuclearimaging, echocardiography and magnetic resonance imaging, or MRI. We believe that the resulting improved diagnostic information enables healthcareproviders to better detect and characterize, or rule out, disease, potentially achieving improved patient outcomes, reducing patient risk and limiting overallcosts for payers and the entire healthcare system.Our commercial products are used by nuclear physicians, cardiologists, radiologists, internal medicine physicians, technologists and sonographersworking in a variety of clinical settings. We sell our products to radiopharmacies, hospitals, clinics, group practices, integrated delivery networks, grouppurchasing organizations and, in certain circumstances, wholesalers. We sell our products globally and have operations in the United States, Puerto Rico,Canada and Australia and distribution relationships in Europe, Asia Pacific and Latin America.Our ProductsOur portfolio of 10 commercial products is diversified across a range of imaging modalities. Our products include medical radiopharmaceuticals(including technetium generators) and contrast agents. Radiopharmaceuticals, or nuclear imaging agents, are radiolabeled compounds that are used byclinicians to perform nuclear imaging procedures, such as Single Photon Emission Computed Tomography, or SPECT, and positron emission tomography, orPET. Technetium generators are used to prepare the radioactive Technetium (Tc99m) isotope that is combined with organ-localizing pharmaceuticals tocreate the most commonly used radiopharmaceuticals in diagnostic medicine. Contrast agents are typically non-radiolabeled compounds used by physiciansto improve the clarity of the diagnostic image in diagnostic procedures such as echocardiograms or MRIs.DEFINITYDEFINITY is the leading ultrasound contrast imaging agent based on revenue and usage and, in the United States, is indicated for use in patients withsuboptimal echocardiograms. Numerous patient conditions can decrease the quality of images of the left ventricle, the primary pumping chamber of the heart.Of the approximately 30 million echocardiograms performed each year in the United States, a third party source estimates that approximately 20%, orapproximately 6.0 million echocardiograms, produce suboptimal images. The use of DEFINITY during echocardiography allows physicians to significantlyimprove their assessment of the function of the left ventricle.DEFINITY is a clear, colorless, sterile liquid, which, upon activation in the Vialmix apparatus, a medical device specifically designed for DEFINITY,becomes a homogenous, 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. We believe this allows clinicians to make more informed decisions about disease status. 3Table of ContentsDEFINITY offers flexible dosing and administration through an IV bolus injection or continuous IV infusion. We believe DEFINITY’s synthetic lipid-cased coating gives the compound a distinct competitive advantage, because it provides a strong ultrasound signal without using human albumin.Since its launch in 2001, DEFINITY has been used in imaging procedures in approximately five million patients throughout the world. In 2014,DEFINITY was the leading ultrasound imaging agent based on revenue and usage, used by echocardiologists and sonographers. We estimate that DEFINITYhad approximately 78% share of the market for contrast agents in the United States as of December 2014. DEFINITY currently competes with Optison, a GEHealthcare product, Lumason, a newly-approved Bracco product (known as SonoVue outside the U.S.) as well as other non-echocardiography imagingmodalities. DEFINITY, Optison and Lumason all carry an FDA-required boxed warning, which has been modified over time, to notify physicians and patientsabout potentially serious safety concerns or risks posed by the products. See “Risk Factors—Ultrasound contrast agents may cause side effects which couldlimit our ability to sell DEFINITY.”DEFINITY is currently patent protected in the United States until 2021 and in numerous foreign jurisdictions with patent or regulatory protection until2019, and we have an active life cycle management program for this agent. DEFINITY generated revenues of $95.8 million, $78.1 million and $51.4 millionfor the years ended December 31, 2014, 2013 and 2012, respectively. DEFINITY represented approximately 32%, 28% and 18% of our revenues in 2014,2013 and 2012, respectively.TechneLiteTechneLite is a self-contained system or generator of Technetium (Tc99m), a radioactive isotope with a six hour half-life, used by radiopharmacies toprepare various nuclear imaging agents. Technetium results from the radioactive decay of Moly, itself a radioisotope with a 66-hour half-life produced innuclear research reactors around the world from enriched uranium. The TechneLite generator is a little larger than a coffee can in size and the self-containedsystem houses a vertical glass column at its core that contains Moly. During our manufacturing process, Moly is added to the column within the generatorwhere it is adsorbed onto alumina powder. The column is sterilized, enclosed in a lead shield and further sealed in a cylindrical plastic container, which isthen immediately shipped to our radiopharmacy customers. Because of the short half-lives of Moly and technetium, radiopharmacies typically purchaseTechneLite generators on a weekly basis pursuant to standing orders.The technetium produced by our TechneLite generator is the medical radioisotope that can be attached to a number of imaging agents, including ourown Cardiolite products and Neurolite, during the labeling process. To radiolabel a technetium-based radiopharmaceutical, a vial of sterile saline and avacuum vial are each affixed to the top of a TechneLite generator. The sterile saline is pulled through the generator where it attracts technetium resultingfrom the radioactive decay of Moly within the generator column. The technetium-containing radioactive saline is then pulled into the vacuum vial andsubsequently combined by a radiopharmacist with the applicable imaging agent, and individual patient-specific radiolabeled imaging agent doses are thenprepared. When administered, the imaging agent binds to specific tissues or organs for a period of time, enabling the technetium to illustrate the functionalhealth of the imaged tissues or organs in a diagnostic image. Our ability to produce and market TechneLite is highly dependent on our supply of Moly. See“—Raw Materials and Supply Relationships—Molybdenum-99.”TechneLite is produced in thirteen sizes and is currently marketed in North America, Latin America and Australia, largely to radiopharmacies thatprepare unit doses of radiopharmaceutical imaging agents and that ship these preparations directly to hospitals for administration to patients. In the UnitedStates, we have supply contracts with significant radiopharmacy chains, including United Pharmacy Partners, or UPPI, and GE Healthcare. We also supplygenerators on a purchase order basis with other customers. In 2014, we believe TechneLite had approximately 43% of the U.S. generator market share,competing primarily with technetium-based generators produced by Mallinckrodt Pharmaceuticals, or Mallinckrodt. In Canada and Puerto Rico, we alsosupply TechneLite to our Company-owned radiopharmacies to prepare radiopharmaceutical imaging agent unit doses. 4Table of ContentsThe Moly used in our TechneLite generators can be produced using targets made of either highly-enriched uranium, or HEU, or low-enriched uranium,or LEU. LEU consists of uranium that contains less than 20% of the uranium-235 isotope. HEU is often considered weapons grade material, with 20% or moreof uranium-235. On January 2, 2013, President Obama signed into law the American Medical Isotopes Production Act of 2011, or AMIPA, as part of the 2013National Defense Authorization Act. AMIPA encourages the domestic production of LEU Moly and provides for the eventual prohibition of the export ofHEU from the United States. Although Medicare generally does not provide separate payment to hospitals for the use of diagnostic radiopharmaceuticalsadministered in an outpatient setting, since January 1, 2013, the Centers for Medicare and Medicaid Services, or CMS, the federal agency responsible foradministering the Medicare program, has provided an add-on payment under the hospital outpatient prospective payment system for every technetiumdiagnostic dose produced from non-HEU sourced Moly, to cover the marginal cost for radioisotopes produced from non-HEU sources. Our LEU TechneLitegenerator satisfies the new reimbursement requirements under the applicable CMS rules.TechneLite has patent protection in the United States and various foreign countries on certain component technology currently expiring in 2029. Inaddition, given the significant know-how and trade secrets associated with the methods of manufacturing and assembling the TechneLite generator, webelieve we have a substantial amount of valuable and defensible proprietary intellectual property associated with the product. We believe that our substantialcapital investments in our highly automated TechneLite production line and our extensive experience in complying with the stringent regulatoryrequirements for the handling of nuclear materials create significant and sustainable competitive advantages for us in generator manufacturing anddistribution. TechneLite generated revenues of $93.6 million, $92.2 million and $114.2 million for the years ended December 31, 2014, 2013 and 2012,respectively. TechneLite represented approximately 31%, 33% and 40% of our revenues in 2014, 2013 and 2012, respectively.Xenon Xe 133 GasXenon is a radiopharmaceutical gas that is inhaled and used to assess pulmonary function and also to image blood flow. Our Xenon is manufactured bya third party as part of the Moly production process and packaged by us. We are currently the leading provider of Xenon in the United States. In 2014, 2013and 2012, Xenon Xe 133 Gas represented approximately 12%, 11% and 10%, respectively, of our revenues.Other Commercial ProductsIn addition to the products listed above, our portfolio of commercial products also includes important imaging agents in specific segments, whichprovide a stable base of recurring revenue. Most of these products have a favorable industry position as a result of our substantial infrastructure investment,our specialized workforce, our technical know-how and our supplier and customer relationships. • Cardiolite, also known by its generic name sestamibi, is an injectable, technetium-labeled imaging agent used in myocardial perfusion imaging,or MPI, procedures to assess blood flow to the muscle of the heart using SPECT. Cardiolite was approved by the FDA in 1990 and its marketexclusivity expired in July 2008. With the advent of generic competition in September 2008, we have faced significant pricing and unit volumepressures on Cardiolite. We also sell Cardiolite in the form of a generic sestamibi at a lower price than branded Cardiolite. Cardiolite representedapproximately 6%, 9% and 12% of our revenues in 2014, 2013 and 2012, respectively. Included in Cardiolite revenues are branded Cardioliteand generic sestamibi revenues, some of which we produce and some of which we procure from third parties from time to time. • Neurolite is an injectable, technetium-labeled imaging agent used with SPECT technology to identify the area within the brain where blood flowhas been blocked or reduced due to stroke. We launched Neurolite in 1995. • Thallium Tl 201 is an injectable radiopharmaceutical imaging agent used in MPI studies to detect coronary artery disease. We have marketedThallium since 1977 and manufacture the agent using cyclotron technology. 5Table of Contents • Gallium Ga 67 is an injectable radiopharmaceutical imaging agent used to detect certain infections and cancerous tumors, especially lymphoma.We manufacture Gallium using cyclotron technology. • Gludef is an injectable, fluorine-18-radiolabeled imaging agent used with PET technology to identify and characterize tumors in patientsundergoing oncologic diagnostic procedures. Gludef is our branded version of fluorodeoxyglucose, or FDG. • Quadramet, our only therapeutic product, is an injectable radiopharmaceutical used to treat severe bone pain associated with certain kinds ofcancer. Previously, we served as a contract manufacturer of Samarium 153, the radioisotope used to prepare Quadramet. Effective December 13,2013, we purchased the rights to Quadramet in the United States and now serve as the direct manufacturer and supplier of Quadramet in theUnited States. • Ablavar is an injectable, gadolinium-based contrast agent used with magnetic resonance angiography, or MRA, a type of MRI scan, to image theiliac arteries that start at the aorta and go through the pelvis into the legs, in order to diagnose narrowing or blockage of these arteries in knownor suspected peripheral vascular disease. We launched Ablavar in January 2010.For revenue and other financial information for our U.S. and International segments, see Note 18, “Segment Information” to our consolidated financialstatements.Distribution, Marketing and SalesThe following table sets forth certain key market information for each of our commercial products: Product Currently Marketed Regulatory Approval,but Not Currently MarketedDEFINITY United States, Canada,Australia, New Zealand,Mexico EU, Israel, India, South Korea, Singapore(1)TechneLite United States, Canada,Caribbean Islands, Colombia,Costa Rica, Taiwan Korea, Mexico, Panama, AustraliaXenon Xe 133 Gas United States, Taiwan Mexico, New Zealand, Australia, PanamaCardiolite United States, Canada, CertainEU countries(2), Brazil, Israel, Japan,South Korea, Mexico, Taiwan, Thailand,Japan, Australia,New Zealand, Slovenia, Hong Kong,Philippines Denmark, MaltaNeurolite United States, Canada, Japan,Hong Kong, Mexico, Philippines, Australia,New Zealand, Thailand South Korea, Europe(3),Slovenia, TaiwanThallium Tl 201 United States, Canada,Australia, South Korea,Pakistan, Panama, Taiwan Mexico, New ZealandGallium Ga67 United States, Canada,Australia, CostaRica, South Korea, Panama, Taiwan,New Zealand MexicoGludef Puerto Rico, Canada (Gludef) NoneQuadramet United States NoneAblavar United States, Canada Australia 6Table of Contents (1)In addition, we have applied for regulatory approval in China, and JHS is pending approval in India and South Korea.(2)Cardiolite is currently marketed in Austria, Belgium, Finland, France, Germany, Italy, Luxembourg, Norway, Slovenia, Spain, Sweden and the UnitedKingdom.(3)JHS has regulatory approval pending for Neurolite in Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Italy, Luxembourg,Norway, Slovenia, Spain and Sweden.In the United States, we sell DEFINITY through our sales team of approximately 80 employees that call on healthcare providers in theechocardiography space, as well as group purchasing organizations and integrated delivery networks. In 2013, we transitioned the sales and marketing effortsfor Ablavar from our sales team to our customer service team in order to allow our sales team to focus exclusively on driving our DEFINITY sales growth. Forthe year ended December 31, 2014, DEFINITY sales represented approximately 32% of our revenues.Our radiopharmaceutical products are sold in the United States through a small nuclear products sales team, primarily to radiopharmacies. We sell amajority of our radiopharmaceutical products in the United States to radiopharmacies that are controlled by or associated with UPPI, GE Healthcare andCardinal. Our contractual distribution and other arrangements with these radiopharmacy groups are as follows: • UPPI is a cooperative purchasing group (roughly analogous to a group purchasing organization) of approximately 77 independently owned orsmaller chain radiopharmacies located in the United States. UPPI’s radiopharmacies are typically broadly dispersed geographically, with someurban presence and a substantial number of radiopharmacies located in suburban and rural areas of the country. We estimate that theseindependent radiopharmacies, together with an additional 36 unofficial, independent radiopharmacies, distributed more than 25% of theaggregate U.S. SPECT doses sold in the first half of 2014. We currently have an agreement with UPPI for the distribution of both Cardiolite andTechneLite products to radiopharmacies or families of radiopharmacies within the UPPI cooperative purchasing group. The agreement containsspecified pricing levels based upon specified purchase amounts for UPPI. We are entitled to terminate the UPPI agreement upon 60 days’ writtennotice. The UPPI agreement expires on December 31, 2016. • GE Healthcare maintains 31 radiopharmacies in the United States that purchase our TechneLite generators. These radiopharmacies primarilydistribute GE Healthcare’s Myoview, a technetium-labeled MPI agent. We estimate that GE Healthcare distributed approximately 15% of theaggregate U.S. SPECT doses sold in the first half of 2014. We currently have one agreement with GE Healthcare for the distribution ofTechneLite and other products. The agreement provides that GE Healthcare will purchase a minimum percentage of TechneLite generators aswell as certain other products in the United States or Canada from us. Our agreement, which expires on December 31, 2017, may be terminated byeither party on (i) two years’ written notice relating to TechneLite and (ii) six months’ written notice relating to the other products. Ouragreement also allows for termination upon the occurrence of specified events including a material breach by either party, bankruptcy by eitherparty and force majeure events. • Cardinal maintains approximately 132 radiopharmacies that are typically located in large, densely populated urban areas in the United States.We estimate that Cardinal’s radiopharmacies distributed approximately 44% of the aggregate U.S. SPECT doses sold in the first half of 2014 (thelatest information currently available to us). Our written supply agreements with Cardinal relating to TechneLite, Xenon, Neurolite, Cardioliteand certain other products expired in accordance with their terms on December 31, 2014. Following extended discussions with Cardinal thathave not yet resulted in one or more new written supply agreements, we are currently accepting and fulfilling product orders from Cardinal on apurchase order basis at list price. We cannot predict the volumes or product mix Cardinal will continue to order and purchase, and such volumesand product mix may vary over time. In the absence of written supply agreements with Cardinal, unit sales volumes in early 2015 have 7Table of Contents decreased from levels experienced throughout 2014, but such sales have been at substantially higher prices. However, ultimate future levels ofnet revenue and operating profit associated with Cardinal cannot be predicted at this time because such amounts depend on future unit salesvolumes, product mix and pricing to Cardinal.In addition to the distribution arrangements for our radiopharmaceutical products described above, we also sell certain of our radiopharmaceuticalproducts to Triad, independent radiopharmacies and directly to hospitals and clinics that maintain in-house radiopharmaceutical capabilities and operations.In the latter case, this represents a small percentage of overall sales because the majority of hospitals and clinics do not maintain these in-house capabilities.In Europe, Asia Pacific and Latin America, we utilize third party distributor relationships to market, sell and distribute our products, either on acountry-by-country basis or on a multicountry regional basis. In October 2013, we entered into a new supply and distribution agreement for Cardiolite andNeurolite in certain European countries with Mallinckrodt AG. In March 2015, we terminated that agreement. In March 2012, we entered into a newdevelopment and distribution arrangement for DEFINITY in China, Hong Kong S.A.R. and Macau S.A.R. with Double-Crane Pharmaceutical Company, orDouble-Crane. Double-Crane is currently pursuing the Chinese regulatory approval required to commence the necessary confirmatory clinical trials. Thereare three milestones in the regulatory approval process to commercialize DEFINITY in China: • First, submission of a Clinical Trial Application which seeks Import Drug License approval. Double-Crane submitted the Clinical TrialApplication to the Chinese Food and Drug Administration, or CFDA, in June 2013. The CFDA accepted the Clinical Trial Application for reviewin July 2013. • Second, approval of the Clinical Trial Application, at which point Double-Crane would conduct two small confirmatory clinical trials—one forabdominal (liver and kidney) and one for cardiac. • Third, approval of the Import Drug License. If the regulatory and clinical trial processes are both successful, we currently estimate the timing forapproval of DEFINITY in China could be as soon as 2017.We believe that international markets, particularly China, represent significant growth opportunities for our products. The Mallinckrodt and Double-Crane distribution agreements did not have a significant impact on our revenue during 2014.We sell our products (and others) directly to end users through the four radiopharmacies we own in Canada, the two radiopharmacies we own inAustralia and the two radiopharmacies we own in Puerto Rico. We also maintain our own direct sales forces in these markets so we can control the marketing,distribution and sale of our imaging agents in these regions.CustomersFor the year ended December 31, 2014, our largest customers were Cardinal, UPPI and GE Healthcare, accounting for 18.0%, 11.1% and 8.8%,respectively, of our revenues.CompetitionWe believe that our key product characteristics, such as proven efficacy, reliability and safety, coupled with our core competencies, such as ourefficient manufacturing processes, our established distribution network, our experienced field sales organization and our customer service focus, areimportant 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 8Table of Contentsthan we are and that have substantial financial, manufacturing, sales and marketing, distribution and other resources. These competitors includeMallinckrodt, GE Healthcare, Bayer, Bracco and Draxis, as well as other competitors. We cannot anticipate their competitive actions in the same orcompeting diagnostic modalities, such as significant price reductions on products that are comparable to our own, development of new products that are morecost-effective or have superior performance than our current products or the introduction of generic versions after our proprietary products lose their currentpatent protection. In addition, distributors of our products could attempt to shift end-users to competing diagnostic modalities and products. Our current orfuture products could be rendered obsolete or uneconomical as a result of these activities.Generic competition has substantially eroded our market share for Cardiolite, beginning in September 2008 when the first generic product waslaunched. We are currently aware of four separate, third party generic offerings of sestamibi. We also sell our own generic version of sestamibi. See “Item 1A—Risk Factors—Generic competition has significantly eroded our market share of the MPI segment for Cardiolite products and will continue to do so.”Raw Materials and Supply RelationshipsWe rely on certain raw materials and supplies to produce our products. Due to the specialized nature of our products and the limited, and sometimesintermittent, supply of raw materials available in the market, we have established relationships with several key suppliers. Our most important and widelyused raw material is Moly. For the year ended December 31, 2014, our largest supplier of raw materials and supplies was Nordion, accounting forapproximately 16% of our total purchases.Molybdenum-99Our TechneLite, Cardiolite and Neurolite products all rely on Moly, the radioisotope which is produced by bombarding Uranium-235 with neutrons inresearch reactors. Moly is the most common radioisotope used for medical diagnostic imaging purposes. With a 66-hour half-life, Moly decays into amongother things technetium-99m, (Tc-99m), another radioisotope with a half-life of six hours. Tc-99m is the isotope that is attached to radiopharmaceuticals,including our own Cardiolite and Neurolite, during the labeling process.We currently purchase finished Moly from four of the five main processing sites in the world, namely, ANSTO in Australia; Institute for Radioelementsor IRE, in Belgium; Nordion, formerly known as MDS Nordion, in Canada; and NTP Radioisotopes, or NTP, in South Africa. These processing sites are, inturn, supplied by seven of the eight main Moly-producing reactors in the world, namely, OPAL in Australia; BR2 in Belgium; OSIRIS in France; LVR-10 inthe Czech Republic; High Flux Reactor, or HFR, in The Netherlands; NRU in Canada; and SAFARI in South Africa.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 percentage purchase requirements for Moly. The agreement allows for termination upon the occurrence of certain events. Nordion canterminate if we fail to purchase a minimum percentage of Moly or if Nordion incurs certain cost increases. Either party may terminate if the other party fails tocomply with material obligations, is bankrupt or experiences a force majeure event subject to a waiting period. The current agreement expires onDecember 31, 2015, and the NRU reactor has announced a transition in 2016 from providing regular supply of medical isotopes to providing only emergencyback-up supply of medical isotopes through March 2018.Our agreement with NTP includes their consortium partner, ANSTO. ANSTO has under construction, in cooperation with NTP, a new Moly processingfacility that ANSTO believes will expand its production capacity by approximately 2.5 times, with expanded commercial production planned to start in mid-2016. This new ANSTO production capacity is expected to replace the NRU’s current routine production. The NTP/ANSTO agreement contains minimumpercentage volume requirements and provides for the increased supply of Moly 9Table of Contentsderived from LEU targets from NTP and ANSTO. The agreement allows for termination upon the occurrence of certain events, including failure by NTP toprovide our required amount of Moly, material breach of any provision by either party, bankruptcy by either party and force majeure events. Additionally, wehave the ability to terminate the agreement with six months’ written notice prior to the expiration of the agreement. The agreement expires on December 31,2017.In March 2013, we entered into a similar agreement with IRE, or the IRE Agreement. IRE previously supplied us as a subcontractor under theagreement with NTP. Similar to the agreement with NTP, the IRE Agreement contains minimum percentage volume requirements. The IRE Agreement alsorequires IRE to provide certain increased quantities of Moly during periods of supply shortage or failure. The IRE Agreement also provides for an increasedsupply of Moly derived from LEU targets upon IRE’s completion of its ongoing conversion program to modify its facilities and processes in accordance withBelgian nuclear security commitments. The IRE Agreement allows for termination upon the occurrence of certain events, including failure by IRE to provideour required amount of Moly, material breach of any provision by either party, bankruptcy by either party and force majeure events. The IRE Agreementexpires on December 31, 2017.To further augment and diversify our current supply, we are pursuing additional sources of Moly from potential new producers around the world thatseek to produce Moly with existing or new reactors or technologies. For example, in November 2014, we announced entering into a new strategic agreementwith SHINE Medical Technologies, Inc., a Wisconsin-based company, or SHINE, for the future supply of Moly. Under the terms of the supply agreement,SHINE will provide Moly produced using its proprietary LEU-solution technology for use in our TechneLite generators once SHINE’s facility becomesoperational and receives all necessary regulatory approvals, which SHINE currently estimates will occur in 2018. See “Item 1A—Risk Factors—The globalsupply of Moly is fragile and not stable. Our dependence on a limited number of third party suppliers for Moly could prevent us from delivering some of ourproducts to our customers in the required quantities, with the required timeframe, or at all, which could result in order cancellations and decreased revenues.”XenonCurrently, Nordion is our sole supplier of Xenon, and we believe it is currently the principal supplier of Xenon in the world. Xenon is captured by theNRU reactor as a by-product of the Moly production process. Our agreement with Nordion is on a purchase order basis. As a result of this transaction, oursupplier could change the terms on which we obtain Xenon. In January 2015, we announced entering into a new strategic agreement with IRE for the futuresupply of Xenon. Under the terms of the agreement, IRE will provide bulk Xenon to us for processing and finishing once development work has beencompleted and all necessary regulatory approvals have been obtained. We currently estimate commercial production will occur in 2016. If we are not able tobegin providing commercial quantities of Xenon prior to the NRU reactor’s announced medical isotope supply transition in October 2016, there may be aperiod of time during which we are not able to offer Xenon in our portfolio of commercial products. See “Item 1A—Risk Factors—We face potential supplyand demand challenges for Xenon.”Other MaterialsWe have additional supply arrangements for APIs, excipients, packaging materials and other materials and components, none of which are exclusive,but a number of which are sole source, and all of which we currently believe are either in good standing or replaceable without any material disruption to ourbusiness.ManufacturingWe maintain manufacturing operations at our North Billerica, Massachusetts facility. We manufacture TechneLite on a highly automated productionline and also manufacture Thallium and Gallium at this site using 10Table of Contentsour cyclotron infrastructure. We manufacture, finish and distribute our radiopharmaceutical products on a just-in-time basis, and supply our customers withthese products either by next day delivery services or by either ground or air custom logistics. We believe that our substantial capital investments in ourhighly automated generator production line, our cyclotrons and our extensive experience in complying with the stringent regulatory requirements for thehandling of nuclear materials and operations in the FDA regulated environment create significant and sustainable competitive advantages for us.In addition to our in-house manufacturing capabilities, a substantial portion of our products are manufactured by third party contract manufacturingorganizations, and in certain instances, we rely on them for sole source manufacturing. To ensure the quality of the products that are manufactured by thirdparties, the key raw materials used in those products are first sent to our North Billerica facility, where we test them prior to the third party manufacturing ofthe final product. After the final products are manufactured, they are sent back to us for final quality control testing and then we ship them to our customers.We have expertise in the design, development and validation of complex manufacturing systems and processes, and our strong execution and quality controlculture supports the just-in-time manufacturing model at our North Billerica facility.BVL, JHS and PharmalucenceHistorically, we relied on Ben Venue Laboratories, or BVL, as our sole manufacturer of DEFINITY, Neurolite and evacuation vials, an ancillarycomponent for our TechneLite generators, and as one of our two manufacturers of Cardiolite. Following extended operational and regulatory challenges atBVL’s Bedford, Ohio facility, in March 2012, we entered into a settlement arrangement with BVL, resulting in an aggregate payment to us of $35.0 million, abroad mutual waiver and a covenant by us not to sue. Later in 2012 and in 2013, BVL continued to attempt to manufacture our products for us, and inOctober 2013 announced that it would cease to manufacture new batches of our products at its Bedford, Ohio facility. In November 2013, we entered into asecond settlement arrangement with BVL, resulting in an additional aggregate payment to us of $8.9 million, a broad mutual waiver and a covenant by us notto sue. At this time, we have a very limited amount of BVL-manufactured products in our finished goods inventory.Contemporaneous with the BVL supply challenges, we expedited 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 manufacture ofDEFINITY. Under the agreement, JHS manufactures DEFINITY for us for an initial term of five years. We have the right to extend the agreementfor an additional five-year period, with automatic renewals for additional one year periods thereafter. The agreement allows for termination uponthe occurrence of certain events such as a material breach or default by either party, or bankruptcy by either party. The agreement also requires usto place orders for a minimum percentage of our requirements for DEFINITY with JHS.On November 12, 2013, we entered into a Manufacturing and Supply Agreement with Pharmalucence to manufacture and supply DEFINITY andwe are currently in the technology transfer process with Pharmalucence in order to diversify our supply. We currently believe that Pharmalucencewill file for FDA approval to manufacture DEFINITY in 2015. There are no minimum purchase requirements under this agreement, which has aninitial term of five years from the effective date and is renewable at our option for an additional five years. The Manufacturing Agreement allowsfor termination upon the occurrence of certain events, including material breach or bankruptcy by either party. During the optional five yearterm, either party may terminate upon thirty months advance notice. Based on our current projections, we believe that we will have sufficientsupply of DEFINITY from JHS to meet expected demand. • Cardiolite—We currently have one manufacturer for our Cardiolite supply. We also entered into a Manufacturing and Supply Agreement,effective as of May 3, 2012, with JHS for the manufacture of 11Table of Contents Cardiolite products, and we are currently in the technology transfer process. Under the agreement, JHS has agreed to manufacture product for aninitial term of five years. We have the right to extend the agreement for an additional five-year period, with automatic renewals for additionalone year periods thereafter. The agreement allows for termination upon the occurrence of specified events, including material breach orbankruptcy by either party. The agreement requires us to place orders for a minimum percentage of our requirements for Cardiolite with JHSduring such term. Based on our current projections, we believe that we will have sufficient Cardiolite product supply from our current supplierand JHS when it has completed the technology transfer process and we have obtained regulatory approval for this manufacturing site to meetexpected demand. • Neurolite—We entered into a Manufacturing and Supply Agreement, effective as of May 3, 2012, with JHS for the manufacture of Neurolite, andin January 2015 the FDA granted approval to JHS to be a new manufacturing site for this product. Under the agreement, JHS has agreed tomanufacture product for an initial term of five years. We have the right to extend the agreement for an additional five-year period, with automaticrenewals for additional one year periods thereafter. The agreement allows for termination upon the occurrence of specified events, includingmaterial breach or bankruptcy by either party. The agreement also requires us to place orders for a minimum percentage of our requirements forNeurolite with JHS during such term. Based on our current projections, we believe that we will have sufficient supply of Neurolite from JHS tomeet expected demand.Although we are pursuing new manufacturing relationships to establish and secure additional long-term or alternative suppliers as described above, weare uncertain of the timing as to when these arrangements could provide meaningful quantities of product. See “Item 1A—Risk Factors—Risks Relating toOur Business and Industry—The global supply of Moly is fragile and not stable. Our dependence on a limited number of third party suppliers for Moly couldprevent us from delivering some of our products to our customers in the required quantities, within the required timeframes, or at all, which could result inorder cancellations and decreased revenues,” “Item 1A—Risk Factors—with product quality or product performance, including defects, caused by us or oursuppliers could result in a decrease in customers and sales, unexpected expenses and loss of market share” and “Item 1A—Risk Factors—Our business andindustry are subject to complex and costly regulations. If government regulations are interpreted or enforced in a manner adverse to us or our business, wemay be subject to enforcement actions, penalties, exclusion and other material limitations on our operations.”PET Manufacturing FacilitiesIf flurpiridaz F 18 is ultimately successful in clinical trials, a new manufacturing model will have to be implemented where chemical ingredients of theimaging agent are provided to PET radiopharmacies that have fluorine-18 radioisotope-producing cyclotrons on premises. The radiopharmacies will combinethese chemical ingredients with fluorine-18 they manufactured in specially designed chemistry synthesis boxes to generate the final radiopharmaceuticalimaging agent, flurpiridaz F 18. Radiopharmacists will be able to prepare and dispense patient-specific doses from the final product. However, because eachof these PET radiopharmacies will be deemed by the FDA to be a separate manufacturing site for flurpiridaz F 18, each of the radiopharmacies will have to beincluded in the agent’s NDA and subsequent FDA filings. As a result, there will be quality and oversight responsibilities of the PET radiopharmaciesassociated with the NDA, unlike the current relationship we have with our nuclear imaging agent distributors that operate radiopharmacies. See “—Researchand Development—Flurpiridaz F 18 Phase 3 Program.”Research and DevelopmentFor the years ended December 31, 2014, 2013 and 2012, we invested $13.7 million, $30.5 million and $40.6 million, respectively, in R&D. Our R&Dteam includes our medical affairs and medical information functions, which educate physicians on the scientific aspects of our commercial products and theapproved indications, labeling and the receipt of reports relating to product quality or adverse events. We have developed a 12Table of Contentspipeline of three potential cardiovascular imaging agents which were discovered and developed in-house and which are protected by patents and patentapplications we own in the United States and numerous foreign jurisdictions.In March 2013, we began to implement a strategic shift in how we will fund our important R&D programs. We have reduced our internal R&Dresources while at the same time we seek to engage strategic partners to assist us in the further development and commercialization of these agents, includingflurpiridaz F 18, 18F LMI 1195 and LMI 1174. See “Item 1A—Risk Factors—Risks Relating to our Business and Industry—We will not be able to furtherdevelop or commercialize our agents in development without successful strategic partners.”Flurpiridaz F 18—PET Perfusion Agent—Myocardial PerfusionWe have developed flurpiridaz F 18, an internally discovered small molecule radiolabeled with fluorine-18, as an imaging agent used in PET MPI toassess blood flow to the heart.Today, most MPI procedures use SPECT technology. Although this imaging modality provides substantial clinical value, there is growing interest inthe medical community to utilize technology such as PET that can provide meaningful advantages. PET is an imaging technology that when used incombination with an appropriate radiopharmaceutical imaging agent can provide important insights into physiologic and metabolic processes in the bodyand be useful in evaluating a variety of conditions including neurological disease, heart disease and cancer. PET imaging has demonstrated broad utility fordiagnosis, prognosis, disease staging and therapeutic response. Images generated with PET technology typically exhibit very high image resolution becauseof substantially 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 MPI studies,PET imaging has gained considerable support in the field of cardiovascular imaging as it offers many advantages to SPECT imaging, including: higher imagequality, increased diagnostic certainty, more accurate risk stratification and reduced patient radiation exposure. In addition, PET MPI imaging could beparticularly useful in difficult to image patients, including women and obese patients. The use of PET technology in MPI tests represents a broad emergingapplication for a technology more commonly associated with oncology and neurology. We anticipate that the adoption of PET technology in MPI tests willincrease significantly in the future.Flurpiridaz F 18 Clinical OverviewWe 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, a Phase 2 clinical trial, conducted from 2007 to 2010, involving a total of 208 subjects who received PET MPI performedwith flurpiridaz F 18 and a Phase 3 clinical trial conducted from 2011 to 2013 involving 920 subjects who received PET MPI procedures with flurpiridazF 18.Flurpiridaz F 18 Phase 2 TrialWe evaluated flurpiridaz F 18 in a Phase 2 trial consisting of 176 subjects from 21 centers. These subjects underwent both SPECT and PET MPI withflurpiridaz at rest and at stress and were evaluated for safety. Of these subjects, 86 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 while thesubject is under mild sedation. These 86 subjects formed the population for evaluating diagnostic performance. 13Table of ContentsThe PET MPI that was performed with flurpiridaz F 18 at stress utilized either pharmacological coronary vasodilation or treadmill exercise. Unlikecurrently available PET imaging agents for MPI with half-lives measured in seconds, flurpiridaz F 18 can be used in conjunction with treadmill exercisegiven its substantially longer 110 minute 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 SPECT imaging forstress 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, was significantlyhigher 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 for coronaryartery disease diagnosis) was significantly higher for flurpiridaz F 18 than SPECT (0.82±0.05 vs. 0.70±0.05, p<0.05), indicating higherdiagnostic performance; • superiority for sensitivity (that is, the ability to identify disease) with flurpiridaz F 18 imaging was significantly higher than SPECT (78.8% vs.61.5%, p=0.02); • a trend toward higher specificity (that is, the ability to rule out disease) was noted, although the advantage was not statistically significant in thestudy; and • no drug-related serious adverse events were observed, demonstrating a positive safety profile for PET MPI imaging with flurpiridaz F 18.Flurpiridaz F 18 Phase 3 ProgramTo date, our Phase 3 program for flurpiridaz F 18 has included a phase 3 trial (study 301), which was an open-label, multicenter, international trial toassess the diagnostic efficacy of flurpiridaz F 18 PET MPI, as compared with SPECT MPI, in the detection of significant coronary artery disease. Coronaryangiography was used as the truth standard for all subjects. The clinical development program included hypotheses for superiority for sensitivity (identifyingdisease) and non-inferiority for specificity (ruling out disease) with SPECT.In March 2011, we obtained agreement from the FDA on a Special Protocol Assessment, or SPA, for our 301 trial. See “Business—Regulatory Matters—Food and Drug Laws.”During the third quarter of 2013, we completed patient enrollment in the 301 trial. In the fourth quarter of 2013, we announced preliminary results fromthe 301 trial. Flurpiridaz F 18 appeared to be well-tolerated from a safety perspective and outperformed SPECT in a highly statistically significant manner inthe co-primary endpoint of sensitivity. In addition, flurpiridaz F 18 showed statistically significant improvements in the secondary endpoints of imagequality and diagnostic certainty in comparison to SPECT. However, flurpiridaz F 18 did not meet its other co-primary endpoint of non-inferiority foridentifying subjects without disease.In the fourth quarter of 2014, we completed a re-read of the 301 trial results, which confirmed the consistency and reproducibility of the flurpiridaz F18 results when compared to coronary angiography, the truth standard. For the overall population, the re-read results comparing flurpiridaz F 18 againstSPECT for sensitivity and specificity were similar to the results in the initial read. However, in certain populations of special clinical interest, the re-readresults improved versus the initial read. Flurpiridaz F 18 outperformed SPECT in women and in subjects with high body mass index, or BMI, in a statisticallyand clinically significant manner. In addition, flurpiridaz F 18 showed statistical superiority versus SPECT in accuracy, diagnostic certainty and imagequality in the overall population and in those of clinical interest. Importantly, flurpiridaz studies exposed patients to approximately 50% of the radiationexposure of SPECT. 14Table of ContentsIn agreement with FDA, we are currently finalizing the study design of a second phase 3 trial (study 303) with new primary and secondary endpointsand have submitted an SPA to the Agency in February 2015. At the same time, we are seeking strategic partners to further develop and, if approved,commercialize flurpiridaz F 18. See “Item 1A—Risk Factors—The process of developing new drugs and obtaining regulatory approval is complex, time-consuming and costly, and the outcome is not certain.”18F LMI 1195—Cardiac Neuronal Activity Imaging AgentWe have developed 18F LMI 1195, also an internally discovered small molecule that is a fluorine-18-based radiopharmaceutical imaging agent,designed to assess cardiac sympathetic nerve function with PET. Sympathetic nerve activation increases the heart rate, constricts blood vessels and raisesblood pressure by releasing a neurotransmitter called norepinephrine throughout the heart. Changes in the cardiac sympathetic nervous system have beenassociated with heart failure progression and fatal arrhythmias.Heart failure is a major public health problem in North America, associated with high morbidity and mortality, frequent hospitalizations and a majorcost burden on the community. In the United States alone, there are over five million patients living with congestive heart failure, and over a half million newdiagnoses each year. Mortality for this condition is around 50% within five years of diagnosis. Expensive therapies for heart failure are often utilized withouteffective predictors of patient response. Costly device therapies (for example, implantable cardiac defibrillators, or ICDs, and cardiac resynchronizationtherapy) are often used, although they sometimes do not provide any benefits or are activated in only a minority of recipients. Conversely, heart failureclinical practice guidelines currently preclude the use of device therapy in many patients who might benefit. Thus, a key opportunity is to better matchpatients to treatment based on the identification of the underlying molecular status of disease progression.18F LMI 1195 is taken up by the transporter that regulates norepinephrine released by the sympathetic nervous system at multiple nerve endings of theheart. PET imaging using 18F LMI 1195 could allow for the identification of patients at risk of sudden death, potentially improving clinical decision-making, including identifying which patients could benefit from certain drug therapies or the implantation of certain anti-arrhythmia devices such as ICDs.We have completed a Phase 1 study of 18F LMI 1195 using PET imaging. 12 normal subjects were injected intravenously with approximately sixmillicuries of 18F LMI 1195, imaged sequentially for a period of approximately five 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. We are seeking to engage strategic partners toassist us with the ongoing development activities relating to this agent.LMI 1174—Vascular Remodeling Imaging AgentWe have developed LMI 1174, an internally discovered gadolinium-based MRI agent targeted to elastin in the arterial walls and atheroscleroticplaque. We believe that this agent could allow assessment of plaque location, burden, type of arterial wall remodeling and, as a result, the potential for avascular event, which, in turn, could lead to heart attack or stroke.Atherosclerosis is the leading cause of heart attacks, strokes and peripheral vascular disease. Elastin plays a key role in the structure of the arterial walland in biological signaling functions. Several pathological stimuli may be responsible for triggering elastogenesis in atherosclerosis, leading to a markedincrease in elastin content during plaque development. In addition to the increase in elastin seen in autopsy samples from patients with carotidatherosclerosis, there is also an increase of elastin in aortic aneurysm samples. As a result, an elastin-specific imaging agent may facilitate detection ofremodeling of the arterial walls. 15Table of ContentsThe majority of the assessments of atherosclerosis are currently obtained using angiography or MPI. MRI using LMI 1174 could allow for theidentification, on a minimally-invasive basis without radiation exposure, of the presence and characteristics of atherosclerosis, potentially improving clinicaldecision-making to reduce the risks 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. Our leadmolecule, LMI 1174, has been used to demonstrate utility in a number of different animal models. We are seeking to engage strategic partners to assist uswith the ongoing development activities relating to this agent.Intellectual PropertyPatents, trademarks and other intellectual property rights, both in the United States and foreign countries, are very important to our business. We alsorely on trade secrets, manufacturing know-how, technological innovations and licensing agreements to maintain and improve our competitive position. Wereview 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 party proprietary rights, identify licensing opportunities and monitor the intellectual property owned by others. Our ability toenforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitorsto capture market position in those countries by utilizing technologies that are similar to those developed or licensed by us. Competitors also may harm oursales by designing 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.Trademarks, Service Marks and Trade NamesWe own various trademarks, service marks and trade names, including DEFINITY, TechneLite, Cardiolite, Neurolite, Ablavar, Vialmix, Quadramet(U.S. only) and Lantheus Medical Imaging. We have registered these trademarks, as well as others, in the United States and numerous foreign jurisdictions.PatentsWe 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 patent protection inthe United States, we file patent applications in numerous foreign countries in order to further protect the inventions that we consider important to thedevelopment of our international business. We also rely upon trade secrets and contracts to protect our proprietary information. As of January 31, 2015, ourpatent portfolio included a total of 44 issued U.S. patents, 194 issued foreign patents, 19 pending patent applications in the United States and 148 pendingforeign applications. These patents include claims covering the composition of matter and methods of use for all of our preclinical and clinical stage agents.Our patents cover many of our commercial products, and our current patent protection is generally in the United States, Canada, Mexico, most ofWestern Europe 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 (including Chileand Brazil). For DEFINITY, we hold a number of different compositions of matter, use, formulation and manufacturing patents, with U.S. patent protectionuntil 2021 and patent or regulatory extension protection in Canada, Europe and parts of Asia until 2019, and we have an active life cycle managementprogram for this agent. TechneLite currently has patent protection in the United States and various foreign countries on certain component technologyexpiring in 2029. In addition, given the significant know-how 16Table of Contentsand trade secrets associated with the methods of manufacturing and assembling the TechneLite generator, we believe we have a substantial amount ofvaluable and defensible proprietary intellectual property associated with the product. Neither Cardiolite nor Neurolite is covered any longer by patentprotection in either the United States or the rest of the world. For Ablavar, we hold a number of different compositions of matter, use, formulation andmanufacturing patents, with the last U.S. patent not expiring until 2020 with regulatory extension and a manufacturing patent application, which if granted,will expire in 2034 in the absence of any patent term adjustment or regulatory extension. Thallium, Gallium and Xenon are all generic radiopharmaceuticals.We have numerous patents and patent applications relating to our clinical development pipeline. We have patents in numerous jurisdictions coveringcomposition, use, formulation and manufacturing of flurpiridaz F 18, including in the United States a composition patent expiring in 2026 and a method ofuse patent expiring in 2028 in the absence of any regulatory extension, and various patent applications, one of which, if granted, will expire in 2033. We alsohave patents and patent applications in numerous jurisdictions covering composition, use, and synthesis of 18F LMI 1195, our cardiac neuronal imagingagent, some of which, if granted, will expire in 2027 and some in 2031 in the absence of any patent term adjustment or regulatory extensions, in the UnitedStates a composition patent expiring in 2030 in the absence of any regulatory extension, and in Europe a composition patent expiring in 2027 in the absenceof any regulatory extension. Additionally, we have patent applications in numerous jurisdictions covering composition, use and synthesis of LMI 1174, ourvascular remodeling imaging agent, some of which if granted, will expire in 2029 and some in 2030 in the absence of any patent term adjustment orregulatory extensions and in the United States a composition and method of use patent expiring in 2031 in the absence of any regulatory extension.In addition to patents, we rely where necessary upon unpatented trade secrets and know-how, proprietary information and continuing technologicalinnovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements withour collaborators, employees, consultants and other third parties and invention assignment agreements with our employees. These confidentiality agreementsmay not prevent unauthorized disclosure of trade secrets and other proprietary information, and we cannot assure you that an employee or an outside partywill not make an unauthorized disclosure of our trade secrets, other technical know-how or proprietary information. We may not have adequate monitoringabilities to discover, or adequate remedies for, any unauthorized disclosure. This might happen intentionally or inadvertently. It is possible that a competitorwill make use of such information, and that our competitive position will be compromised, in spite of any legal action we might take against persons makingsuch unauthorized disclosures. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent thatour collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related orresulting know-how and inventions.In addition, we license a limited number of third party technologies and other intellectual property rights that are incorporated into some elements ofour drug discovery and development efforts. These licenses are not material to our business, and the technologies can be obtained from multiple sources. Weare currently party to separate royalty-free, non-exclusive, cross-licenses with each of Bracco, GE Healthcare and Imcor Pharmaceutical Company. Thesecross-licenses give us freedom to operate in connection with contrast enhanced ultrasound imaging technology. We also in-license certain freedom to operaterights for Ablavar from, among others, Bayer. 17Table of ContentsRegulatory MattersFood and Drug LawsThe 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, marketing, sampling, distribution, import and export, record keeping and storage and disposalpractices, together with various post-marketing requirements. Governmental regulatory actions can result in the seizure or recall of products, suspension orrevocation 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 and securitystandards of the FDA, the U.S. Nuclear Regulatory Commission, or the NRC, the U.S. Department of Health and Human Services, or the HHS, Health Canada,the European Medicines Agency, or the EMA, the U.K. Medicines and Healthcare Products Regulatory Agency, or MHRA, the CFDA and various state andprovincial boards of pharmacy, state and provincial controlled substance agencies, state and provincial health departments and/or comparable state andprovincial agencies, as well as foreign agencies, and certain accrediting 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 Federal Food,Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, and implementing regulations. The process of obtaining regulatory approvals andcompliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.Currently, the process required by the FDA before a drug product may be marketed in the United States generally 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, to establishthe 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 cGMPs, 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 our agents indevelopment will be granted on a timely basis, if at all. Once a pharmaceutical agent is identified for development, it enters the preclinical testing stage.Preclinical tests include laboratory evaluations of product chemistry, toxicity, formulation, and stability, as well as animal studies to assess its potentialsafety and efficacy. This testing culminates in the submission of the IND to the FDA. 18Table of ContentsOnce the IND becomes effective, the clinical trial program may begin. Each new clinical trial protocol must be submitted to the FDA before the studymay begin. Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:Phase 1. The agent is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution andexcretion. In the case of some products for severe or life-threatening diseases, especially when the agent may be too inherently toxic to ethicallyadminister to healthy volunteers, the initial human testing is often conducted in patients with those diseases.Phase 2. Involves studies in a limited patient population to identify possible adverse effects and safety risks, to evaluate preliminarily the efficacy ofthe agent 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 at geographicallydispersed clinical study sites. These studies are intended to collect sufficient safety and effectiveness data to support the NDA for FDA approval.Clinical trial sponsors may request an SPA from the FDA. The FDA’s SPA process creates a written agreement between the sponsoring company and theFDA regarding the clinical trial design and other clinical trial issues that can be used to support approval of an agent. The SPA is intended to provideassurance that, if the agreed-upon clinical trial protocols are followed and the trial endpoints are achieved, then the data may serve as the primary basis for anefficacy claim in support of an NDA. However, the SPA agreement is not a guarantee of an approval of an agent or any permissible claims about the agent. Inparticular, the SPA is not binding on the FDA if public health concerns become evident that are unrecognized at the time that the SPA agreement is enteredinto, other new scientific concerns regarding product safety or efficacy arise, or if the clinical trial sponsor fails to comply with the agreed upon clinical trialprotocols.Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and safety reports must be submitted to theFDA and the investigators for serious and unexpected adverse events. Submissions must also be made to inform the FDA of certain changes to the clinicaltrial protocol. Federal law also requires the sponsor to register the trials on public databases when they are initiated, and to disclose the results of the trials onpublic databases upon completion. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA orthe clinical trial sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects or patientsare being exposed to an unacceptable health risk. Similarly, any institutional review board, or IRB, serving any of the institutions participating in the clinicaltrial can suspend or terminate approval of a clinical study at a relevant institution if the clinical study is not being conducted in accordance with the IRB’srequirements or if the agent has been associated with unexpected serious harm to patients. Failure to register a clinical trial or disclose study results within therequired time periods could result in penalties, 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 with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the agent and, among other things, the manufacturermust develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected andtested and stability studies must be conducted to demonstrate that the agent does not undergo unacceptable deterioration 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, requestingapproval to market the agent. The submission of an NDA is subject to the payment of a substantial user fee, pursuant to the Prescription 19Table of ContentsDrug User Fee Act, or PDUFA, which was first enacted in 1992 to provide the FDA with additional resources to speed the review of important new medicines.A waiver of that fee may be obtained under certain limited circumstances. PDUFA expires every five years and must be reauthorized by Congress. PDUFA IVexpired on September 30, 2012, and was renewed as Title I of the FDA Safety and Innovation Act, or PDUFA V, in 2012 and is scheduled to expire in 2017.PDUFA V focuses on improving the efficiency and predictability of the review process, strengthening the agency regulatory science base and enhancingbenefit-risk assessment and post-approval safety surveillance.The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied. The FDAhas substantial discretion in the product approval process, and it is impossible to predict with any certainty whether and when the FDA will grant marketingapproval. The FDA may on occasion require the sponsor of an NDA to conduct additional clinical studies or to provide other scientific or technicalinformation about the product, and these additional requirements may lead to unanticipated delay or expense. Even if such data and information aresubmitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not alwaysconclusive, and the FDA may interpret data differently than we interpret the same 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 further assess adrug product’s safety and effectiveness after NDA approval. The FDA also may impose a Risk Evaluation and Mitigation Strategy, or REMS, to ensure thatthe benefits of a product outweigh its risks. A REMS could add training requirements for healthcare professionals, safety communications efforts and limitson channels of distribution, among other things. The sponsor would be required to evaluate and monitor the various REMS activities and adjust them if needbe. Whether 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, product samplingand distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion and advertisingrequirements. The FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. Drugsmay be promoted only for the approved indications and in accordance with the provisions of the approved label and promotional claims must beappropriately balanced with important safety information and otherwise be adequately substantiated. Further, manufacturers of drugs must continue tocomply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition,changes to the manufacturing process generally require prior FDA approval before being implemented, and other types of changes 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 register theirestablishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain other agencies forcompliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production, processing,sterilization, packaging, labeling, storage and shipment of the drug product. Manufacturers must establish validated systems to ensure that products meetspecifications and regulatory standards, and test each product batch or lot prior to its release. In addition, manufacturers of commercial PET products,including radiopharmacies, hospitals and academic medical centers, are required to submit either an NDA or Abbreviated New Drug Application, or ANDA, inorder to produce PET drugs for clinical use, or produce the drugs under an IND. 20Table of ContentsThe 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 of certainmedical devices. The FDA can also impose restrictions on the sale, distribution or use of medical devices at the time of their clearance or approval, orsubsequent to marketing. Currently, two medical devices, both of which are manufactured by third parties which hold the product clearances, comprise only asmall portion of our revenues.The FDA may withdraw marketing authorization a pharmaceutical or medical device product if compliance with regulatory standards is not maintainedor if problems 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 may result inadministrative or judicial actions, such as fines, warning letters, holds on clinical studies, product recalls or seizures, product detention or refusal to permitthe import or export of pharmaceuticals or medical device products, refusal to approve pending applications or supplements, restrictions on marketing ormanufacturing, 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 the applicable stateboards of pharmacy. In addition, the FDA is also involved in the regulation of cyclotron facilities where PET products are produced and compliance withcGMP requirements and United States Pharmacopeia 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 adverse events,are components of most of these regulatory systems. Most of our business is subject to varying degrees of governmental regulation in the countries in whichwe operate, and the general trend is toward increasingly stringent regulation. The exercise of broad regulatory powers by the FDA continues to result inincreases in the amount of testing and documentation required for approval or clearance of new drugs and devices, all of which add to the expense of productintroduction. Similar trends also are evident in major non-U.S. markets, including Canada, the European Union, Australia and Japan.To assess and facilitate compliance with applicable FDA, NRC and other state, federal and foreign regulatory requirements, we regularly review ourquality systems to assess their effectiveness and identify areas for improvement. As part of our quality review, we perform assessments of our suppliers of theraw materials that are incorporated into products and conduct quality management reviews designed to inform management of key issues that may affect thequality of our products. From time to time, we may determine that products we manufactured or marketed do not meet our specifications, published standards,such as those issued by the International Standards Organization, or regulatory requirements. When a quality or regulatory issue is identified, we investigatethe issue and take appropriate corrective action, such as withdrawal of the product from the market, correction of the product at the customer location, noticeto the customer of revised labeling and other actions.Drug Price Competition and Patent Term Restoration Act of 1984The Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, added two pathways for FDA drug approval.First, the Hatch-Waxman Act permits the FDA to approve ANDAs for generic versions of drugs if the ANDA applicant demonstrates, among other things, thatits product is bioequivalent to the innovator product and provides relevant chemistry, manufacturing and product data. Second, the Hatch-Waxman Actcreated what is known as a Section 505(b)(2) NDA, which requires the same information 21Table of Contentsas a full NDA (known as a Section 505(b)(1) NDA), including full reports of clinical and preclinical studies but allows some of the information from thereports required for marketing approval to come from studies which the applicant does not own or have a legal right of reference. A Section 505(b)(2) NDApermits a manufacturer to obtain marketing approval for a drug without needing to conduct or obtain a right of reference for all of the required studies. TheHatch-Waxman Act also provides for: (1) restoration of a portion of a product’s patent term that was lost during clinical development and application reviewby the FDA; and (2) statutory protection, known as exclusivity, against the FDA’s acceptance or approval of certain competitor applications.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 the submissiondate 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 amaximum extension of five years, and the patent term extension cannot extend the remaining term of a patent beyond a total of 14 years. The application forpatent 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 FDA approves aSection 505(b)(1) NDA for a new drug that is a new chemical entity, meaning that the FDA has not previously approved any other new drug containing anysame active moiety, then the Hatch-Waxman Act prohibits the submission or approval of an ANDA or a Section 505(b)(2) NDA for a period of five years fromthe date of approval of the NDA, except that the FDA may accept an application for review after four years under certain circumstances. The Hatch-WaxmanAct will not prevent the filing or approval of a full NDA, as opposed to an ANDA or Section 505(b)(2) NDA, for any drug, but the competitor would berequired to conduct its own clinical trials, and any use of the drug for which marketing approval is sought could not violate another NDA holder’s patentclaims. The Hatch-Waxman Act provides for a three-year period of exclusivity for an NDA for a new drug containing an active moiety that was previouslyapproved by the FDA, but also includes new clinical data (other than bioavailability and bioequivalence studies) to support an innovation over thepreviously approved drug and those studies were conducted or sponsored by the applicant and were essential to approval of the application. This three-yearexclusivity period does not prohibit the FDA from accepting an application from a third party for a drug with that same innovation, but it does prohibit theFDA from approving that application for the three year period. The three year exclusivity does not prohibit the FDA, with limited exceptions, from approvinggeneric drugs containing the same active ingredient but without the new innovation.Healthcare Reform Act and Related LawsThe Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the HealthcareReform Act substantially changes the way in which healthcare is financed by both governmental and private insurers and has a significant impact on thepharmaceutical industry. The Healthcare Reform Act contains a number of provisions that affect coverage and reimbursement of drug products and themedical imaging procedures in which our drug products are used. Key provisions, include the following: • increasing the presumed utilization rate from 50% to 75% for imaging equipment costing $1 million or more in the physician office and free-standing imaging facility setting for dates of service on or after January 1, 2011. Under the American Taxpayer Relief Act of 2012, or ATRA, thepresumed utilization rate was further increased to 90%, effective January 1, 2014, which reduces the Medicare per procedure medical imagingreimbursement; • increasing the minimum rebate percentage of the average manufacturer price for Medicaid rebates payable by manufacturers of brand-name drugs(such as us) from 15.1% to the higher of 23.1% of the average manufacturer price or the difference between the average manufacturer price andthe best price, as adjusted by the Consumer Price Index-Urban; 22Table of Contents • extending Medicaid rebates payable by manufacturers of brand-name drugs to drugs paid by Medicaid managed care organizations; • expanding eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage generally to individualswith income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; • expanding access to commercial health insurance coverage through new state-based health insurance marketplaces, or exchanges; • imposing a non-deductible annual fee on pharmaceutical manufacturers or importers who sell brand name prescription drugs to specified federalgovernment programs; and • imposing an excise tax on the sale of taxable medical device, to be paid by the entity that manufactures or imports the device.The Healthcare Reform Act also establishes an Independent Payment Advisory Board, or IPAB, to reduce the per capita rate of growth in Medicarespending. The IPAB is mandated to propose changes in Medicare payments if it is determined that the rate of growth of Medicare expenditures exceeds targetgrowth rates or the projected percentage increase for the medical expenditures portion of the Consumer Price Index is greater than the projected percentageincrease in the Consumer Price Index for all items. A proposal made by the IPAB must be implemented by CMS, unless Congress adopts a proposal thatachieves the necessary savings. Although under the Healthcare Reform Act, the IPAB proposals may impact payments for physician and free-standingimaging services beginning in 2015 and for hospital services beginning in 2020, the threshold for triggering IPAB proposals has not been reached, so noadjustments will be made under the IPAB in 2017 (at the earliest).The Healthcare Reform Act also amended the federal self-referral laws, requiring referring physicians to inform patients under certain circumstancesthat the patients may obtain services, including MRI, computed tomography or CT, PET and certain other diagnostic imaging services, from a provider otherthan that physician, another physician in his or her group practice, or another individual under direct supervision of the physician or another physician in thegroup practice. The referring physician must provide each patient with a written list of other suppliers who furnish those services in the area in which thepatient resides. These new requirements could have the effect of shifting where certain diagnostic medical imaging procedures are performed.In addition, the Budget Control Act of 2011, as amended by the ATRA imposed across-the-board cuts, or sequestrations, to mandatory anddiscretionary spending. Medicare (but not Medicaid) reimbursement rates were reduced by 2% beginning in April 2013. The Bipartisan Budget Act of 2013applied reductions to Medicare reimbursement rates through 2023, with two pieces of additional legislation extending these cuts through 2024 and front-loading the cuts in 2024 to the first half of the year, respectively. The ATRA also, among other things, further reduced Medicare payments to severalproviders, including hospitals and imaging centers.The Healthcare Reform Act has been subject to political and judicial challenges. In 2012, the Supreme Court considered the constitutionality of certainprovisions of the law. The Court upheld as constitutional the mandate for individuals to obtain health insurance, but held the provision allowing the federalgovernment to withhold certain Medicaid funds to states that do not expand state Medicaid programs unconstitutional. Therefore, not all states haveexpanded their Medicaid programs under the Healthcare Reform Act. Political and judicial challenges to the law may continue in the wake of the Court’sruling. Perhaps of most significance is the case challenging the Internal Revenue Service’s application of the premium tax credits to individuals in all states,regardless of whether their state established a state-run exchange or allowed the federal government to facilitate an exchange on its behalf. The Court isscheduled to hear the challenge in March of 2015.Healthcare Fraud and Abuse LawsWe are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claimslaws. Anti-kickback laws generally prohibit a pharmaceutical 23Table of Contentsmanufacturer from soliciting, offering, receiving, or paying any remuneration in order to generate business, including the purchase or prescription of aparticular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or courtdecisions that apply the laws to particular industry practices. There is therefore a possibility that our practices might be challenged under the anti-kickback orsimilar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors(including Medicare and Medicaid) claims for drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims formedically unnecessary items or services. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws.Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and/or exclusion fromfederal health care programs (including Medicare and Medicaid). Federal and state authorities are paying increased attention to enforcement of these lawswithin the pharmaceutical industry and private individuals have been active in alleging violations of the laws and bringing suits on behalf of the governmentunder the false claims act. Violations of international fraud and abuse laws could result in similar penalties, including exclusion from participation in healthprograms outside the United States. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed.Laws and regulations have also 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; requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the U.S. federal government; and/or require disclosure to the government and/or public of financial interactions (so-called “sunshine laws”).State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Many of these laws and regulations containambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, our reportingactions could be subject to the penalty provisions of the pertinent federal and state laws and regulations.Other Healthcare LawsOur operations may be affected by the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health InformationTechnology for Economic and Clinical Health Act and its implementing regulations, or HITECH, which impose obligations on certain “covered entities”(healthcare providers, health plans and healthcare clearinghouses) and certain of their “business associate” contractors with respect to safeguarding theprivacy, security and transmission of individually identifiable health information. Although we believe that we are neither a “covered entity” nor a “businessassociate” under the legislation, a business associate relationship may be imputed from facts and circumstances even in the absence of an actual businessassociate agreement. In addition, HIPAA and HITECH may affect our interactions with customers who are covered entities or their business associates.Laws Relating to Foreign TradeWe are subject to various federal and foreign laws that govern our international business practices with respect to payments to government officials.Those laws include the 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, political party, or politicalcandidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a person working in an official capacity.In many countries, the healthcare professionals we regularly interact with may meet the FCPA’s definition of a foreign government official. The FCPA alsorequires public companies to make and keep books and records that accurately and fairly reflect their transactions and to devise and maintain an adequatesystem of internal accounting controls. 24Table of ContentsThose laws also include the Bribery Act which proscribes giving and receiving bribes in the public and private sectors, bribing a foreign publicofficial, and failing to have adequate procedures to prevent employees and other agents from giving bribes. U.S. companies that conduct business in theUnited Kingdom generally will be subject to the Bribery Act. Penalties under the Bribery Act include potentially unlimited fines for companies and criminalsanctions 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. Despite ourtraining and compliance programs, our internal control policies and procedures may not always protect us from reckless or criminal acts committed by ouremployees or agents.Health and Safety LawsWe 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 MattersWe 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 materials andwastes. If we violate these laws and regulations, we could be fined, criminally charged or otherwise sanctioned by regulators. We believe that our operationscurrently comply in all material respects with applicable environmental laws and regulations. See “Item 1A—Risk Factors—We use hazardous materials inour business and must comply with environmental laws and regulations, which can be expensive.”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 those 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 personal injury,property damage or other claims due to the presence of, or exposure to, hazardous materials or wastes. We currently are not party to any claims or anyobligations to investigate or remediate contamination at any of our facilities.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 Commonwealth ofMassachusetts. 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. As of December 31, 2014, we currently estimate the D&D cost at theBillerica site to be approximately $24.1 million. As of December 31, 2014 and 2013, we have a liability recorded associated with the fair value of the assetretirement obligations of approximately $7.4 million and $6.4 million, respectively. We have recorded accretion expense of $0.8 million, $0.6 million and$0.6 million during the years ended December 31, 2014, 2013 and 2012, respectively. We currently provide this financial assurance in the form of suretybonds. We generally contract with third parties for the disposal of wastes generated by our operations. Prior to disposal, we store any low level radioactivewaste at our facilities until the materials are no longer considered radioactive, as allowed by 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 25Table of Contentslaws and regulations, we cannot assure you that our costs of complying with current or future environmental protection, health and safety laws andregulations will not exceed our estimates or adversely affect our results of operations and financial condition. Further, we cannot assure you that we will notbe subject to additional environmental claims for personal injury or cleanup in the future based on our past, present or future business activities. While it isnot feasible to predict the future costs of ongoing environmental compliance, it is possible that there will be a need for future provisions for environmentalcosts that, in management’s opinion, are not likely to have a material effect on our financial condition, but could be material to the results of operations inany one accounting period.EmployeesAs of December 31, 2014, we had 524 employees, of which 406 were located in the United States and 118 were located internationally, andapproximately 84 contractors. None of our employees are represented by a collective bargaining unit, and we believe that our relationship with ouremployees is good.Corporate HistoryFounded in 1956 as New England Nuclear Corporation, our medical imaging diagnostic business was purchased by DuPont in 1981. BMSsubsequently acquired our diagnostic medical imaging business as part of its acquisition of DuPont Pharmaceuticals in 2001. Avista acquired our medicalimaging business from BMS in January 2008.Our SponsorAvista is a leading private equity firm with over $5 billion under management and offices in New York, NY, Houston, TX and London, UK. Founded in2005 as a spin-out from the former DLJ Merchant Banking Partners, or DLJMB, franchise, Avista makes controlling or influential minority investmentsprimarily in growth-oriented energy, healthcare, communications and media, industrial and consumer businesses. Through its team of seasoned investmentprofessionals and industry experts, Avista seeks to partner with exceptional management teams to invest in and add value to well-positioned businesses.Item 1A. Risk FactorsYou should carefully consider the following risks. These risks could materially affect our business, results of operations or financial condition, causethe trading price of our outstanding notes to decline materially or cause our actual results to differ materially from those expected or those expressed in anyforward-looking statements made by us or on our behalf. See “Cautionary Note Regarding Forward-Looking Statements” and the risks of our businessesdescribed elsewhere in this annual report.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 timeframes, or at all, which could result in order cancellations and decreasedrevenues.We obtain a substantial portion of our products from third party manufacturers and suppliers. Historically, we relied on BVL in Bedford, Ohio as oursole manufacturer of DEFINITY, Neurolite and evacuation vials, an ancillary component for our TechneLite generators, and as one of two manufacturers ofCardiolite. Following extended operational and regulatory challenges at BVL, in March 2012 we entered into a settlement arrangement with BVL, resultingin an aggregate payment to us of $35.0 million, a broad mutual waiver and a covenant by us not to sue. Later in 2012 and in 2013, BVL continued to attemptto manufacture our products for us, and in October 2013 announced that it would cease to manufacture new batches of our products at its Bedford, Ohiofacility. In November 2013, we entered into a second settlement arrangement with BVL, resulting in an additional aggregate payment to us of $8.9 million, abroad mutual waiver and a covenant by us not to sue. At this time, we have a very limited amount of BVL-manufactured products in our finished goodsinventory. 26Table of ContentsFollowing extensive technology transfer activities, we now rely on JHS as our sole source manufacturer of DEFINITY, Neurolite and evacuation vials.We currently have additional ongoing technology transfer activities at JHS for our Cardiolite products and at Pharmalucence for DEFINITY, but we can giveno assurances as to when that technology transfer will be completed and when we will actually receive supply of Cardiolite from JHS or DEFINITY fromPharmalucence. In the meantime, our DEFINITY, Neurolite, evacuation vial and Cardiolite product supply is currently manufactured by a singlemanufacturer. In addition, we currently have no manufacturer for Ablavar.Based on our current estimates, we believe that we will have sufficient supply of DEFINITY, Neurolite and evacuation vials from JHS to meet expecteddemand, sufficient Cardiolite product supply from our current manufacturer to meet expected demand, and sufficient Ablavar product supply to meetexpected demand. However, we can give no assurances that JHS or our other manufacturing partners will be able to manufacture and distribute our productsin a high quality and timely manner and in sufficient quantities to allow us to avoid product stock-outs and shortfalls. Currently, the regulatory authorities incertain countries have not yet approved JHS as a manufacturer of our products. Accordingly, until those regulatory approvals have been obtained, ourinternational business, results of operations, financial condition and cash flows will continue to be adversely affected.Our manufacturing agreement for Ablavar has terminated. We do not have any current plans to initiate technology transfer activities for Ablavar. If wedo not engage in Ablavar technology transfer activities in the future with a new manufacturing partner for Ablavar, then our existing Ablavar inventory willexpire in 2016 and we will have no further Ablavar inventory that we will be able to sell.In addition to the products described above, for reasons of quality assurance or cost-effectiveness, we purchase certain components and raw materialsfrom sole suppliers (including, for example, the lead casing for our TechneLite generators, the evacuation vials for our TechneLite generators manufacturedby JHS and the lipid blend material used in the processing of DEFINITY). Because we do not control the actual production of many of the products we selland many of the raw materials and components that make up the products we sell, we may be subject to delays caused by interruption in production based onevents and conditions outside of our control. At our North Billerica, Massachusetts facility, we manufacture TechneLite on a relatively new, highlyautomated production line, as well as Thallium and Gallium using our older cyclotron technology. As with all manufacturing facilities, equipment andinfrastructure age and become subject to increasing maintenance and repair. If we or one of our manufacturing partners experiences an event, including alabor dispute, natural disaster, fire, power outage, machinery breakdown, security problem, failure to meet regulatory requirements, product quality issue,technology transfer issue or other issue, we may be unable to manufacture the relevant products at previous levels or on the forecasted schedule, if at all. Dueto the stringent regulations and requirements of the governing regulatory authorities regarding the manufacture of our products, we may not be able toquickly restart manufacturing at a third party or our own facility or establish additional or replacement sources for certain products, components or materials.In addition to our existing manufacturing relationships, we are also pursuing new manufacturing relationships to establish and secure additional oralternative suppliers for our commercial products. On November 12, 2013, we entered into a Manufacturing and Supply Agreement with Pharmalucence tomanufacture and supply DEFINITY. We cannot assure you, however, that these supply diversification activities will be successful, or that before thosealternate manufacturers or sources of product are fully functional and qualified, that we will be able to avoid or mitigate interim supply shortages. In addition,we cannot assure you that our existing manufacturers or suppliers or any new manufacturers or suppliers can adequately maintain either their financial healthor regulatory compliance to allow continued production and supply. A reduction or interruption in manufacturing, or an inability to secure alternativesources of raw materials or components, could eventually have a material adverse effect on our business, results of operations, financial condition and cashflows. 27Table of ContentsChallenges with product quality or product performance, including defects, caused by us or our suppliers could result in a decrease in customers andsales, 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 current cGMPs. Problems may be identified or arise during manufacturing quality review, packaging or shipment for avariety of reasons including equipment malfunction, failure to 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 inan unsafe condition or the injury or death of a patient. Those events could lead to a recall of, or issuance of a safety alert relating to, our products. We alsomay undertake voluntarily to recall products or temporarily shutdown production lines based on internal safety and quality monitoring and testing data.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. These challenges could also divert the attention of our management and employees from operational,commercial or other business efforts. If we deliver products with defects, or if there is a perception that our products or the processes related to our productscontain errors or defects, we could incur additional recall and product liability costs, and our credibility and the market acceptance and sales of our productscould be materially adversely affected. Due to the strong name recognition of our brands, an adverse event involving one of our products could result inreduced market acceptance and demand for all products within that brand, and could harm our reputation and our ability to market our products in the future.In some circumstances, adverse events arising from or associated with the design, manufacture or marketing of our products could result in the suspension ordelay of regulatory reviews of our applications for new product approvals. These challenges could have a material adverse effect on our business, results ofoperations, 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, historically our largest product by annual revenues, is Moly. We currently purchase finished Moly from four of thefive main processing sites in the world, namely ANSTO in Australia; IRE in Belgium; Nordion, formerly known as MDS Nordion, in Canada; and NTP inSouth Africa. These processing sites are, in turn, supplied by seven of the eight main Moly-producing reactors in the world, namely, OPAL in Australia; BR2in Belgium; OSIRIS in France; LVR-10 in the Czech Republic; HFR in The Netherlands; NRU in Canada; and SAFARI in South Africa.Historically, our largest supplier of Moly has been Nordion, which has relied on the NRU reactor owned and operated by Atomic Energy of CanadaLimited, or AECL, a Crown corporation of the Government of Canada, located in Chalk River, Ontario. This reactor was off-line from May 2009 until August2010 due to a heavy water leak in the reactor vessel. The inability of the NRU reactor to produce Moly and of Nordion to finish Moly during the shutdownperiod had a detrimental effect on our business, results of operations and cash flows. As a result of the NRU reactor shutdown, we experienced businessinterruption losses. We estimate the quantity of those losses to be, in the aggregate, more than $70 million, including increases in the cost of obtaininglimited amounts of Moly from alternate, more distant, suppliers and substantial decreases in 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 our forecastedresults. The Government of Canada has stated that it intends to exit the medical isotope business when the NRU reactor’s current license transitions inOctober 2016 and thereafter provide only emergency back-up medical isotope supply through March 2018. 28Table of ContentsAs part of the conditions for the relicensing of the NRU reactor, the Canadian government has asked AECL to shut down the reactor for at least fourweeks at least once a year for inspection and maintenance. The most recent shutdown period ran from April 13, 2014 until May 13, 2014, and we were able tosource sufficient Moly to satisfy all of our standing-order customer demand for our TechneLite generators during this time period from our other suppliers.During this shutdown period, however, because Xenon is a by-product of the Moly production process and is currently captured only by NRU, we were notable to supply all of our standing-order customer demand for Xenon. There can be no assurance that in the future these off-line periods will last for the statedtime or that the NRU will not experience other unscheduled shutdowns. Further prolonged scheduled or unscheduled shutdowns would limit the amount ofMoly and Xenon available to us and limit the quantity of TechneLite that we could manufacture, sell and distribute and the amount of Xenon that we couldsell and distribute, resulting in a further substantial negative effect on our business, results of operations, financial condition and cash flows.In the face of the NRU reactor operating challenges and licensure issues we entered into Moly supply agreements with NTP, ANSTO and IRE toaugment our supply of Moly. ANSTO has under construction, in cooperation with NTP, a new Moly processing facility that ANSTO believes will expand itsproduction capacity by approximately 2.5 times, with expanded commercial production planned to start in mid-2016. This new ANSTO production capacityis expected to replace the NRU’s current routine production.While we believe this additional Moly supply now gives us the most balanced and diversifiedMoly supply chain in the industry, a prolonged disruption of service from only one of our significant Moly suppliers could have a material adverse effect onour business, results of operations, financial condition and cash flows. We are also pursuing additional sources of Moly from potential new producers aroundthe world to further augment our current supply. For example, in November 2014, we announced entering into a new strategic agreement with SHINE for thefuture supply of Moly. Under the terms of the supply agreement, SHINE will provide Moly produced using its proprietary LEU-solution technology for use inour TechneLite generators once SHINE’s facility becomes operational and receives all necessary regulatory approvals, which SHINE currently estimates willoccur in 2018. However, we cannot assure you that SHINE or any other possible additional sources of Moly will result in commercial quantities of Moly forour business, or that these new suppliers together with our current suppliers will be able to deliver a sufficient quantity of Moly to meet our needs.Although our agreements with NTP, ANSTO and IRE run until December 31, 2017, our agreement with Nordion runs only until December 31, 2015 andcan be terminated by Nordion upon the occurrence of certain events, including if we fail to purchase a minimum percentage of Moly or if Nordion incurscertain cost increases.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 after the NRUreactor‘s transition in 2016 from providing regular supply of medical isotopes to providing only emergency back-up supply of medical isotopes throughMarch 2018. As a result, there is a limited amount of Moly available which could limit the quantity of TechneLite that we could manufacture, sell anddistribute, resulting in a further substantial negative effect on our business, results of operations, financial condition and cash flows.Most of the global suppliers of Moly rely on AREVA Group in France to fabricate uranium targets for research reactors from which Moly is produced.Absent a new supplier, a supply disruption relating to uranium targets could have a substantial negative effect on our business, results of operations, financialcondition and cash flows. 29Table of ContentsThe instability of the global supply of Moly, including supply shortages, resulted in increases in the cost of Moly, which has negatively affected ourmargins, and more restrictive agreements with suppliers, which could further increase our costs.With the general instability in the global supply of Moly, including supply shortages during 2009 and 2010, we have faced substantial increases in thecost of Moly in comparison to historical costs. We expect these cost increases to continue in the future as the Moly suppliers move closer to a full costrecovery business model. The Organization of Economic Cooperation and Development, or OECD, defines full cost recovery as the identification of all of thecosts of production and recovering these costs from the market. While we are generally able to pass Moly cost increases on to our customers in our customercontracts, if we are not able to do so in the future, our margins may decline further with respect to our TechneLite generators, which could have a materialadverse effect on our business, results of operations, financial condition and cash flows.The Moly supply shortage caused by the 2009-10 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, including ourCardiolite products. With less Moly, we manufactured fewer generators for radiopharmacies and hospitals to make up unit doses of Cardiolite products,resulting in decreased market 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 of TechneLite. However, TechneLite unit volume has not returned topre-shortage levels for, we believe, a number of reasons, including: (i) changing staffing and utilization practices in radiopharmacies, which have resulted inan increased number of unit-doses of technetium-based radiopharmaceuticals being made from available amounts of technetium; (ii) shifts to alternativediagnostic imaging modalities during the Moly supply shortage, which have not returned to technetium-based procedures; and (iii) decreased amounts oftechnetium being used in unit-doses of technetium-based radiopharmaceuticals due to growing concerns about patient radiation dose exposure. We do notknow if the staffing and utilization practices in radiopharmacies, the mix between technetium and non-technetium-based diagnostic procedures and theincreased concerns about radiation exposure, will allow technetium demand to ever return to pre-shortage levels, which could have a material adverse effecton our business, results of operations, financial condition and cash flows.Our just-in-time manufacturing of radiopharmaceutical products relies on the timely receipt of radioactive raw materials and the timely shipment offinished goods, and any disruption of our supply or distribution networks could have a negative effect on our business.Because a number of our radiopharmaceutical products, including our TechneLite generators, rely on radioisotopes with limited half-lives, we mustmanufacture, finish and distribute these products on a just-in-time basis, because the underlying radioisotope is in a constant state of radio decay. Forexample, if we receive Moly in the morning of a manufacturing day for TechneLite generators, then we will generally ship finished generators to customersby the end of that same business day. Shipment of generators may be by next day delivery services or by either ground or air custom logistics. Any delay inus receiving radioisotopes from suppliers or being able to have finished products delivered to customers because of weather or other unforeseentransportation issues could have a negative effect on our business, results of operations, financial condition and cash flows.The growth of our business is substantially dependent on increased market penetration for the appropriate use of DEFINITY in suboptimalechocardiograms.The growth of our business is substantially dependent on increased market penetration for the appropriate use of DEFINITY in suboptimalechocardiograms. Of the approximately 30 million echocardiograms performed each year in the United States, a third party source estimates that 20%, orapproximately six million echocardiograms, produce suboptimal images. We estimate that DEFINITY had approximately 78% share of the market for contrastagents in the United States as of December 2014. If we are not able to continue to grow 30Table of ContentsDEFINITY sales through increased market penetration, we will not be able to grow the revenue and cash flow of the business or continue to fund our othergrowth initiatives at planned levels, which could have a negative effect on our prospects.We face potential supply and demand challenges for Xenon.Currently, Nordion is our sole supplier, and we believe the principal supplier on a global basis, of Xenon, which is captured by the NRU reactor as a by-product of the Moly production process. In January 2015, we announced entering into a new strategic agreement with IRE for the future supply of Xenon.Under the terms of the agreement, IRE will provide bulk Xenon to us for processing and finishing once development work has been completed and allnecessary regulatory approvals have been obtained. We currently estimate commercial production will occur in 2016. If we are not able to begin providingcommercial quantities of Xenon prior to the NRU reactor’s transition in October 2016 from providing regular supply of medical isotopes to providing onlyemergency back-up supply of medical isotopes through March 2018, there may be a period of time during which we are not able to offer Xenon in ourportfolio of commercial products, which would have a negative effect on our business, results of operations, financial condition and cash flows. For the yearended December 31, 2014, Xenon represented approximately 12% of our revenues.Currently, we obtain Xenon from Nordion on a purchase order basis. If we are not able to pass along to our customers any change of terms from oursupplier, there could be a negative effect on our business, results of operations, financial condition and cash flows.Currently, we are the leading provider of packaged Xenon in the United States. If other providers obtained regulatory approval and began to sellpackaged Xenon in the United States without otherwise increasing market penetration for the agent, or if there is an increase in the use of other imagingmodalities in place of using packaged Xenon, our current sales volumes would decrease, which could have a negative effect on our business, results ofoperations, financial condition and cash flows.Xenon is frequently administered as part of a ventilation scan to evaluate pulmonary function prior to a perfusion scan with microaggregated albumin,or MAA, a technetium-based radiopharmaceutical used to evaluate blood flow to the lungs. Currently, Draxis is the sole supplier of MAA on a global basis.Recently, Draxis encountered supply challenges and announced substantial price increases for MAA. If supply challenges for MAA or the increased price ofMAA decreases the frequency that MAA is used for lung perfusion evaluation, which, in turn, decreases the frequency that Xenon is used for pulmonaryfunction evaluation, the MAA supply challenges or price increase would have a negative effect on our business, results of operations, financial condition andcash flows.In the United States, we are heavily dependent on a few large customers and group purchasing organization arrangements to generate a majority of ourrevenues for our medical imaging products. Outside of the United States, we rely on distributors to generate a substantial portion of our revenue.In the United States, we have historically relied on a limited number of radiopharmacy customers, primarily Cardinal, GE Healthcare, UPPI and Triad,to distribute our current largest volume nuclear imaging products and generate a majority of our revenues. Three customers accounted for approximately 38%of our revenues in the fiscal year ended December 31, 2014, with Cardinal, UPPI and GE Healthcare accounting for approximately 18%, 11% and 9%,respectively. Among the existing radiopharmacies in the United States, continued consolidations, divestitures and reorganizations may have a negative effecton our business, results of operations, financial condition or cash flows. We generally have distribution arrangements with our major radiopharmacycustomers pursuant to multi-year contracts, each of which is subject to renewal. If these contracts are terminated prior to expiration of their term, or are notrenewed, or are renewed on terms that are less favorable to us, then such an event could have a material adverse effect on our business, results of operations,financial condition and cash flows. 31Table of ContentsOur written supply agreements with Cardinal relating to TechneLite, Xenon, Neurolite, Cardiolite and certain other products expired in accordancewith their terms on December 31, 2014. Following extended discussions with Cardinal that have not yet resulted in one or more new written supplyagreements, we are currently accepting and fulfilling product orders from Cardinal on a purchase order basis at list price. We cannot predict the volumes orproduct mix Cardinal will continue to order and purchase, and such volumes and product mix may vary over time. In the absence of written supplyagreements with Cardinal, unit sales volumes have decreased in early 2015 from levels experienced throughout 2014, but such sales have been atsubstantially higher prices. However, ultimate future levels of net revenue and operating profit associated with Cardinal cannot be predicted at this timebecause such amounts depend on future unit sales volumes, product mix and pricing to Cardinal. A significant decrease in the operating profit contributionfrom sales to Cardinal would have a material adverse effect on our business, results of operations, financial condition and cash flows.For both our nuclear imaging agents and contrast agents, we continue to experience significant pricing pressures from our competitors, large customersand group purchasing organizations, and any significant, additional pricing pressures could lead to a reduction in revenue which could have a materialadverse effect on our business, 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, consequently, rely on third partydistributors, either on a country-by-country basis or on a multicountry, regional basis, to market, sell and distribute our products. These distributorsaccounted for approximately 17%, 13% and 16% of non-U.S. revenues for the fiscal years ended December 31, 2014, 2013 and 2012, respectively. In certaincircumstances, these distributors may also sell competing products to our own or products for competing diagnostic modalities and may have incentives toshift sales towards those competing products. As a result, we cannot assure you that our international distributors will increase or maintain our current levelsof 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 have a history of net losses and total stockholder’s deficits which may continue and which may negatively impact our ability to achieve or sustainprofitability.We have a history of net losses and cannot assure you that we will achieve or sustain profitability in the future. We incurred net loss for the years endedDecember 31, 2014, 2013 and 2012 of $1.2 million, $61.7 million and $42.0 million, respectively, and as of December 31, 2014, we had a total stockholders’deficit of $241.0 million. We cannot assure you that we will be able to achieve or sustain profitability on a quarterly or annual basis in the future. If wecannot improve our profitability, the value of our enterprise may decline.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 more diversifiedthan ours, such as Mallinckrodt, GE Healthcare, Bayer Schering Pharma AG, or Bayer, Bracco, and DRAXIS Specialty Pharmaceuticals Inc. (an affiliate ofJHS), or Draxis, as well as other competitors. We cannot anticipate their actions in the same or competing diagnostic modalities, such as significant pricereductions on products that are comparable to our own, development or introduction of new products that are more cost-effective or have superiorperformance than our current products, the introduction of generic versions when our proprietary products lose their patent protection or the new entry into ageneric market in which we are already a participant. In addition, distributors of our products could attempt to shift end-users to competing diagnosticmodalities and products. Our current or future products could be rendered obsolete or uneconomical as a result of these activities. Our failure to competeeffectively could cause us to lose market share to our competitors and have a material adverse effect on our business, results of operations, financial conditionand cash flows. 32Table of ContentsIn October 2014, Bracco received FDA approval in the United States for its echocardiography agent, Lumason (known as SonoVue outside of the U.S.),which is already approved for sale in Europe and certain Asian markets, including China, Japan and Korea. Bracco now has one of three FDA-approvedechocardiography contrast agents in the United States, together with GE Healthcare’s Optison and our DEFINITY. Although Bracco has not yet formallylaunched Lumason in the United States, if Bracco successfully commercializes Lumason in the United States without otherwise increasing the overall usageof ultrasound contrast agents, our current and future sales volume could suffer, which would have a material adverse effect on our business, results ofoperations, financial condition and cash flows.Generic competition has significantly eroded our market share of the MPI segment for Cardiolite products and will 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. Cardiolite productsaccounted for approximately 6%, 9% and 12% of our revenues in the fiscal years ended December 31, 2014, 2013, and 2012, respectively. Included inCardiolite is branded Cardiolite and generic sestamibi, some of which we produce and some of which we procure from third parties. With the advent ofgeneric competition in September 2008, we have faced significant pricing and unit volume pressures on Cardiolite. To the extent generic competitors furtherreduce their prices, we may be forced to further reduce the price of our Cardiolite products as well as lose additional market share, which would have anadverse effect on our business, results of operations, financial condition and cash flows.In addition, because several of the products we manufacture became less available due to recent supply challenges, certain of our customers may havebegun to favor a generic offering or a competing agent or diagnostic modality. If we experience continued pricing and unit volume pressures or that productor modality shift is sustained, it could have a material adverse effect on our business, results of operation, financial condition and cash flows.Certain of our customers are highly dependent on payments from third party payors, including government sponsored programs, particularly Medicare,in the United States and other countries in which we operate, and reductions in third party coverage and reimbursement rates for our products (orsources provided with our products) could 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 purchased by our customers are reimbursed bythird party payors, including Medicare, Medicaid, other U.S. government sponsored programs, non-U.S. governmental payors and private payors. These thirdparty payors exercise significant control over patient access and increasingly use their enhanced bargaining power to secure discounted rates and otherrequirements that may reduce demand for our products. Our potential customers’ ability to obtain appropriate reimbursement for products and services fromthese third party payors affects the selection of products they purchase and the prices they are willing to pay. If these third party payors do not provideappropriate reimbursement for the costs of our products (or services provided using our products), deny the coverage of the products (or those services), orreduce current levels of reimbursement, healthcare professionals may not prescribe our products and providers and suppliers may not purchase our products.In addition, demand for new products may be limited unless we obtain favorable reimbursement policies (including coverage, coding and payment) fromgovernmental and private third party payors at the time of the product’s introduction, which will depend, in part, on our ability to demonstrate that a newagent has a positive impact on clinical outcomes. Third party payors continually review their coverage policies for existing and new therapies and can denycoverage for treatments that include the use of our products or revise payment policies such that payments do not adequately cover the cost of our products.Even if third party payors make coverage and reimbursement available, that reimbursement may not be adequate or these payors’ reimbursement policies mayhave an adverse effect on our business, results of operations, financial condition and cash flows. 33Table of ContentsOver the past several years, Medicare has implemented numerous changes to payment policies for imaging procedures in both the hospital setting andnon-hospital settings (which include physician offices and freestanding imaging facilities). Some of these changes have had a negative impact on utilizationof imaging services. Examples of these changes include: • limiting payments for imaging services in physician offices and free-standing imaging facility settings based upon rates paid to hospitaloutpatient departments; • reducing payments for certain imaging procedures when performed together with other imaging procedures in the same family of procedures onthe same patient on the same day in the physician office and free-standing imaging facility setting; • making significant revisions to the methodology for determining the practice expense component of the Medicare payment applicable to thephysician office and free-standing imaging facility setting which results in a reduction in payment; and • revising payment policies and reducing payment amounts for imaging procedures performed in the hospital outpatient setting.We believe that Medicare changes to payment policies for imaging procedures will continue to result in certain physicians practices ceasing to providethese services and a further shifting of where certain medical imaging procedures are performed, from the physician office and free-standing imaging facilitysettings to the hospital outpatient setting. We believe that these changes and their resulting pressures may incrementally reduce the overall number ofdiagnostic medical imaging procedures performed. In recent legislation, Congress expanded CMS’ authority to review and revalue the codes used forreimbursement under the Medicare Physician Fee Schedule. Changes applicable to Medicare payment in the hospital outpatient setting could influence thedecisions by hospital outpatient physicians to perform procedures that involve our products. These changes overall could slow the acceptance andintroduction of next-generation imaging equipment into the marketplace, which, in turn, could adversely impact the future market adoption of certain of ourimaging agents already in the market or currently in clinical or preclinical development. We expect that there will continue to be proposals to reduce or limitMedicare and Medicaid payment for diagnostic services.Even within the hospital outpatient setting, CMS has revised its payment policy such that the use of many of our products is not separately payable byMedicare, although other products may be payable as an addition to the procedure. Specifically, in 2013, although Medicare generally does not provideseparate payment to hospitals for the use of diagnostic radiopharmaceuticals administered in an outpatient setting, CMS finalized a policy to make anadditional payment to hospitals that utilize products with non-HEU, meaning the product is 95% derived from non-HEU sources. This payment policycontinues in 2015. Although some of our TechneLite generators are manufactured using non-HEU, not all of our TechneLite generators meet CMS’sdefinition of non-HEU, and therefore this payment will not be available for doses produced by the latter category of TechneLite generators used by ourcustomers. This payment as well as other changes to the Medicare hospital outpatient prospective payment system payment rates could influence thedecisions by hospital outpatient physicians to perform procedures that involve our products.We also expect increased regulation and oversight of advanced diagnostic testing. One provision in the Protecting Access to Medicare Act requiresCMS to develop appropriate use criteria, or AUC, that professionals must consult when ordering advanced diagnostic imaging services (which include MRI,CT, nuclear medicine (including PET) and other advanced diagnostic imaging services that the Secretary of the Department of Health and Human Services, orHHS, may specify). Beginning in 2017, payment will be made to the furnishing professional for an applicable advanced diagnostic imaging service only ifthe claim indicates that the ordering professional consulted a qualified clinical decision support mechanism, as identified by HHS, as to whether the orderedservice adheres to the applicable AUC. To the extent that these types of changes 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“Business—Regulatory Matters.” 34Table of ContentsReforms 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 regulated andsubject to frequent and substantial changes. For example, in March 2010, the President signed one of the most significant healthcare reform measures indecades, the Healthcare Reform Act. The Healthcare Reform Act contains a number of provisions that affect coverage and reimbursement of drug productsand medical imaging procedures in which our drug products are used. See “Business—Regulatory Matters—Healthcare Reform Act and Related Laws.” 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, judicial 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. The Budget Control Act of 2011includes provisions to reduce the federal deficit. The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare payments toproviders, which went into effect on April 1, 2013 and will remain in effect through 2024 unless additional Congressional action is taken. Any significantspending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significanttaxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, could have anadverse impact on our results of operations.In addition, federal spending is also subject to a statutory debt ceiling. If the federal debt reaches the statutory debt ceiling, Congress must enactlegislation to suspend enforcement of, or increase, the statutory debt ceiling. If Congress fails to do so before the ceiling is reached and, as a result, is unableto satisfy its financial obligations, including under Medicare, Medicaid and other publicly funded or subsidized health programs, our results of operationscould be adversely impacted.The full impact on our business of the Healthcare Reform Act and the other new laws is uncertain. Nor is it clear whether other legislative changes willbe adopted or how those changes would affect our industry generally or our ability to successfully commercialize our products or the development of newproducts.Under the statutory Medicare sustainable growth rate formula, payments under the Medicare Physician Fee Schedule could have decreasedsignificantly over the past several years without congressional intervention. In the past, when the application of the statutory formula would have resulted inlower payments, Congress has passed interim legislation to prevent the reductions. In 2014, Congress again prevented the negative update factor from goinginto effect until March 31, 2015. If Congress fails to intervene to prevent the negative update factor in the future through either another temporary measure ora permanent revision to the statutory formula, payments to physicians may be reduced.The Healthcare Reform Act could potentially reduce the number of diagnostic medical imaging procedures performed or could reduce the amount ofreimbursements paid for those procedures.The implementation of the Healthcare Reform Act could potentially reduce the aggregate number of diagnostic medical imaging procedures performedin the United States. Under the Healthcare Reform Act, referring physicians under the federal self-referral law must inform patients that they may obtaincertain services, including MRI, CT, PET and certain other diagnostic imaging services from a provider other than that physician, another physician in his orher group practice, or another individual under the direct supervision of the physician or another physician in the group practice. The referring physicianmust provide each patient with a written list of other suppliers which furnish those services in the area in which the patient resides. These new requirementscould have the effect of shifting where certain diagnostic medical imaging procedures are performed. In addition, they could potentially reduce the overallnumber of diagnostic medical imaging procedures performed. We cannot predict the full impact of the Healthcare Reform Act on our business. The lawsubstantially changed the way healthcare is financed by both governmental and private insurers. Although certain provisions may 35Table of Contentsnegatively affect payment rates for certain imaging services, the Healthcare Reform Act is projected to reduce the number of people without health insuranceby approximately 25 million by 2016 (based on April 2014 estimates from the Congressional Budget Office), which may result in an increase in the demandfor our services, but we cannot be assured of a proportional, or any, increase in the use of our products.Further, we expect that there will continue to be proposals to reduce or limit Medicare and Medicaid payment for services. Rates paid by some privatethird party payors are based, in part, on established physician, clinic and hospital charges and are generally higher than Medicare payment rates. Reductionsin the amount of reimbursement paid for diagnostic medical imaging procedures and changes in the mix of our patients between non-governmental payorsand government sponsored healthcare programs and among different types of non-government payor sources, could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows.Our business and industry are subject to complex and costly regulations. If government regulations are interpreted or enforced in a manner adverse tous 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 agents in development, we, our products, development agents, operations, facilities, suppliers,distributors, contract manufacturers, contract research organizations and contract testing laboratories are subject to extensive and, in certain circumstances,expanding regulation by federal, state and local government agencies in the United States as well as non-U.S. and transnational laws and regulations, withregulations differing from country to 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 exportof drug products. We are required to register our business for permits and/or licenses with, and comply with the stringent requirements of the FDA, the NRC,the HHS, Health Canada, the EMA, the MHRA, the CFDA, state and provincial boards of pharmacy, state and provincial health departments and other federal,state and provincial agencies.Under U.S. law, for example, we are required to report certain adverse events and production problems, if any, to the FDA. We also have similar adverseevent and production reporting obligations outside of the United States, including to the EMA and MHRA. Additionally, we must comply with requirementsconcerning advertising and promotion for our products, including the prohibition on the promotion of our products for indications that have not beenapproved by the FDA or a so-called “off-label use.” If the FDA determines that our promotional materials constitute the unlawful promotion of an off-labeluse, it could request that we modify our promotional materials or subject us to regulatory or enforcement actions. Also, quality control and manufacturingprocedures at our own facility and at third party suppliers must conform to cGMP regulations and other applicable law after approval, and the FDAperiodically inspects manufacturing facilities to assess compliance with cGMPs and other applicable law, and, from time to time, makes those cGMPs morestringent. Accordingly, we and others with whom we work must expend time, money, and effort in all areas of regulatory compliance, includingmanufacturing, production and quality control. For example, we currently rely on JHS as our sole manufacturer of DEFINITY and Neurolite. In 2013, JHSreceived a warning letter from the FDA in connection with their manufacturing facility in Spokane, Washington where our products are manufactured. If JHScannot resolve the issues in their facility underlying the warning letter or if the issues become worse, then the FDA could take additional regulatory actionwhich could limit or suspend the ability of JHS to manufacture our products or have any additional products approved at the Spokane facility formanufacture until the issues are resolved and remediated. Such a limitation or suspension could have a material adverse effect on our business, results ofoperations, financial condition and cash flows.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 and other fraud and abuse laws andregulations. For example, in 2010, we entered into a Medicaid Drug Rebate Agreement with the federal government for some but not all of our 36Table of Contentsproducts, which requires us to report certain price information to the federal government that could subject us to potential liability under the False ClaimsAct, civil monetary penalties or liability under other laws and regulations in connection with the covered products as well as the products not covered by theagreement. Determination of the rebate amount that we pay to state Medicaid programs for our products, as well as determination of payment amounts underMedicare and certain other third party payers, including government payers, depends upon information reported by us to the government. If we providecustomers or government officials with inaccurate information about the products’ pricing or eligibility for coverage, or the products fail to satisfy coveragerequirements, we could be terminated from the rebate program, be excluded from participation in government healthcare programs, or be subject to potentialliability under the False Claims Act or other laws and regulations. See “Business—Regulatory Matters—Healthcare Fraud and Abuse Laws.”Additionally, funds received under all healthcare reimbursement programs are subject to audit with respect to the proper billing by customers. Ourcustomers engage in billing, and retroactive adjustments of revenue received from these programs could occur.Failure to comply with other requirements and restrictions placed upon us or our third party manufacturers or suppliers by laws and regulations canresult in fines, civil and criminal penalties, exclusion from federal healthcare programs and debarment. Possible consequences of those actions could include: • substantial modifications to our business practices and operations; • significantly reduced demand for our products (if products become ineligible for reimbursement under federal and state healthcare programs); • a total or partial shutdown of production in one or more of the facilities where our products are produced while the alleged violation is beingremediated; • delays in or the inability to obtain future pre-market clearances or approvals; and • withdrawals or suspensions of our 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 effect on our business,results of operations, financial condition and cash flows.Our marketing and sales practices may contain risks that could result in significant liability, require us to change our business practices and restrictour operations in the future.We are subject to domestic (federal, state and local) and foreign laws addressing fraud and abuse in the healthcare industry, including the False ClaimsAct and Federal Anti-Kickback Statute, the U.S. Foreign Corrupt Practices Act, or the FCPA, the U.K. Bribery Act, or the Bribery Act, the self-referral laws andrestrictions on the promotion of off-label uses of our products. Violations of these laws are punishable by criminal or civil sanctions, including substantialfines, imprisonment and exclusion from participation in healthcare programs such as Medicare and Medicaid as well as health programs outside the UnitedStates, and even alleged violations can result in the imposition of corporate integrity agreements that could severely restrict or limit our business practices.These laws and regulations are complex and subject to changing interpretation and application, which could restrict our sales or marketing practices. Evenminor and inadvertent irregularities could potentially give rise to a charge that the law has been violated. Although we believe we maintain an appropriatecompliance program, we cannot be certain that the program will adequately detect or prevent violations and/or the relevant regulatory authorities maydisagree with our interpretation. Additionally, if there is a change in law, regulation or administrative or judicial interpretations, we may have to change oneor more of our business practices to be in compliance with these laws. Required changes could be costly and time consuming. 37Table of ContentsThe Healthcare Reform Act, through its federal “sunshine” provisions, also imposes new requirements on certain device and drug manufacturers toreport certain financial interactions with physicians and teaching hospitals as well as ownership and investment interests held by physicians or theirimmediate family members. The first report containing aggregate payment data was due by March 31, 2014 (covering August 1, 2013 through December 31,2013). Manufacturers subject to the reporting requirements were required to report detailed payment data for the same reporting period and submit legalattestation to the completeness and accuracy of such data by June 30, 2014. Thereafter, the manufacturers must submit reports by the 90th day of eachsubsequent calendar year. A manufacturer may be subject to civil monetary penalties of up to $150,000 aggregate per year for failures to report requiredinformation and up to $1 million aggregate per year for “knowing” failures to report.Separately, the Healthcare Reform Act requires manufacturers to submit information on the identity and quantity of drug samples requested anddistributed by a manufacturer during each year. The first report (covering 2011) was to be submitted by April 1, 2012, but the FDA indicated that it wouldexercise enforcement discretion until October 1, 2012, and would issue a notice prior to its decision to begin enforcing this decision. The FDA released adraft guidance document in July 2014 requiring submission of data for 2014 by April 1, 2015. We have not yet submitted reports. State laws may also requiredisclosure of pharmaceutical pricing information and marketing expenditures, compliance with the pharmaceutical industry’s voluntary complianceguidelines and the relevant compliance guidance promulgated by the federal government, and/or the tracking and reporting of gifts, compensation, and otherremuneration to physicians and other healthcare providers. We believe we have developed appropriate protocols to implement these state requirements. Anyirregularities or mistakes in our reporting, however, could result in a finding that we have been non-compliant with these requirements, which could subjectus to the penalty provisions of applicable federal and state laws and regulations.The Healthcare Reform Act also provides greater financial resources to be allocated to enforcement of the fraud and abuse laws and amends the intentrequirements of the Federal Anti-Kickback Statute and the general criminal healthcare fraud statute, which may increase overall compliance costs for industryparticipants, including us. A person or entity does not need to have actual knowledge of the statutes or a specific intent to violate them. In addition, theHealthcare Reform Act revised the False Claims Act to provide that a claim arising from a violation of the Federal Anti-Kickback Statute constitutes a false orfraudulent claim for purposes of the False Claims Act. If our operations are found to be in violation of these laws or any other government regulations thatapply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, imprisonment, the curtailment orrestructuring of our operations, or exclusion from state and federal healthcare programs including Medicare and Medicaid, any of which could have amaterial 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 reported deathswere caused by cardiac arrest occurring either during or within 30 minutes following the administration of the contrast agent; most of the 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, which distributes Optison, acompetitor to DEFINITY, add a boxed warning to these products emphasizing the risk for serious cardiopulmonary reactions and that the use of theseproducts was contraindicated in certain patients. In a strong reaction by the cardiology community to the FDA’s new position, a letter was sent to the FDA,signed by 161 doctors, stating that the benefit of these ultrasound contrast agents outweighed the risks and urging that the boxed warning be removed. InMay 2008, the FDA substantially modified the boxed warning. On May 2, 2011, the FDA held an advisory committee meeting to consider the status ofultrasound micro-bubble contrast agents and the boxed warning. In October 2011, we received FDA approval of further 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 withexercise 38Table of Contentsstress or pharmacologic stress testing have not been established” (previously added in October 2007 in connection with the imposition of the box warning);and including summary data from the post-approval CaRES (Contrast echocardiography Registry for Safety Surveillance) safety registry and the post-approval pulmonary hypertension study. Bracco’s newly approved ultrasound contrast agent, Lumason, has substantially similar safety labeling asDEFINITY and Optison. If additional safety issues arise, this may result in further changes in labeling or result in restrictions on the approval of our product,including removal of the product from the market. Lingering safety concerns about DEFINITY among some healthcare providers or future unanticipated sideeffects or safety concerns associated with DEFINITY could limit expanded use of DEFINITY and have a material adverse effect on the unit sales of thisproduct and our financial condition 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. Thesuccess of new product development depends on many factors, including our ability to fund development of new agents, anticipate and satisfy customerneeds, obtain regulatory approval on a timely basis based on performance of our agents in development versus their clinical study comparators, develop andmanufacture products in a cost-effective and timely manner, maintain advantageous positions with respect to intellectual property and differentiate ourproducts from our competitors. To compete successfully in the marketplace, we must make substantial investments in new product development whetherinternally or externally through licensing or acquisitions. Our failure to introduce new and innovative products in a timely manner would have an adverseeffect on our business, results of operations, financial condition and cash flows.Even if we are able to develop, manufacture and obtain regulatory approvals for our new products, the success of these products would depend uponmarket acceptance and adequate reimbursement. 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, such as, in the case of DEFINITY, GE Healthcare’s Optison, Bracco’s Lumason andother imaging modalities; • 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; • market acceptance of our products; and • our ability to obtain adequate reimbursement.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 developed thatprovide 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. In addition, new or revised appropriate use criteria developed by professional societies, to assist physiciansand other health care providers in making appropriate imaging decisions for specific clinical conditions, can and have reduced the frequency of and demandfor certain imaging modalities and imaging agents. To the extent there is technological obsolescence in any of our products that we manufacture, resulting inlower unit sales or decreased unit sales prices, we will have increased unit overhead allocable to the remaining market share, which could have a materialadverse effect on our business, results of operations, financial condition and cash flows. 39Table of ContentsOur current portfolio of commercial products primarily focuses on heart disease and vascular disease. This particular focus, however, may not be in ourlong-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 care throughexercise, diet and improved medications could decrease the overall demand for our products, which could have a material adverse effect on our business,results of operations, financial condition and cash flows.The process of developing new drugs and obtaining regulatory approval is complex, time-consuming and costly, and the outcome is not certain.We currently have three agents in development, two of which (flurpiridaz F 18 and 18F LMI 1195) are currently in clinical development, while a third(LMI 1174) is in pre-clinical development. To obtain regulatory approval for these agents, we must conduct extensive human tests, which are referred to asclinical trials, as well as meet other rigorous regulatory requirements, as further described in “Business—Regulatory Matters.” Satisfaction of all regulatoryrequirements typically takes many years and requires the expenditure of substantial resources. A number of other factors may cause significant delays in thecompletion of our clinical trials, including unexpected delays in the initiation of clinical sites, slower than projected enrollment, competition with ongoingclinical trials and scheduling conflicts with participating clinicians, regulatory requirements, limits on manufacturing capacity and failure of an agent to meetrequired standards for administration to humans. In addition, it may take longer than we project to achieve study endpoints and complete data analysis for atrial or we may decide to slow down the enrollment in a trial in order to conserve financial resources.Our agents in development are also subject 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, agents thathave shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. Agents in later stage clinical trialsmay fail to show desired safety and efficacy traits, despite having progressed through initial clinical testing. Further, the data collected from clinical trials ofour agents in development may not be sufficient to support regulatory approval, or regulators could interpret the data differently and less favorably than wedo. Further, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may notbecome apparent until the clinical trial is well advanced. Clinical trials of potential products often reveal that it is not practical or feasible to continuedevelopment efforts. Regulatory authorities may require us or our partners to conduct additional clinical testing, in which case we would have to expendadditional time and resources. The approval process may also be delayed by changes in government regulation, future legislation or administrative action orchanges in regulatory policy that occur prior to or during regulatory review. The failure to provide clinical and preclinical data that are adequate todemonstrate to the satisfaction of the regulatory authorities that our agents in development are safe and effective for their proposed use will delay or precludeapproval and will prevent us from marketing those products.In our flurpiridaz F 18 Phase 3 program, in the fourth quarter of 2013 we announced preliminary results from the 301 trial, which is subject to an SPAwith the FDA. Although flurpiridaz F 18 appeared to be well-tolerated from a safety perspective and outperformed SPECT in a highly statistically significantmanner in the co-primary endpoint of sensitivity and in the secondary endpoints of image quality and diagnostic certainty, the agent did not meet its otherco-primary endpoint of non-inferiority for identifying subjects without disease. We can give no assurances that our SPA agreement will be deemed bindingon the FDA or will result in any particular outcome from regulatory review of the study or the agent, that any of the data generated in the 301 trial will besufficient to support an NDA approval, that a strategic partner will have to conduct only one additional clinical trial prior to filing an NDA, or that flurpiridazF 18 will ever be approved as a PET MPI imaging agent by the FDA. See “Business—Regulatory Matters—Food and Drug Laws.”We are not permitted to market our agents in development 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 40Table of Contentssubmission of an NDA to the FDA for our agents in development. The NDA must include extensive nonclinical and clinical data and supporting informationto establish the agent’s safety and effectiveness for each indication. The NDA must also include significant information regarding the chemistry,manufacturing and controls for the product. The FDA review process can take many years to complete, and approval is never guaranteed. If a product isapproved, the FDA may limit the indications for which the product may be marketed, require extensive warnings on the product labeling, impose restricteddistribution programs, require expedited reporting of certain adverse events, or require costly ongoing requirements for post-marketing clinical studies andsurveillance or other risk management measures to monitor the safety or efficacy of the agent. Markets outside of the United States also have requirements forapproval of agents with which we must comply prior to marketing. Obtaining regulatory approval for marketing of an agent in one country does not ensurewe will be able to obtain regulatory approval in other countries, but a failure or delay in obtaining regulatory approval in one country may have a negativeeffect on the regulatory process in other countries. Also, any regulatory approval of any of our products or agents in development, once obtained, may bewithdrawn. 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 our productcandidates may severely harm our business and delay or prevent us from being able to generate revenue from product sales.Even if our agents in development proceed successfully through clinical trials and receive regulatory approval, there is no guarantee that an approvedproduct can be manufactured in commercial quantities at a reasonable cost or that such a product will be successfully marketed or distributed. The burdenassociated with the marketing and distributing of products like ours is substantial. For example, rather than being manufactured at our own facilities,flurpiridaz F 18 would require the creation of a complex, field-based network involving PET cyclotrons located at radiopharmacies where the agent wouldneed to be manufactured and distributed rapidly to end-users, given the agent’s 110-minute half-life. In addition, in the case of flurpiridaz F 18, obtainingadequate reimbursement is critical, including not only coverage from Medicare, Medicaid, other government payors as well as private payors but alsoappropriate payment levels which adequately cover the substantially higher manufacturing and distribution costs associated with a PET MPI agent incomparison to, for example, sestamibi.We will not be able to further develop or commercialize our agents in development without successful strategic partners.In March 2013, we began to implement a strategic shift in how we will fund our important R&D programs. We have reduced our internal R&Dresources, while at the same time we are seeking to engage strategic partners to further develop and commercialize our important agents in development,including flurpiridaz F 18, 18F LMI 1195 and LMI 1174. However, different strategic partners may have different time horizons, risk profiles, returnexpectations and amounts of capital to deploy, and we may not be able to negotiate relationships with potential strategic partners on acceptable terms, or atall. If we are unable to establish or maintain these strategic partnerships, we will have to limit the size or scope of, or delay, our development programs.In addition, our dependence on strategic partnerships is subject to a number of risks, including: • the inability to control the amount or timing of resources that our partners may devote to developing the agents; • the possibility that we may be required to relinquish important rights, including economic, intellectual property, marketing and distributionrights; • the receipt of lower revenues than if we were to commercialize those agents ourselves; • our failure to receive future milestone payments or royalties if a partner fails to commercialize one of our agents successfully; 41Table of Contents • the possibility that a partner could separately move forward with competing agents developed either independently or in collaboration withothers, including our competitors; • the possibility that our strategic partners may experience financial or operational difficulties; • business combinations or significant changes in a partner’s business strategy that may adversely affect that partner’s willingness or ability tocomplete its obligations under any arrangement with us; and • the possibility that our partners may operate in countries where their operations could be negatively impacted by changes in the local regulatoryenvironment or by political unrest.Any of these factors either alone or taken together could have a material adverse effect on our business, results of operations, financial condition andcash flows.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 January 2012, theCMS required the accreditation of facilities providing the technical component of advanced imaging services, including CT, MRI, PET and nuclearmedicine, in non-hospital free-standing settings. In August 2011, The Joint Commission (an independent, not-for-profit organization that accredits andcertifies more than 20,500 healthcare organizations and programs in the United States) issued an alert on the radiation risks of diagnostic imaging andrecommended specific actions for providing “the right test and the right dose through effective processes, safe technology and a culture of safety.” Revisedaccreditation standards issued by The Joint Commission for diagnostic imaging will take effect in July 2015.Heightened regulatory focus on risks caused by the radiation exposure received by diagnostic imaging patients could lead to increased regulation ofradiopharmaceutical manufacturers or healthcare providers who perform procedures that use our imaging agents, which could make the procedures morecostly, reduce the number of providers who perform procedures and/or decrease the demand for our products. In addition, heightened public focus on or fearof radiation exposure could lead to decreased demand for our products by patients or by healthcare providers who order the procedures in which our agentsare used. Although we believe that our diagnostic imaging agents when properly used do not expose patients and healthcare providers to unsafe levels ofradiation, any of the foregoing risks could have an adverse effect on our business, results of operations, financial condition and cash flows.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 time consuming and costly to defend and could result in an increase ofour insurance premiums. Although we have not had any such claims to date, claims that could be brought against us might not be covered by our insurancepolicies. Furthermore, although we currently have product liability insurance coverage with policy limits that we believe are customary for pharmaceuticalcompanies in the diagnostic medical imaging industry and adequate to provide us with insurance coverage for foreseeable risks, even where the claim iscovered by our insurance, our insurance coverage might be inadequate and we would have to pay the amount of any settlement or judgment that is in excessof our policy limits. 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 to obtain.Our failure to maintain adequate insurance coverage or successfully defend against product liability claims could have a material adverse effect on ourbusiness, results of operations, financial condition and cash flows. 42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, change frequentlyand have become more stringent over time. We are required to obtain, maintain and renew various environmental permits and nuclear licenses. Although webelieve that our safety procedures for transporting, using, handling, storing and disposing of, and limiting exposure to, these materials and wastes comply inall material respects with the standards prescribed by applicable laws and regulations, the risk of accidental contamination or injury cannot be eliminated. Weplace a high priority in these safety procedures and seek to limit any inherent risks. We generally contract with third parties for the disposal of wastesgenerated by our operations. Prior to disposal, we store any low level radioactive waste at our facilities to decay until the materials are no longer consideredradioactive. Although we believe we have complied in all material respects with all applicable environmental, health and safety laws and regulations, wecannot 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 orotherwise sanctioned by regulators. We may be required to incur further costs to comply with current or future environmental and safety laws and regulations.In addition, in the event of accidental contamination or injury from these materials, we could be held liable for any damages that result and any such liabilitycould exceed our resources.While we have budgeted for current and future capital and operating expenditures to maintain compliance with these laws and regulations, we cannotassure you that our costs of complying with current or future environmental, health and safety laws and regulations will not exceed our estimates or adverselyaffect our results of operations and financial condition. Further, we cannot assure you that we will not be subject to additional environmental claims forpersonal 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 and agentsin development as well as successfully defending these patents and trade secrets against third party challenges, both in the United States and in foreigncountries. We will only be able to protect our intellectual property from unauthorized use by third parties to the extent that we maintain the secrecy of ourtrade secrets and can enforce our valid patents and trademarks.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 States orother countries may diminish the value of our intellectual property and we may not receive the same degree of protection in every jurisdiction. Accordingly,we cannot predict the breadth of claims that may be allowed or enforced 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 we couldlose 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 wecould lose our patent rights as a result; 43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 use of ourintellectual property by third parties, and may not provide us with any competitive advantages; • our patent applications or patents may be subject to interferences, oppositions, post-grant review, reexaminations or similar administrativeproceedings; • while we generally apply for patents in those countries where we intend to make, have made, use or sell patented products, we may not be able toaccurately predict all of the countries where patent protection will ultimately be desirable and may be precluded from doing so at a later date; • we may fail to seek patent protection in certain countries where the actual cost outweighs the perceived benefit at a certain time; • patents issued in foreign jurisdictions may have different scopes of coverage as our United States patents and so our products may not receive thesame degree of protection in foreign countries as they would in the United States; • 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 of apatent even after its issuance by the U.S. Patent and Trademark Office or the applicable foreign patent office. It is also uncertain how much protection, if any,will be afforded by our patents if 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 to challenge the validity of a patent.The defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings are costly, timeconsuming to pursue and result in diversion of resources. The outcome of these proceedings is uncertain and could significantly harm our business. If we arenot able to defend the patents of our technologies and products, then we will not be able to exclude competitors from marketing products that directlycompete with our products, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.We will also rely on trade secrets and other know-how and proprietary information to protect our technology, especially where we do not believepatent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We use reasonable efforts to protect our trade secrets, but ouremployees, consultants, contractors, outside scientific partners and other advisors may unintentionally or willfully disclose our confidential information tocompetitors 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 is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitorsmay independently 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 and proprietaryinformation concerning our business. These confidentiality agreements may not prevent unauthorized disclosure of trade secrets and other know-how andproprietary information, and there can be no guarantee that an employee or an outside party will not make an unauthorized disclosure of our trade secrets,other technical know-how or proprietary information, or that we can detect such an unauthorized disclosure. We may not have adequate remedies for anyunauthorized disclosure. This might happen intentionally or inadvertently. It is possible that a 44Table of Contentscompetitor will make use of that information, and that our competitive position will be compromised, in spite of any legal action we might take againstpersons making those unauthorized disclosures, which could have a material adverse effect on our business, results of operations, financial condition andcash 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, Neurolite, Ablavar, Quadramet and Lantheus Medical Imaging.We cannot assure you that any pending trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwisechallenge our use of the trademarks. If our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss ofbrand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot assure you that competitors will notinfringe our trademarks, or that we will have adequate resources to enforce our trademarks.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 of these claims is uncertain and any unfavorable result could adversely affect our business, financial condition and results ofoperations.We may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property rights. While webelieve that the products that we currently manufacture using our proprietary technology do not infringe upon or otherwise violate proprietary rights of otherparties or that meritorious defenses would exist with respect to any assertions to the contrary, we cannot assure you that we would not be found to infringe onor 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 costly andtime consuming and could divert management’s attention and resources, generate significant expenses, damage payments (potentially including trebledamages) or restrictions or prohibitions on our use of our technology, which could adversely affect our results of operations. In addition, if we are found to beinfringing on proprietary rights of others, we may be required to develop non-infringing technology, obtain a license (which may not be available onreasonable terms, or at all), make substantial one-time or ongoing royalty payments, or cease making, using and/or selling the infringing products, any ofwhich could have a material adverse effect on our business, results of operations, financial condition and cash flows.We may be adversely affected by prevailing economic conditions and financial, business and other factors beyond our control.Our ability to attract and retain customers, invest in and grow our business and meet our financial obligations depends on our operating and financialperformance, which, in turn, is subject to numerous factors, including the prevailing economic conditions and financial, business and other factors beyondour control, such as the rate of unemployment, the number of uninsured persons in the United States and inflationary pressures. We cannot anticipate all theways 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 be adverselyaffected by volatile conditions in the financial markets. For example, unemployment and underemployment, and the resultant loss of insurance, may decreasethe demand for healthcare services and pharmaceuticals. If fewer patients are seeking medical care because they do not have insurance coverage, ourcustomers may experience reductions in revenues, profitability and/or cash flow that could lead them to modify, delay or cancel orders for our products. Ifcustomers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of,accounts receivable that are owed to us. This, in turn, could adversely affect our financial condition and liquidity. In addition, widespread and prolongedunemployment, either regionally or on a national basis, prior to the effectiveness of certain provisions of the Healthcare Reform Act, could result in asubstantial number of 45Table of Contentspeople becoming uninsured or underinsured. In turn, this may lead to fewer individuals pursuing or being able to afford diagnostic medical imagingprocedures. To the extent prevailing economic conditions result in fewer procedures being performed, our business, results of operations, financial conditionand cash flows could be adversely affected.Our business is subject to international economic, political and other risks that could negatively affect our results of operations or financial position.For the years ended December 31, 2014, 2013 and 2012, 22%, 25% and 27%, respectively, of our revenues were derived from countries outside theUnited States. We anticipate that revenue from non-U.S. operations will grow in the future. 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; • entering into or renewing commercial agreements with international governments or provincial authorities or entities directly or indirectlycontrolled by such governments or authorities, such as our Chinese partner Double-Crane; • make it more difficult to refinance the outstanding Notes; • international customers which are agencies or institutions of foreign governments, • local business practices which may be in conflict with the FCPA and Bribery Act; • 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 potential for intellectual property piracy; • greater difficulties in managing and staffing non-U.S. operations; • the need to ensure compliance with the numerous in-country and international regulatory and legal requirements applicable to our business ineach of these jurisdictions 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, financial condition and cash flows. As our international exposure increases and as we executeour strategy of international expansion, these risks may intensify.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, 2014, 2013 and 2012, the net impact of foreign currency changes 46Table of Contentson transactions was a loss of $279,000, $349,000 and $579,000, respectively. Operations outside the United States expose us to risks including fluctuationsin currency values, trade restrictions, tariff and trade regulations, U.S. export controls, non-U.S. tax laws, shipping delays and economic and politicalinstability. 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 or criminal penalties and the suspension or loss of export privileges which could have a material adverse effect on ourbusiness, 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 currency is theU.S. Dollar. Exchange rates between some of these currencies and U.S. Dollar have fluctuated significantly in recent years and may do so in the future.Historically, we have not used derivative financial instruments or other financial instruments to hedge those economic exposures. It is possible thatfluctuations 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 financing witha variable interest rate, interest rate fluctuations based on macroeconomic conditions that are beyond our control.As of December 31, 2014, we had approximately $408.0 million of total principal indebtedness consisting of $400.0 million of Notes issued May 10,2010 and March 16, 2011 and due May 15, 2017 and our revolving credit facility, with an outstanding balance of $8.0 million. In addition to the $8.0million outstanding under our revolving credit facility, there is an $8.8 million unfunded Standby Letter of Credit as of December 31, 2014. As ofDecember 31, 2014, our revolving credit facility had $33.2 million of remaining availability. In June 2014, we amended our revolving credit facility toincrease the size from $42.5 million to $50.0 million. During periods of volatility and disruption in the U.S., European, or global credit markets, obtainingadditional or replacement financing may be more difficult and the cost of issuing new debt or replacing our revolving credit facility could be higher thanunder our current revolving credit facility. Higher cost of new debt may limit our ability to have cash on hand for working capital, capital expenditures andacquisitions on terms that are acceptable to us. Additionally, our revolving credit facility has a variable interest rate. By its nature, a variable interest rate willmove up or down based on changes in the economy and other factors, all of which are beyond our control. If interest rates increase, our interest expense couldincrease, affecting earnings and reducing cash flows available for working capital, 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 be adverselyaffected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws outside the United States.The FCPA, the Bribery Act and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediariesfrom 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 the predominance ofgovernment-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. In addition, the Bribery Act has beenenacted, and its provisions extend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, includingjurisdiction, 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 governmental corruptionto some degree, and in certain circumstances strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our training andcompliance programs, 47Table of Contentsour internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents. Violations ofthese laws, or allegations of those violations, could disrupt our business and result in a material adverse effect on our results of operations, financial conditionand cash flows.Our business depends on the continued effectiveness and availability of our information technology infrastructure, and failures of this infrastructurecould 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 and that capture, manage and analyze the large streams of data generated in our clinical trials in compliance withapplicable regulatory requirements. We rely extensively on technology, some of which is managed by third-party service providers, to allow the concurrentconduct of work sharing around the world. As with all information technology, our equipment and infrastructure age and become subject to increasingmaintenance and repair and our systems generally are vulnerable to potential damage or interruptions from fires, natural disasters, power outages, blackouts,machinery breakdown, telecommunications failures and other unexpected events, as well as to break-ins, sabotage, increasingly sophisticated intentional actsof vandalism or cyber threats. As these threats continue to evolve, we may be required to expend additional resources to enhance our information securitymeasures or to investigate and remediate any information security vulnerabilities. Given the extensive reliance of our business on technology, anysubstantial disruption or resulting loss of data that is not avoided or corrected by our backup measures could harm our business, operations and financialcondition.We may not be able to hire or retain the number of qualified personnel, particularly scientific, medical and sales personnel, required for our business,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. Although we have not had any material difficulty inthe past in hiring or retaining qualified personnel other than from this intense competition, if we are unable to retain our existing personnel, or attract andtrain additional qualified personnel, either because of competition in our industry for these personnel or because of insufficient financial resources, then ourgrowth 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. Jeffrey Bailey, our Chief Executive Officer and President, and other members of our executive leadership and senior managementteam play a significant role in generating new business and retaining existing customers. We have employment agreements with Mr. Bailey and a limitednumber of other individuals on our executive leadership team, although we cannot prevent them from terminating their employment with us. We do notmaintain key person life insurance policies on any of our executive officers. While we have experienced both voluntary and involuntary turnover on ourexecutive leadership team, to date we have been able to attract new, qualified individuals to lead our company and key functional areas. Our inability toretain our existing executive leadership and senior management team, maintain an appropriate internal succession program or attract and retain additionalqualified personnel could have a material adverse effect on our business. 48Table of ContentsOur future growth may depend on our ability to identify and in-license or acquire additional products, and if we do not successfully do so, or otherwisefail to integrate any new products into our operations, we may have limited growth opportunities and it could materially adversely affect ourrelationships with customers and/or result in significant impairment charges.We are continuing to seek to acquire or in-license products, businesses or technologies that we believe are a strategic fit with our business strategy.Future in-licenses or acquisitions, however, may entail numerous operational and financial risks, including: • exposure to unknown liabilities; • disruption of our business, customer base and diversion of our management’s time and attention to develop acquired products or technologies; • a reduction of our current financial resources; • difficulty or inability to secure financing to fund development activities for those acquired or in-licensed technologies; • incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions; and • higher than expected acquisition and integration costs.We may not have sufficient resources to identify and execute the acquisition or in-licensing of third party products, businesses and technologies andintegrate them into our current infrastructure. In particular, we may compete with larger pharmaceutical companies and other competitors in our efforts toestablish new collaborations and in-licensing opportunities. These competitors likely will have access to greater financial resources than we do and may havegreater expertise in identifying and evaluating new opportunities. Furthermore, there may be overlap between our products or customers and the companieswhich we acquire that may create conflicts in relationships or other commitments detrimental to the integrated businesses. Additionally, the time between ourexpenditures to in-license or acquire new products, technologies or businesses and the subsequent generation of revenues from those acquired products,technologies or businesses (or the timing of revenue recognition related to licensing agreements and/or strategic collaborations) could cause fluctuations inour financial performance from period to period. Finally, if we devote resources to potential acquisitions or in-licensing opportunities that are nevercompleted, or if we fail to realize the anticipated benefits of those efforts, we could incur significant impairment charges or other adverse financialconsequences.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, 2014, we had approximately $408.0 million of total principal indebtedness consisting of $400.0 million of the Notes, whichmature on May 15, 2017, and $8.0 million outstanding under our revolving credit facility. As of December 31, 2014, in addition to the $8.0 millionoutstanding under our revolving credit facility, there is an $8.8 million unfunded Standby Letter of Credit. 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, therebyreducing 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 and principal; • make it more difficult to refinance the outstanding Notes; • 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; 49Table of Contents • reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and • place us at a competitive disadvantage to competitors that have relatively less debt than we have.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 million ofinterest per year based on our $400.0 million in total principal indebtedness as of December 31, 2014 related to the Notes, which principal is due at maturityon May 15, 2017, 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 payments andthe payment of principal at maturity, our credit ratings could be downgraded, and we may have to undertake alternative financing plans, such as refinancingor restructuring our debt, selling assets, entering into additional corporate collaborations or licensing arrangements for one or more of our products or agentsin development, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would bepossible, that any assets could be sold, licensed or partnered, or, if sold, licensed or partnered, of the timing of the transactions and the amount of proceedsrealized from those transactions, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permittedunder the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the condition of the financial andcredit markets. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable termsor 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 restricted subsidiariesfrom incurring additional indebtedness, these restrictions are subject to important exceptions and qualifications. For example, we are generally permitted toincur certain indebtedness, including indebtedness arising in the ordinary course of business, indebtedness among restricted subsidiaries and us andindebtedness relating to hedging obligations. We are also permitted to incur indebtedness under the Indenture governing the Notes so long as we complywith an interest coverage ratio of 2.0 to 1.0, determined on a pro forma basis for the most recently completed four fiscal quarters. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—External Sources of Liquidity.” If we or oursubsidiaries incur additional debt, the risks that we and they now face as a result of our high leverage could intensify. In addition, the Indenture governingthe Notes and the agreement governing our revolving credit facility will not prevent us from incurring obligations that do not constitute indebtedness underthe agreements.Our debt agreements contain restrictions that will limit our flexibility in operating our business.The Indenture governing the Notes and the agreement governing our revolving credit facility contain various covenants that limit our ability toengage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things: • incur additional debt; • pay dividends or make other distributions; 50Table of Contents • 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.A breach of any of these covenants could result in a default under the Indenture governing the Notes and the agreement governing our revolving creditfacility. We may also be unable to take advantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenantsunder our indebtedness.We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.As of December 31, 2014, we had federal income tax loss carryforwards of $114.0 million, which will begin to expire in 2031 and will completelyexpire in 2034. We have had significant financial losses in previous years and as a result we currently maintain a full valuation allowance for our deferred taxassets including our federal and state tax loss carryforwards.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesOur executive offices and primary manufacturing facilities are located at our North Billerica, Massachusetts facility, which we own. In addition, as ofDecember 31, 2014, we lease 5 facilities in Canada, 2 in Australia and 2 in Puerto Rico. Our owned facilities consist of approximately 578,000 square feet ofmanufacturing, laboratory, mixed use and office space, and our leased facilities consist of approximately 54,019 square feet of manufacturing, laboratory,mixed use and office space. We believe all of these facilities are well-maintained and suitable for the office, radiopharmacy, manufacturing or warehouseoperations conducted in them.The following table summarizes information regarding our significant leased and owned properties, as of December 31, 2014: Location Squarefootage Owned/Leased United States North Billerica, Massachusetts 578,000 Owned Canada Montreal 8,729 Leased Dorval 13,079 Leased Quebec 6,261 Leased Hamilton* 5,300 Leased Vancouver 880 Leased Australia Melbourne 4,634 Leased Adelaide 4,306 Leased Puerto Rico San Juan 9,550 Leased Ponce 1,280 Leased *The Hamilton lease was terminated subsequent to December 31, 2014. 51Table of ContentsItem 3. Legal ProceedingsFrom 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, and mayin the future be, subject to investigations by governmental and regulatory authorities which exposes us to greater risks associated with litigation, regulatoryor other proceedings, 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, intellectual propertydisputes often have a risk of injunctive relief which, if imposed against us, could materially and adversely affect our financial condition or results ofoperations.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 shortage (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 NRU reactor inChalk River, Ontario. The NRU reactor was off-line from May 2009 until August 2010. The defendant answered the complaint on January 21, 2011, denyingsubstantially all of the allegations, presenting certain defenses and requesting dismissal of the case with costs and disbursements. Discovery, includinginternational discovery and related motion practice, has been on-going for more than three years. The defendant filed a motion for summary judgment onJuly 14, 2014. The Company filed a memorandum of law in opposition to defendant’s motion for summary judgment on August 25, 2014. The defendantfiled a reply memorandum of law in further support of its motion for summary judgment on September 15, 2014. Expert witness discovery was completed onOctober 31, 2014. We cannot be certain what amount, if any, or when, if ever, we will be able to recover for business interruption losses related to this matter.Item 4. Mine Safety DisclosuresNot applicable 52Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket and Dividend InformationOur outstanding common stock is privately held and there is no established public trading market for our common stock. There is one stockholder ofrecord of our common stock as of December 31, 2014.Unregistered Sales of Equity SecuritiesWe sold no equity securities during the year ended December 31, 2014.Securities Authorized for Issuance Under Equity Compensations PlansSee “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 DataBasis of Financial InformationFollowing our purchase of the medical imaging business from Bristol-Myers Squibb Company, or BMS, with the financial sponsorship of Avista onJanuary 8, 2008 (the “Acquisition”), our audited financial statements were prepared at the Lantheus Intermediate level rather than at the Lantheus level dueto covenants in our financial arrangements undertaken in connection with the Acquisition.Non-GAAP Financial MeasuresAdjusted EBITDA and EBITDA as used in our equity incentive plans, collectively, our Non-GAAP Measures, as presented in this annual report, aresupplemental measures of our performance that are not required by, or presented in accordance with GAAP. They are not measurements of our financialperformance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance withGAAP or as alternatives to cash flow from operating activities as measures of our liquidity.Our presentation of our Non-GAAP Measures may not be comparable to similarly titled measures of other companies. We have included informationconcerning our Non-GAAP Measures in this annual report because we believe that this information is used by certain investors as measures of a company’shistorical performance.Our Non-GAAP Measures have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of ouroperating results or cash flows as reported under GAAP. Some of these limitations include: • 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 our debt; • although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and our Non-GAAPMeasures do not reflect any cash requirements for those replacements; 53Table of Contents • 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 Non-GAAP Measures should not be considered as measures of discretionary cash available to us to invest in thegrowth of our business. We compensate for these limitations by relying primarily on our GAAP results and using our Non-GAAP Measures only forsupplemental purposes.Selected Financial DataThe following table sets forth certain selected consolidated financial data for Lantheus Intermediate, our parent company and a guarantor of the Notes,as of and for the fiscal years ended December 31, 2014, 2013, 2012, 2011 and 2010, which have been derived from the audited consolidated financialstatements of Lantheus Intermediate. See “—Basis of Financial Information.”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’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidatedfinancial statements and related notes included in Item 8 of this annual report. Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands) Statement of Comprehensive (Loss) Income Data: Revenues $301,600 $283,672 $288,105 $356,292 $353,956 Cost of goods sold 176,081 206,311 211,049 255,466 204,006 Loss on firm purchase commitment — — 1,859 5,610 — Sales and marketing expenses 35,116 35,227 37,437 38,689 45,384 General and administrative expenses 34,921 33,159 32,520 32,057 30,042 Research and development expense 13,673 30,459 40,604 40,945 45,130 Proceeds from manufacturer — (8,876) (34,614) — — Impairment on land — 6,406 — — — Operating income (loss) 41,809 (19,014) (750) (16,475) 29,394 Interest expense (42,288) (42,915) (42,014) (37,658) (20,395) Loss on early extinguishment of debt — — — — (3,057) Interest income 27 104 252 333 179 Other income (expense), net 478 1,161 (44) 1,429 1,314 Income (loss) before income taxes 26 (60,664) (42,556) (52,371) 7,435 Provision (benefit) for income taxes 1,195 1,014 (555) 84,098 2,465 Net (loss) income$(1,169) $(61,678) $(42,001) $(136,469) $4,970 Statement of Cash Flows Data:Net cash flows provided by (used in):Operating activities$11,573 $(15,678) $523 $22,420 $26,317 Investing activities (7,682) (3,483) (8,145) (7,694) (8,550) Financing activities (2,293) 5,535 (2,039) (6,991) (17,550) Other Financial Data:EBITDA(1)$60,557 $6,789 $26,815 $16,832 $62,037 Adjusted EBITDA(1) 70,755 38,360 21,598 80,084 85,228 Capital expenditures 8,137 5,010 7,920 7,694 8,335 54Table of Contents Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands) Balance Sheet Data (at period end): Cash and cash equivalents $17,817 $16,669 $31,595 $40,607 $33,006 Total assets 247,516 259,385 322,926 358,804 495,881 Total liabilities 488,485 496,473 497,279 492,007 342,447 Total long-term debt, net 399,280 399,037 398,822 398,629 250,000 Total stockholder’s (deficit) equity (240,969) (237,088) (174,353) (133,203) 153,434 (1)EBITDA is defined as net (loss) income plus interest, income taxes, depreciation and amortization. EBITDA is a measure used by management tomeasure operating performance. Adjusted EBITDA is defined as EBITDA, further adjusted to exclude unusual items and other adjustments required orpermitted in calculating Adjusted EBITDA under the indenture governing the Company’s notes and the credit agreement for the Company’s revolvingcredit facility. Adjusted EBITDA is also used by management to measure operating performance and by investors to measure a company’s ability toservice its debt and meet its other cash needs. Management believes that the inclusion of the adjustments to EBITDA applied in presenting AdjustedEBITDA are appropriate to provide additional information to investors about the Company’s performance across reporting periods on a consistentbasis by excluding items that it does not believe are indicative of its 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 periods presented: Year Ended December 31, 2014 2013(j) 2012(j) 2011 2010 (dollars in thousands) Net (loss) income $(1,169) $(61,678) $(42,001) $(136,469) $4,970 Interest expense, net 42,261 42,811 41,762 37,325 20,216 Provision for income taxes(a) 441 (127) (901) 82,718 1,215 Depreciation and amortization 19,024 25,783 27,955 33,258 35,636 EBITDA 60,557 6,789 26,815 16,832 62,037 Non-cash stock-based compensation 1,031 578 1,240 (969) 1,634 Loss on early extinguishment of debt — — — — 3,057 Legal fees(b) 1,113 660 1,455 2,017 — Loss on firm purchase commitment(c) — — 1,859 5,610 — Asset write-off(d) 1,257 28,349 13,095 52,973 14,084 Severance and recruiting costs(e) 818 5,239 1,761 1,995 1,001 Sponsor fee and other(f) 1,020 1,457 1,042 1,020 1,090 New manufacturer costs(g) 4,959 4,164 8,945 606 1,816 Ablavar launch costs(h) — — — — 509 Proceeds from manufacturer — (8,876) (34,614) — — Adjusted EBITDA(i)$70,755 $38,360 $21,598 $80,084 $85,228 (a)Represents provision for income taxes, less tax indemnification associated with an agreement with BMS, and, in 2011, includes theestablishment of a full valuation allowance against the U.S. deferred tax assets. (b)Represents legal fees and disbursements incurred in connection with our business interruption claim associated with the NRU reactor shutdownin 2009 to 2010. (c)Represents a loss associated with a portion of the committed purchases of Ablavar that we do not believe we will be able to sell prior toexpiration. (d)Represents non-cash losses incurred associated with the write-down of land, intangible assets, inventory and write-off of long-lived assets. The2013 amount consists primarily of a $6.4 million 55Table of Contents write-down of land, a $15.4 million impairment charge on the Cardiolite trademark intangible asset, a $1.7 million impairment charge on acustomer relationship intangible asset and a $1.6 million inventory write-down related to Ablavar. The 2012 amount consists primarily of a$10.6 million inventory write-down related to Ablavar. The 2011 amount consists primarily of a $25.8 million inventory write-down related toAblavar and a $23.5 million impairment charge to adjust the carrying value of the Ablavar patent portfolio asset to its fair value of zero. The2010 amount consists primarily of a $10.9 million inventory write-down related to Ablavar. (e)The 2014, 2013, 2012 and 2011 amounts consist of severance and recruitment costs related to employees, executives and directors. The 2010amount consists of severance costs relating to one of our executive officers and a work force reduction in the fourth quarter. (f)Represents annual sponsor monitoring fee and related expenses, and certain non-recurring charges related to a customer relationship. (g)Represents internal and external costs associated with establishing new manufacturing sources for our commercial and clinical candidateproducts. (h)Represents costs associated with the launch of Ablavar. (i)Does not include run-rate cost savings, operating expense reductions and other expense and cost-savings of $14.4 million and $2.9 million,which were realized for the years ended December 31, 2013 and 2012, respectively, primarily relating to our strategic shift from in-house R&D toan external partnering model of R&D. (j)Previously presented as excluding Proceeds from manufacturer as an Adjusted EBITDA reconciling item, resulting in 2013 and 2012 AdjustedEBITDA of $47.2 million and $56.2 million, respectively. Presentation of 2013 and 2012 Adjusted EBITDA has been modified to allow bettergo-forward comparability by including Proceeds from manufacturer as an Adjusted EBITDA reconciling item, resulting in 2013 and 2012Adjusted EBITDA of $38.4 million and $21.6 million, respectively.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read together with “Item 6—Selected FinancialData” and the consolidated financial statements and the related notes included in Item 8 of this annual report. This discussion contains forward-lookingstatements related to future events and our future financial performance that are based on current expectations and subject to risks and uncertainties. Ouractual 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.”OverviewWe are a global leader in developing, manufacturing, selling and distributing innovative diagnostic medical imaging agents and products that assistclinicians in the diagnosis of cardiovascular and other diseases. Our agents are routinely used to diagnose coronary artery disease, congestive heart failure,stroke, peripheral vascular disease and other diseases. Clinicians use our imaging agents and products across a range of imaging modalities, including nuclearimaging, echocardiography and MRI. We believe that the resulting improved diagnostic information enables healthcare providers to better detect andcharacterize, or rule out, disease, potentially achieving improved patient outcomes, reducing patient risk and limiting overall costs for payers and the entirehealthcare system.Our commercial products are used by nuclear physicians, cardiologists, radiologists, internal medicine physicians, technologists and sonographersworking in a variety of clinical settings. We sell our products to radiopharmacies, hospitals, clinics, group practices, integrated delivery networks, grouppurchasing organizations and, in certain circumstances, wholesalers.We sell our products globally and have operations in the United States, Puerto Rico, Canada and Australia and distribution relationships in Europe,Asia Pacific and Latin America. 56Table of ContentsOur ProductsOur principal products include the following:DEFINITY is an ultrasound contrast agent used in ultrasound exams of the heart, also known as echocardiography exams. DEFINITY containsperflutren-containing lipid microspheres and is indicated in the United States for use in patients with suboptimal echocardiograms to assist in imaging theleft ventricular chamber and left endocardial border of the heart in ultrasound procedures. We launched DEFINITY in 2001, and its last patent in the UnitedStates will currently expire in 2021 and in numerous foreign jurisdictions in 2019. We also have an active life cycle management program for this agent.TechneLite is a technetium generator which provides the essential nuclear material used by radiopharmacies to radiolabel Cardiolite, Neurolite andother technetium-based radiopharmaceuticals used in nuclear medicine procedures. TechneLite uses Molybdenum-99, or Moly, as its main active ingredient.Xenon is a radiopharmaceutical gas that is inhaled and used to assess pulmonary function and also for imaging blood flow. Xenon is manufactured by athird party and packaged by us.Cardiolite is a technetium-based radiopharmaceutical imaging agent used in MPI procedures to detect coronary artery disease using SPECT. Cardiolitewas approved by the U.S. Food and Drug Administration, or FDA, in 1990, and its market exclusivity expired in July 2008.Sales of our contrast agent, DEFINITY, are made through our sales team of approximately 80 employees. In the United States, our nuclear imagingproducts, including TechneLite, Xenon, Cardiolite and Neurolite, are primarily distributed through approximately 350 radiopharmacies that are controlledby or associated with Cardinal Health, or Cardinal, GE Healthcare, United Pharmacy Partners, or UPPI, and Triad. A small portion of our nuclear imagingproduct sales in the United States are made through our direct sales force to hospitals and clinics that maintain their own in-house radiopharmaceuticalcapabilities. Outside the United States, we own four radiopharmacies in Canada and two radiopharmacies in each of Puerto Rico and Australia. We alsomaintain a direct sales force in each of these countries. In Europe, Asia Pacific and Latin America, we rely on third party distributors to market, sell anddistribute our nuclear imaging and contrast agent products, either on a country-by-country basis or on a multicountry regional basis.The following table sets forth our revenue derived from our principal products: Year Ended December 31, (dollars in thousands) 2014 % 2013 % 2012 % DEFINITY $95,760 31.8 $78,094 27.5 $51,431 17.9 TechneLite 93,588 31.0 92,195 32.5 114,249 39.7 Xenon 36,549 12.1 32,125 11.3 30,075 10.4 Cardiolite 18,823 6.2 26,137 9.2 34,995 12.1 Other 56,880 18.9 55,121 19.5 57,355 19.9 Revenues$301,600 100.0 $283,672 100.0 $288,105 100.0 Included in Cardiolite revenue are sales of branded Cardiolite and generic sestamibi, some of which we produce and some of which we procure fromthird parties. 57Table of ContentsKey Factors Affecting Our ResultsOur business and financial performance have been, and continue to be, affected by the following:Growth of DEFINITYWe believe the market opportunity for our contrast agent, DEFINITY, remains significant. DEFINITY is currently our fastest growing and highestmargin commercial product. We believe that DEFINITY sales will continue to grow and that DEFINITY will constitute a greater share of our overall productmix. As a result of DEFINITY’s continued growth, we believe that our gross profit will increase, and our gross margin will continue to expand. As we bettereducate the physician and healthcare provider community about the benefits and risks of this product, we believe we will experience further penetration ofsuboptimal echocardiograms.Prior to the supply issues with BVL in 2012, sales of DEFINITY continually increased year-over-year since June 2008, when the boxed warning onDEFINITY was modified. Unit sales of DEFINITY had decreased substantially in late 2007 and early 2008 as a result of an FDA request in October 2007 thatwe and GE Healthcare, which distributes Optison, a competitor to DEFINITY, add a boxed warning to their products to notify physicians and patients aboutpotentially serious safety concerns or risks posed by the products. However, in May 2008, the FDA boxed warning was modified in response to thesubstantial advocacy efforts of prescribing physicians. In October 2011, we received FDA approval of further 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 withexercise stress or pharmacologic stress testing have not been established” (previously added in October 2007 in connection with the imposition of the boxwarning); and including summary data from the post-approval CaRES (Contrast echocardiography Registry for Safety Surveillance) safety registry and thepost-approval pulmonary hypertension study. Bracco’s newly approved ultrasound contrast agent, Lumason, has substantially similar safety labeling asDEFINITY. As discussed above under “Inventory Supply,” the future growth of our DEFINITY sales will be dependent on the ability of JHS and, if approved,Pharmalucence to continue to manufacture and release DEFINITY on a timely and consistent basis and our ability to continue to increase segmentpenetration for DEFINITY in suboptimal echocardiograms. See “Item 1A—Risk Factors—The growth of our business is substantially dependent on increasedmarket penetration for the appropriate use of DEFINITY in suboptimal echocardiograms.”There are three echocardiography contrast agents approved by the FDA for sale in the U.S. – DEFINITY which as of December 2014 had anapproximately 78% segment share, Optison, and Lumason approved by the FDA in October 2014. Lumason is known as SonoVue outside of the U.S. and isalready approved for sale in Europe and certain Asian markets, including China, Japan and Korea. While we believe that additional promotion in the U.S.echocardiography segment will help raise awareness around the value that echocardiography contrast brings and potentially increase the overall contrastpenetration rate, if Bracco successfully commercializes Lumason in the U.S. without otherwise increasing the overall usage of ultrasound contrast agents, ourown growth expectations for DEFINITY revenue, gross profit and gross margin may have to be adjusted.Global Isotope SupplyCurrently, our largest supplier of Moly and our only supplier of Xenon is Nordion, which relies on the NRU reactor in Chalk River, Ontario. For Moly,we currently have a supply agreement with Nordion that runs through December 31, 2015, subject to certain early termination provisions and supplyagreements with NTP of South Africa, ANSTO of Australia, and IRE of Belgium, each running through December 31, 2017. For Xenon, we have a purchaseorder relationship with Nordion. The Canadian government requires the NRU reactor to shut down for at least four weeks at least once a year for inspectionand maintenance. The 2014 shutdown period ran from April 13, 2014 until May 13, 2014, and we were able to source all of our standing order customerdemand for Moly during this time period from our other suppliers. However, because Xenon is a by-product of the Moly 58Table of Contentsproduction process and is currently captured only by NRU, during this shutdown period, we were not able to supply all of our standing order customerdemand for Xenon during the outage. Because the month-long NRU shutdown was fully anticipated in our 2014 budgeting process, the shutdown did nothave a material adverse effect on our 2014 results of operations, financial condition and cash flows.We believe we are well-positioned with our current supply partners to have a secure supply of Moly, including low-enriched uranium, or LEU, Moly,when the NRU reactor transitions in October 2016 from providing regular supply of medical isotopes to providing only emergency back-up supply medicalisotopes through March 2018. ANSTO has under construction, in cooperation with NTP, a new Moly processing facility that ANSTO believes will expand itsproduction capacity by approximately 2.5 times, with expanded commercial production planned to start in mid-2016. This new ANSTO production capacityis expected to replace the NRU’s current routine production. In January 2015, we announced entering into a new strategic agreement with IRE for the futuresupply of Xenon. Under the terms of the agreement, IRE will provide bulk Xenon to us for processing and finishing once development work has beencompleted and all necessary regulatory approvals have been obtained. We currently estimate commercial production will occur in 2016. If we are not able tobegin providing commercial quantities of Xenon prior to the NRU reactor’s supply transition in 2016, there may be a period of time during which we are notable to offer Xenon in our portfolio of commercial products. See “Item 1A—Risk Factors—We face potential supply and demand challenges for Xenon.”Inventory SupplyOur products consist of radiopharmaceuticals and other imaging agents. The radiopharmaceuticals are decaying radioisotopes with half-lives rangingfrom a few hours to several days. These products cannot be kept in inventory because of their limited useful lives and are subject to just-in-timemanufacturing, processing and distribution. We obtain a substantial portion of our other imaging agents from third party suppliers. JHS is currently our solesource manufacturer of DEFINITY and Neurolite and we have ongoing technology transfer activities at JHS for our Cardiolite product supply. In themeantime, our Cardiolite product supply is manufactured by a single manufacturer. Until JHS is approved by certain foreign regulatory authorities tomanufacture certain of our products, we will face continued limitations on where we can sell those products outside of the U.S.Historically, we relied on BVL in Bedford, Ohio as our sole manufacturer of DEFINITY, Neurolite and evacuation vials, an ancillary component for ourTechneLite generators, and as one of two manufacturers of Cardiolite. Following extended operational and regulatory challenges at BVL, in March 2012 weentered into a settlement arrangement with BVL, resulting in an aggregate payment to us of $35.0 million, a broad mutual waiver and a covenant by us not tosue. Later in 2012 and in 2013, BVL continued to attempt to manufacture our products for us, and in October 2013 announced that it would cease tomanufacture new batches of our products at its Bedford, Ohio facility. In November 2013, we entered into a second settlement arrangement with BVL,resulting in an additional aggregate payment to us of $8.9 million, a broad mutual waiver and a covenant by us not to sue. At this time, we have a verylimited amount of BVL-manufactured products in our finished goods inventory.In addition to JHS, we are also currently working to secure additional alternative suppliers for our key products as part of our ongoing supply chaindiversification strategy. On November 12, 2013, we entered into a Manufacturing and Supply Agreement with Pharmalucence to manufacture and supplyDEFINITY. We currently believe that Pharmalucence will file for FDA approval to manufacture DEFINITY in 2015.Demand for TechneLiteSince the global Moly supply shortage in 2009 to 2010, we have experienced reduced demand for TechneLite generators from pre-shortage levels eventhough volume has increased in absolute terms from levels during the shortage following the return of our normal Moly supply in August 2010. However, wedo not know if overall industry demand for technetium will ever return to pre-shortage levels. 59Table of ContentsWe also believe that there has been an overall decline in the MPI study market because decreased levels of patient studies during the Moly shortageperiod have not returned to pre-shortage levels and industry-wide cost-containment initiatives that have resulted in a transition of where imaging proceduresare performed, from free standing imaging centers to the hospital setting. We expect these factors will continue to affect technetium demand in the future.In November 2014, CMS announced the 2015 final Medicare payment rules for hospital outpatient settings. Under the final rules, each technetiumdose produced from a generator for a diagnostic procedure in a hospital outpatient setting is reimbursed by Medicare at a higher rate if that technetium doseis produced from a generator containing Moly sourced from at least 95 percent LEU. We currently understand that CMS expects to continue this incentiveprogram for the foreseeable future. In January 2013, we began to offer a TechneLite generator which contains Moly sourced from at least 95 percent LEU andwhich satisfies the requirements for reimbursement under this incentive program. Although demand for LEU generators appears to be growing, we do notknow when, or if, this incremental reimbursement for LEU Moly generators will result in a material increase in our generator sales.Cardinal Supply AgreementsOur written supply agreements with Cardinal relating to TechneLite, Xenon, Neurolite, Cardiolite and certain other products expired in accordancewith their terms on December 31, 2014. Following extended discussions with Cardinal that have not yet resulted in one or more new written supplyagreements, we are currently accepting and fulfilling product orders from Cardinal on a purchase order basis at list price. We cannot predict the volumes orproduct mix Cardinal will continue to order and purchase, and such volumes and product mix may vary over time. In the absence of written supplyagreements with Cardinal, unit sales volumes have decreased in early 2015 from levels experienced throughout 2014, but such sales have been atsubstantially higher prices. However, ultimate future levels of net revenue and operating profit associated with Cardinal cannot be predicted at this timebecause such amounts depend on future unit sales volumes, product mix and pricing to Cardinal. See “Item 1A—Risk Factors—In the United States, we areheavily dependent on a few large customers and group purchasing organization arrangements to generate a majority of our revenues for our medical imagingproducts. Outside of the United States, we rely on distributors to generate a substantial portion of our revenues.”Cardiolite Competitive PressuresCardiolite’s market exclusivity expired in July 2008. In September 2008, the first of several competing generic products to Cardiolite was launched.With continued pricing and unit volume pressures from generic competitors, we also sell our Cardiolite product in the form of a generic sestamibi at the sametime as we continue to sell branded Cardiolite throughout the MPI segment. We believe this strategy of selling branded as well as generic sestamibi hasslowed our market share loss by having multiple sestamibi offerings that are attractive in terms of brand, as well as price.In addition to pressures due to generics, our Cardiolite products have also faced a volume decline in the MPI segment due to a change in professionalsociety appropriate use criteria, ongoing reimbursement pressures, the limited availability of Moly during the NRU reactor shutdown, the limited availabilityof Cardiolite products to us during the BVL outage, and the increase in use of other diagnostic modalities as a result of a shift to more available imagingagents and modalities. We believe the continuing effects from the BVL outage and continued generic competition will result in further market share andmargin erosion for our Cardiolite products.These factors have impacted the carrying value of our Cardiolite trademark intangible asset as further described in “Gross Profit.” 60Table of ContentsResearch and Development ExpensesTo remain a leader in the marketplace, we have historically made substantial investments in new product development. As a result, the positivecontributions of those internally funded R&D programs have been a key factor in our historical results and success. In March 2013, we began to implement astrategic shift in how we will fund our important R&D programs. We have reduced our internal R&D resources while at the same time we are seeking toengage strategic partners to assist us in the further development and commercialization of our important agents in development, including flurpiridaz F 18,18F LMI 1195 and LMI 1174. As a result of this shift, we are seeking strategic partners to assist us with the further development and possiblecommercialization of flurpiridaz F 18. For our other two important agents in development, 18F LMI 1195 and LMI 1174, we will also seek to engagestrategic partners to assist us with the ongoing development activities relating to these agents.SegmentsWe report our results of operations in two operating segments: United States and International. We generate a greater proportion of our revenue and netincome in the United States segment, which consists of all regions of the United States with the exception of Puerto Rico. We expect our percentage ofrevenue and net income derived from our International segment to continue to increase in future periods as we continue to expand globally.Operating ResultsThe following have been included in our results as of and for the year ended December 31, 2014: • increased revenues and segment penetration for DEFINITY in the suboptimal echocardiogram segment as a result of our sales efforts andsustained availability of product supply; • increased revenues for Xenon, mainly the result of higher selling prices, offset in part by mix shift among certain sales channels; • increased revenues resulting from the return of Neurolite product supply in the third quarter of 2013; • decreased revenues from our Cardiolite products resulting from continued generic competition; • the impact of certain cost savings actions taken in March 2013 as we finish implementing the strategic shift in how we fund our research anddevelopment, or R&D, programs; • lower material costs incurred for the production of TechneLite; and • lower international revenues across product lines because of unfavorable foreign exchange and competitive pressures. 61Table of ContentsYears Ended December 31, 2014, 2013 and 2012 December 31, 2014 comparedto 2013 2013 comparedto 2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% Revenues $301,600 $283,672 $288,105 $17,928 6.3% $(4,433) (1.5)% Cost of goods sold 176,081 206,311 211,049 (30,230) (14.7) (4,738) (2.2) Loss on firm purchase commitment — — 1,859 — — (1,859) (100.0) Total cost of goods sold 176,081 206,311 212,908 (30,230) (14.7) (6,597) (3.1) Gross profit 125,519 77,361 75,197 48,158 62.3 2,164 2.9 Operating expensesSales and marketing expenses 35,116 35,227 37,437 (111) (0.3) (2,210) (5.9) General and administrative expenses 34,921 33,159 32,520 1,762 5.3 639 2.0 Research and development expenses 13,673 30,459 40,604 (16,786) (55.1) (10,145) (25.0) Proceeds from manufacturer — (8,876) (34,614) 8,876 (100.0) 25,738 (74.4) Impairment on land — 6,406 — (6,406) (100.0) 6,406 100.0 Total operating expenses 83,710 96,375 75,947 (12,665) (13.1) 20,428 26.9 Operating income (loss) 41,809 (19,014) (750) 60,823 319.9 (18,264) 2,435.2 Interest expense (42,288) (42,915) (42,014) 627 (1.5) (901) 2.1 Interest income 27 104 252 (77) (74.0) (148) (58.7) Other income (expense), net 478 1,161 (44) (683) (58.8) 1,205 2,738.6 Income (loss) before income taxes 26 (60,664) (42,556) 60,690 (100.0) (18,108) 42.6 Provision (benefit) for income taxes 1,195 1,014 (555) 181 17.9 1,569 282.7 Net loss (1,169) (61,678) (42,001) 60,509 (98.1) (19,677) 46.8 Foreign currency translation (1,236) (1,729) 964 493 (28.5) (2,693) (279.4) Total comprehensive loss$(2,405) $(63,407) $(41,037) $61,002 (96.2)% $(22,370) 54.5% 62Table of ContentsComparison of the Years Ended December 31, 2014, 2013, and 2012RevenuesRevenues are summarized as follows: Year ended December 31, 2014 comparedto 2013 2013 comparedto 2012 2014 2013 2012 Change$ Change% Change$ Change% (dollars in thousands) United States DEFINITY $93,848 $76,539 $50,377 $17,309 22.6% $26,162 51.9% TechneLite 82,321 80,609 101,049 1,712 2.1 (20,440) (20.2) Xenon 36,542 32,086 30,048 4,456 13.9 2,038 6.8 Cardiolite 3,268 8,612 13,851 (5,344) (62.1) (5,239) (37.8) Other 20,541 15,793 14,686 4,748 30.1 1,107 7.5 Total U.S. revenues$236,520 $213,639 $210,011 $22,881 10.7% $3,628 1.7% InternationalDEFINITY$1,912 $1,555 $1,054 $357 23.0% $501 47.5% TechneLite 11,267 11,586 13,200 (319) (2.8) (1,614) (12.2) Xenon 7 39 27 (32) (82.1) 12 44.4 Cardiolite 15,555 17,525 21,144 (1,970) (11.2) (3,619) (17.1) Other 36,339 39,328 42,669 (2,989) (7.6) (3,341) (7.8) Total International revenues$65,080 $70,033 $78,094 $(4,953) (7.1) $(8,061) (10.3) Revenues$301,600 $283,672 $288,105 $17,928 6.3% $(4,433) (1.5)% 2014 v. 2013Total revenues increased $17.9 million, or 6.3%, to $301.6 million in the year ended December 31, 2014, as compared to $283.7 million in the yearended December 31, 2013. U.S. segment revenue increased $22.9 million, or 10.7%, to $236.5 million in the same period, as compared to $213.6 million inthe prior year. The U.S. segment increase is primarily due to a $17.3 million increase in DEFINITY as a result of higher unit volumes, a $6.8 million increasein Neurolite as the product returned to market in September 2013, a $4.5 million increase in Xenon primarily due to higher selling prices, a $1.9 millionincrease in Thallium driven by higher unit volumes with significant customer and $1.7 million TechneLite increase as a result of higher unit volumes.Offsetting these increases was a decrease in Cardiolite revenues of $5.3 million over the prior year period as a result of a contract with a significant customerthat reduced unit pricing and volume commitments and a $3.4 million decrease in Quadramet revenues due to lower unit volume as a result of increasedcompetitive pressures since we transitioned to being the direct manufacturer at the end of 2013.International segment revenues decreased $5.0 million, or 7.1%, to $65.1 million in the year ended December 31, 2014, as compared to $70.0 millionin the year ended December 31, 2013. The decrease in the International segment revenue during the year ended December 31, 2014, as compared to the prioryear period, is primarily due to $3.5 million unfavorable foreign exchange, combined with a $2.3 million decrease in third party product revenues and a $1.1million decrease in Cardiolite revenues as a result of competitive pressures in our international markets. Offsetting these decreases were a $1.0 millionincrease in Neurolite revenues driven by the return of finished product to the market, $0.4 million increase in TechneLite revenues primarily in the LatinAmerica market and $0.5 million increase in DEFINITY revenues as a result of sales volume growth in certain international markets.2013 v. 2012Revenues decreased $4.4 million, or 1.5%, to $283.7 million in the year ended December 31, 2013, as compared to $288.1 million in the year endedDecember 31, 2012. U.S. segment revenue increased $3.6 million, 63Table of Contentsor 1.7%, to $213.6 million in the same period, as compared to $210.0 million in the prior year. The increase of $3.6 million in U.S. segment revenue duringthe year ended December 31, 2013, as compared to the prior year period is primarily driven by a $26.2 million increase in DEFINITY revenue given productsupply shortages that impacted the prior year period. Offsetting this increase was a decrease in TechneLite revenues of $20.4 million over the prior yearperiod as a result of: (i) a contract that took effect at the beginning of 2013 with a significant customer that reduced unit pricing, resulting in lower revenuesof $16.9 million as compared to the prior year period; (ii) a decline in a significant customer’s market share which lowered its share of product purchases fromus and decreased revenues by $5.7 million; and (iii) loss of a customer resulting in lower revenue of $1.3 million. Offsetting these decreases in TechneLiterevenues was a higher share volume with a group of customers resulting in a $3.3 million increase in sales over the prior year period. Additionally, Cardioliterevenues were $5.2 million lower than the prior year period as a result of a contract with a significant customer that reduced unit pricing and volumecommitments.International segment revenues decreased $8.1 million, or 10.3%, to $70.0 million in the year ended December 31, 2013, as compared to $78.1 millionin the year ended December 31, 2012. The decrease of $8.1 million in the International segment revenue during the year ended December 31, 2013, ascompared to the prior year period, is due in part to a $3.3 million decrease in other revenue. This decrease is the result of a new contract with an existingcustomer, which altered the timing of shipments and reflected a lower selling price, as well as an unfavorable foreign exchange impact in the amount $1.9million for the year ended December 31, 2013 versus the prior year. In addition, Cardiolite sales decreased by $3.6 million mainly due to competitivepressures in international markets, as well as $0.7 million in unfavorable foreign exchange. TechneLite sales decreased by $1.6 million due to reduced sellingprices in Canada, lower sales volume in the Latin America and Asia Pacific markets as well as $0.3 million in unfavorable foreign exchange. Overall, totalunfavorable foreign exchange totaled $2.9 million when compared to the prior period.Rebates and AllowancesEstimates 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 revenue and the establishment of a liability which isincluded in accrued expenses. These rebates result from performance-based offers that are primarily based on attaining contractually specified sales volumesand growth, Medicaid rebate programs for certain products, administrative fees of group purchasing organizations, royalties 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. 64Table of ContentsAn analysis of the amount of, and change in, reserves is summarized as follows: (in thousands) Rebates Allowances Total Balance, as of January 1, 2012 $1,356 $33 $1,389 Current provisions relating to revenues in current year 3,224 291 3,515 Adjustments relating to prior years’ estimate (145) — (145) Payments/credits relating to revenues in current year (2,232) (223) (2,455) Payments/credits relating to revenues in prior years (661) (35) (696) Balance, as of December 31, 2012 1,542 66 1,608 Current provisions relating to revenues in current year 4,696 243 4,939 Adjustments relating to prior years’ estimate (21) — (21) Payments/credits relating to revenues in current year (3,438) (220) (3,658) Payments/credits relating to revenues in prior years (1,040) (69) (1,109) Balance, as of December 31, 2013 1,739 20 1,759 Current provisions relating to revenues in current year 5,773 310 6,083 Adjustments relating to prior years’ estimate (18) — (18) Payments/credits relating to revenues in current year (4,264) (284) (4,548) Payments/credits relating to revenues in prior years (1,066) (20) (1,086) Balance, as of December 31, 2014$2,164 $26 $2,190 Sales rebates accrued were approximately $2.2 million and $1.7 million at December 31, 2014 and 2013, respectively. The $0.5 million increase inaccrued sales rebates is primarily associated with a new rebate program associated with the Quadramet product as well as royalties incurred associated withthe net revenues generated by Quadramet. In addition, accrued sales rebates increased due to the timing of certain rebates.Cost of Goods SoldCost of goods sold consists of manufacturing, distribution, intangible asset amortization and other costs related to our commercial products. Inaddition, it includes the write-off of excess and obsolete inventory.Cost of goods sold is summarized as follows: December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% United States $127,237 $149,018 $156,098 $(21,781) (14.6)% $(7,080) (4.5)% International 48,844 57,293 56,810 (8,449) (14.7) 483 0.9 Total Cost of Goods Sold$176,081 $206,311 $212,908 $(30,230) (14.7)% $(6,597) (3.1)% 2014 v. 2013Total cost of goods sold decreased $30.2 million, or 14.7%, to $176.1 million in the year ended December 31, 2014, as compared to $206.3 million inthe year ended December 31, 2013. U.S. segment cost of goods sold decreased approximately $21.8 million, or 14.6%, to $127.2 million in same period, ascompared to $149.0 million in the prior year period. The decrease in the U.S. segment cost of goods sold for the year ended December 31, 2014 over the prioryear period is primarily due to a $22.0 million decrease in Cardiolite cost of goods as a result of a $15.4 million write-down in the Cardiolite trademarkintangible asset in the fourth quarter of 2013 and lower amortization expense in 2014 as compared to 2013 as a result of the impairment. In addition, therewas a $2.8 million decrease in Technelite cost of goods sold primarily due to lower material costs for 2014. 65Table of ContentsWe also incurred $2.1 million of lower write-off expense as compared to the prior year related to the Ablavar product line. Offsetting these decreases was a$5.9 million increase in DEFINITY and Thallium cost of goods sold due to higher sales unit volumes and higher DEFINITY technology transfer costs.For the year ended December 31, 2014, the International segment cost of goods sold decreased $8.5 million, or 14.7%, to $48.8 million, as compared to$57.3 million in the prior year period. The decrease in the International segment cost of goods sold during the year ended December 31, 2014, as compared tothe prior year period, is primarily due to a $4.5 million decrease as a result of reduced costs associated with operating efficiencies as well as lower cost ofgoods sold for certain products. We also incurred an impairment charge of $1.7 million in the prior year relating to customer relationship intangible assets inEurope, lower amortization expense in the current year and incurred a favorable foreign exchange impact of $1.7 million in the current year.2013 v. 2012Total cost of goods sold decreased $6.6 million, or 3.1%, to $206.3 million in the year ended December 31, 2013, as compared to $212.9 million in theyear ended December 31, 2012. U.S. segment cost of goods sold decreased approximately $7.1 million, or 4.5%, to $149.0 million in same period, ascompared to $156.1 million in the prior year period. The decrease in the U.S. segment cost of goods sold for the year ended December 31, 2013 over the prioryear is primarily due to $10.9 million of lower write-off expense as compared to the prior year related to the Ablavar product line. We also incurred lower costof goods sold of $9.3 million for TechneLite over the prior period primarily due to lower material cost and lower unit volumes. Technology transfer costsdecreased by $4.0 million related to JHS becoming an approved manufacturing site for DEFINITY by the FDA in the first quarter of 2013. Lower sales volumeof Cardiolite contributed to lower cost of goods sold by $2.6 million. Offsetting these decreases was an increase in DEFINITY cost of goods sold ofapproximately $4.7 million primarily driven by an increase in units sold, an impairment charge of $15.4 million related to the Cardiolite trademarkintangible asset and an increase of $2.1 million related to Neurolite technology transfer.For the year ended December 31, 2013, the International segment cost of goods sold increased $0.5 million, or 0.9%, to $57.3 million, as compared to$56.8 million in the prior year period. The increase in the International segment was primarily due to an impairment charge on customer relationshipintangible assets in Europe totaling $1.7 million, which was partially offset by favorable foreign exchange impact of $1.0 million, lower volume and lowercost of goods sold for certain products.Gross Profit December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% United States $109,283 $64,621 $53,913 44,662 69.1% $10,708 19.9% International 16,236 12,740 21,284 3,496 27.4 (8,544) (40.1) Total Gross Profit$125,519 $77,361 $75,197 48,158 62.3% $2,164 2.9% 2014 v. 2013Total gross profit increased $48.2 million, or 62.3%, to $125.5 million, or 41.6% of revenues in the year ended December 31, 2014, as compared to$77.4 million or 27.3% of revenues in the year ended December 31, 2013. U.S. segment gross profit increased $44.7 million, or 69.1%, to $109.3 million, ascompared to $64.6 million in the prior year period. The increase in the U.S. segment gross profit for the year ended December 31, 2014 over the prior yearperiod is primarily due to a $16.6 million increase in Cardiolite gross profit due to a write-down in the Cardiolite trademark intangible asset in the fourthquarter of 2013 and a $25.1 million aggregate increase in DEFINITY, TechneLite and Neurolite gross profit due to higher unit volumes and 66Table of Contentslower material costs for TechneLite. In addition, Xenon gross profit increased by $4.1 million due to higher selling price. Offsetting these increases was a $3.8million decrease in Quadramet gross profit due to less unit volume since we transitioned as the direct manufacturer at the end of 2013.For the year ended December 31, 2014, the International segment gross profit increased $3.5 million, or 27.4%, to $16.2 million, as compared to$12.7 million in the prior year period. The increase in the International segment gross profit during the year ended December 31, 2014, as compared to theprior year period is primarily due to a $1.7 million impairment charge on customer relationship intangible assets in the prior year and lower amortization ascompared to the prior year. The increase is also driven by reduced costs associated with increased operating efficiencies, the return of Neurolite finishedproduct to the market and lower volume of more expensive substitute products sold in the current period as a result of the return of supply. These increaseswere partially offset by an unfavorable foreign exchange impact of $1.8 million.2013 v. 2012Total gross profit increased $2.2 million, or 2.9%, to $77.4 million in the year ended December 31, 2013, as compared to $75.2 million in the yearended December 31, 2012. U.S. segment gross profit increased $10.7 million, or 19.9%, to $64.6 million, as compared to $53.9 million in the prior yearperiod. The increase in the U.S. segment gross profit for the year ended December 31, 2013 over the prior year period is primarily due to an ongoing shift inmix among products, specifically a higher DEFINITY gross profit of approximately $25.3 million primarily due to an increase in sales volume and $4.0million due to lower technology transfer cost related to JHS becoming an approved manufacturing site for DEFINITY by the FDA. In addition, gross profitimproved due to a $10.9 million decrease in write-offs related to Ablavar. Offsetting these increases was a decrease in TechneLite gross margin ofapproximately $11.1 million over the prior period driven primarily by lower selling price and lower gross profit on Cardiolite due to an impairment charge of$15.4 million related to the Cardiolite trademark intangible asset and lower selling prices.For the year ended December 31, 2013, the International segment gross profit decreased $8.5 million, or 40.1%, to $12.7 million, as compared to$21.3 million in the prior year period. Gross profit in our International segment decreased due to a new contract with an existing customer, which altered thetiming of shipments and reflected a lower selling price, unfavorable changes in foreign exchange rates, lower sales due to competitive pressures in all marketsand a $1.7 million impairment charge on customer relationship intangible assets.Sales and Marketing December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% United States $30,815 $31,024 $33,638 $(209) (0.7)% $(2,614) (7.8)% International 4,301 4,203 3,799 98 2.3 404 10.6 Total Sales and Marketing$35,116 $35,227 $37,437 $(111) (0.3)% $(2,210) (5.9)% Sales and marketing expenses consist primarily of salaries and other related costs for personnel in field sales, marketing, business development andcustomer service functions. Other costs in sales and marketing expenses include the development and printing of advertising and promotional material,professional services, market research and sales meetings.2014 v. 2013Total sales and marketing expenses decreased $0.1 million, or 0.3%, to $35.1 million in the year ended December 31, 2014, as compared to$35.2 million in the year ended December 31, 2013. In the U.S. segment, 67Table of Contentssales and marketing expense decreased $0.2 million, or 0.7%, to $30.8 million in the same period, as compared to $31.0 million in the prior year. Thedecrease in the U.S. segment sales and marketing expenses for the year ended December 31, 2014 over the prior year period is primarily due to decreases inheadcount and employee related expenses. Offsetting these decreases are increases in support of DEFINITY including marketing, research and travelexpenses. As a percentage of total U.S. revenues, sales and marketing expenses in the U.S. segment were 13.0%, 14.5% and 16.0% for the years endedDecember 31, 2014, 2013 and 2012, respectively.For the year ended December 31, 2014, the International segment sales and marketing expense increased $0.1 million or 2.3%, to $4.3 million ascompared to $4.2 million in the prior year period. The increase in the International segment sales and marketing expenses for the year ended December 31,2014 over the prior year period is primarily due to increased external advertising and marketing expenses and external professional services which were offsetby a favorable foreign exchange impact. As a percentage of total International revenues, sales and marketing expenses in the International segment were6.6%, 6.0% and 4.9% for the years ended December 31, 2014, 2013 and 2012, respectively.2013 v. 2012Total sales and marketing expenses decreased $2.2 million, or 5.9%, to $35.2 million in the year ended December 31, 2013, as compared to$37.4 million in the year ended December 31, 2012. In the U.S. segment, sales and marketing expense decreased $2.6 million, or 7.8%, to $31.0 million in thesame period, as compared to $33.6 million in the prior year. The decrease in the U.S. segment was primarily due to lower headcount and employee relatedexpenses, including contractors, due to a reduction in workforce and reduced marketing expenses related to Ablavar. Offsetting the decreases were increasesin variable compensation and marketing expenses related to DEFINITY. As a percentage of total U.S. revenues, sales and marketing expenses in the U.S.segment were 14.5% and 16.0% for the years ended December 31, 2013, and 2012, respectively.For the year ended December 31, 2013, the International segment sales and marketing expense increased $0.4 million or 10.6%, to $4.2 million ascompared to $3.8 million in the prior year period due to increased headcount and higher variable compensation. Offsetting the increases was a decrease inprofessional services. As a percentage of total International revenues, sales and marketing expenses in the International segment were 6.0% and 4.9% for theyears ended December 31, 2013, and 2012, respectively.General and Administrative December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% United States $32,609 $30,865 $30,192 $1,744 5.7% $673 2.2% International 2,312 2,294 2,328 18 0.8 (34) (1.5) Total General and Administrative$34,921 $33,159 $32,520 $1,762 5.3% $639 2.0% General and administrative expenses consist of salaries and other related costs for personnel in executive, finance, legal, information technology andhuman resource functions. Other costs included in general and administrative expenses are professional fees for information technology services, externallegal fees, consulting and accounting services as well as bad debt expense, certain facility and insurance costs, including director and officer liabilityinsurance.2014 v. 2013Total general and administrative expenses increased approximately $1.8 million, or 5.3%, to $34.9 million in the year ended December 31, 2014, ascompared to $33.2 million in the year ended December 31, 2013. In the 68Table of ContentsU.S. segment, general and administrative expenses increased $1.7 million, or 5.7%, to $32.6 million, as compared to $30.9 million in the prior year period.The increase was primarily due to an increase in employee related expenses. Offsetting these increases were non-recurrence of severance expense related tothe reduction in force in the first quarter of 2013, decrease in depreciation expense, cost savings achieved through the renegotiation of certain informationtechnology related contracts and lower legal costs.For the year ended December 31, 2014, general and administrative expenses in the International segment remained relatively consistent as compared tothe prior year period.2013 v. 2012Total general and administrative expenses increased approximately $0.6 million, or 2.0%, to $33.2 million in the year ended December 31, 2013, ascompared to $32.5 million in the year ended December 31, 2012. In the U.S. segment, general and administrative expenses increased $0.7 million, or 2.2%, to$30.9 million, as compared to $30.2 million in the prior year period. The increase was primarily due to additional variable compensation in the current periodand severance expense from a reduction in workforce in the first quarter of 2013. Offsetting these increases were cost savings over the prior period through therenegotiation of certain information technology related contracts as support provided by certain vendors was reduced and reduced legal expense. In addition,compensation for performance-based awards was lower in the current period due to adjustments made based on the probability of achievement.For the year ended December 31, 2013, general and administrative expenses in the International segment were consistent with the prior year period at$2.3 million as lower salaries and employee related expenses, which were driven by lower headcount, were offset by increased bad debt expense andincreased recruiting fees.Research and Development December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% United States $13,252 $30,138 $40,457 $(16,886) (56.0)% $(10,319) (25.5)% International 421 321 147 100 31.2 174 118.4 Total Research and Development$13,673 $30,459 $40,604 $(16,786) (55.1)% $(10,145) (25.0)% Research and development expenses relate primarily to the development of new products to add to our portfolio and costs related to medical affairs,medical information and regulatory functions. We do not allocate research and development expenses incurred in the United States to our Internationalsegment.2014 v. 2013Total research and development expense decreased $16.8 million, or 55.1%, to $13.7 million for the year ended December 31, 2014, as compared to$30.5 million in the year ended December 31, 2013. In the U.S. segment, research and development expense decreased approximately $16.9 million, or56.0%, to $13.3 million, as compared to $30.1 million in the prior year period. The decrease in the U.S. segment research and development expenses isprimarily due to a decline in external expense associated with Phase 3 clinical trial for flurpiridaz F 18 as we completed patient enrollment during the thirdquarter of 2013. In addition, there were decreases in employee related costs as a result of the reduction in workforce from a strategic shift to use fewer internalresources and lower external expense as we expect to seek one or more strategic partners to assist in the future development and commercialization of ouragents in development. Offsetting this decrease was a $0.9 million increase in depreciation expense as we announced in November 2014 our plans todecommission certain 69Table of Contentslong-lived assets associated with our research and development operations in the United States. We expect the decommissioning to begin in the second halfof 2015. As a result, we revised our estimates of the remaining useful lives of the affected long-lived assets to seven months, which increased depreciationexpense by $1.2 million which is included in research and development expenses. Future decommissioning costs are expected to impact our general andadministrative expenses through 2015.For the year ended December 31, 2014, the International segment research and development expenses increased approximately $0.1 million, or 31.2%,to $0.4 million, as compared to $0.3 million in the prior year period. The increase in research and development expenses for the International segment wasprimarily due to depreciation expense since we shifted the primary utilization of certain assets to support research and development functions.2013 v. 2012Total research and development expense decreased $10.1 million, or 25.0%, to $30.5 million for the year ended December 31, 2013, as compared to$40.6 million in the year ended December 31, 2012. In the U.S. segment, research and development expense decreased approximately $10.3 million, or25.5%, to $30.1 million, as compared to $40.4 million in the prior year period. The decrease in the U.S. segment research and development expenses for theyear ended December 31, 2013 over the prior year period is driven by a decline in external expense associated with the Phase 3 clinical trial for flurpiridazF 18, as we completed patient enrollment during the third quarter of 2013. There were decreases in employee related costs as a result of the reduction inworkforce from a strategic shift to use fewer internal resources and lower external expense as we expect to seek one or more strategic partners to assist in thefuture development and commercialization of our agents in development. Offsetting these decreases, in part, was an increase in severance expense andvariable compensation.For the year ended December 31, 2013, the International segment research and development expenses increased approximately $0.2 million, or118.4%, to $0.3 million, as compared to $0.1 million in the prior year period. The increase in research and development expenses for the Internationalsegment was primarily due to depreciation expense since we shifted the primary utilization of certain assets to support research and development functions.Impairment of LandDuring the third quarter of 2013, we committed to a plan to sell certain of our excess land, which had a carrying value of $7.5 million. This eventqualified for held for sale accounting and the excess land was written down to its fair value, less costs to sell. The fair value was estimated utilizing Level 3inputs and using a market approach, based on available data for transactions in the region as well as the asking price of comparable properties in our principalmarket. This resulted in a loss of $6.4 million, which is included within operating income (loss) as impairment of land in the accompanying consolidatedstatement of comprehensive loss. During the fourth quarter of 2013, we sold the excess land for net proceeds of $1.1 million.Proceeds from ManufacturerFor the year ended December 31, 2013, as compared to the same period in 2012, proceeds from manufacturer decreased by $25.7 million as a result ofthe receipt of the $35 million from BVL in 2012 to compensate us for business losses compared to proceeds of $8.9 million from BVL under a further 2013settlement.During the fourth quarter of 2013, BVL and LMI entered into a Settlement and Release Agreement. Pursuant to the Settlement and Release Agreement,BVL and LMI agreed to a broad mutual waiver and release for all matters that occurred prior to the date of the Settlement Agreement, a covenant not to sueand settlement payments to us in the aggregate amount of $8.9 million. In addition, the Settlement and Release Agreement 70Table of Contentsprovided that the Manufacturing and Service Contract terminate as of November 15, 2013, subject to BVL’s obligations to use commercially reasonableefforts to finalize specific batches of DEFINITY, Cardiolite product and saline manufactured and not yet released by the BVL quality function for commercialdistribution.Other Income (Expense), Net December 31, 2014 compared to2013 2013 compared to2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% Interest expense $(42,288) $(42,915) $(42,014) $627 (1.5)% $(901) 2.1% Interest income 27 104 252 (77) (74.0) (148) (58.7) Other income (expense), net 478 1,161 (44) (683) (58.8) 1,205 2,738.6 Total Other Expense, net$(41,783) $(41,650) $(41,806) $(133) 0.3% $156 (0.4)% Interest ExpenseFor the year ended December 31, 2014 compared to the same period in 2013, interest expense decreased by 1.5% to $42.3 million from $42.9 million,as a result of decreased amortization related to deferred financing costs.For the year ended December 31, 2013 compared to the same period in 2012, interest expense increased by 2.1% to $42.9 million from $42.0 million,as a result of increased amortization related to the capitalization of additional deferred financing costs in connection with our new line of credit and the writeoff of the existing unamortized deferred financing costs related to our old facility.Interest IncomeFor the year ended December 31, 2014, as compared to the same period in 2013, interest income decreased by 74.0% to $27,000 from $104,000,primarily as a result of the change in balances in interest bearing accounts.For the year ended December 31, 2013, as compared to the same period in 2012, interest income decreased by 58.7% to $104,000 from $252,000,primarily as a result of the change in balances in interest bearing accounts.Other Income (Expense), netFor the year ended December 31, 2014, as compared to the same period in 2013, other income (expense), net decreased by $0.7 million from $1.2million primarily due to a net $1.2 million settlement indemnified by BMS during 2014.For the year ended December 31, 2013, as compared to the same period in 2012, other income (expense), net increased by $1.2 million from $(44,000)primarily due to a $0.8 million increase as a result of the closing of the statute of limitations relating to a federal research credit matter in 2012, whichdecreased the tax indemnification assets in the prior year. In addition, we received $0.4 million in consideration from the extinguishment of our membershipinterests in a mutual insurance company.Provision (Benefit) for Income Taxes December 31, 2014 compared to2013 2013 compared to 2012 (dollars in thousands) 2014 2013 2012 Change$ Change% Change$ Change% Provision (benefit) for income taxes $1,195 $1,014 $(555) $181 17.9% $1,569 282.7% 71Table of ContentsFor the year ended December 31, 2014 compared to the same period in 2013, provision for income taxes increased by 17.9% to $1.2 million from $1.0million.We have generated domestic pre-tax losses for two of the past three years and continue to be in cumulative loss position. This loss history demonstratesnegative evidence concerning our ability to utilize our gross deferred tax assets. In order to overcome the presumption of recording a valuation allowanceagainst our net deferred tax assets, we must have sufficient positive evidence that we can generate sufficient taxable income to utilize these deferred tax assetswithin the carryover or forecast period. Although we have no history of expiring net operating losses or other tax attributes, based on the cumulativedomestic loss incurred over the three-year period ended December 31, 2014, management has determined that all of the net U.S. deferred tax assets are notmore-likely-than-not recoverable. As a result of this analysis, we maintained a valuation allowance against substantially all of our net deferred tax assets in2014.Considering our history of losses, our provision (benefit) for income taxes results primarily from taxes due in certain foreign jurisdictions where wegenerate taxable income, as well as interest and penalties associated with uncertain tax positions, offset by reversals of those positions as statutes lapse or aresettled during the year. Provision (benefit) for income taxes increased in 2014 due to changes in taxable income in certain foreign jurisdictions andsettlements and lapse of statute of limitations of uncertain tax positions in the current year.For the year ended December 31, 2013, as compared to the same period in 2012, provision (benefit) for income taxes increased by 282.7% to $1.0million from $(0.6) million due primarily to lower credits associated with settlements and lapse of statute of limitations of uncertain tax positions in thecurrent year.Our effective tax rates for the years ended December 31, 2014, 2013, and 2012 were, 4,581.7%, (1.7)%, and 1.3 %, respectively. Our tax rate is affectedby recurring items, such as tax rates in foreign jurisdictions, which we expect to be fairly consistent in the near term, as well as non-recurring items such as thesettlement of state audits. The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 35%and our effective tax rate during the years ended:December 31, 2014 • A $0.8 million increase attributable to prior year uncertain tax positions for a closed tax year. • A $0.4 million increase for taxes in foreign jurisdictions.December 31, 2013 • A $25.6 million increase to our valuation allowance against net domestic deferred tax assets. • A $1.4 million reduction relating primarily to prior year uncertain tax positions for a closed tax year. • A $1.8 million reduction primarily relating to a state income tax benefit related to state NOL’s.December 31, 2012 • A $20.2 million increase to our valuation allowance against net domestic deferred tax assets. • A $2.3 million reduction relating to prior year uncertain tax positions for a closed tax year. • A $1.8 million reduction relating to a state income tax benefit consisting of $1.1 million related to state NOL’s, $0.3 million related to researchcredits, and $0.4 million to other changes to state deferred taxes. 72Table of ContentsLiquidity and Capital ResourcesCash FlowsThe following table provides information regarding our cash flows: Year Ended December 31, % Change 2014 2013 2012 2014Comparedto 2013 2013Comparedto 2012 (dollars in thousands) Cash provided by (used in): Operating activities $11,573 $(15,678) $523 173.8% (3,097.7)% Investing activities (7,682) (3,483) (8,145) 120.6% (57.2)% Financing activities (2,293) 5,535 (2,039) (141.4)% 371.5% Net Cash Provided by (Used in) Operating ActivitiesCash provided by operating activities is primarily driven by our earnings and changes in working capital. The increase in cash provided by operatingactivities for the year ended December 31, 2014 as compared to 2013 was primarily driven by a decrease in net loss and cash flow increase for inventorypurchases primarily due to timing of the receipt of inventory. The improvement was partially offset by cash flow decreases in accounts receivable primarilydue to increased revenues.The decrease in cash provided by operating activities for the year ended December 31, 2013 as compared to 2012 was primarily driven by the receipt of$35.0 million from the BVL settlement in 2012 as compared to the receipt of $8.9 million from the BVL settlement in 2013. Offsetting this was an increase ingross profit and fewer expenditures related to research and development in 2013.Net Cash Used in Investing ActivitiesOur primary uses of cash in investing activities are for the purchase of property and equipment. Net cash used in investing activities in 2014, 2013 and2012 reflected the purchase of property and equipment for $8.1 million, $5.0 million and $7.9 million, respectively.Net Cash (Used in) Provided by Financing ActivitiesNet cash used in financing activities during 2014 was due to payments made to our parent. Net cash provided by financing activities during 2013 wasassociated with an $8.0 million draw against our outstanding line of credit. On March 21, 2011, we issued $150.0 million of our Notes and paid associatedfinancing costs. Net cash used in 2012 primarily represented the results of these activities.Our primary source of cash flows from financing activities is draws against our outstanding line of credit. Going forward, we expect our primary sourceof cash flows from financing activities to be similar draws against our line of credit, issuances of securities or other financing arrangements into which we mayenter. Our primary historical uses of cash in financing activities are principal payments on our term loan and line of credit as well as dividends to Holdings,our parent. See “—External Sources of Liquidity.”External Sources of LiquidityOn May 10, 2010, we issued $250.0 million in aggregate principal amount of 9.750% Senior Notes due in 2017, or the Restricted Notes, at face value,net of issuance costs of $10.1 million, under the indenture, dated as of May 10, 2010. On February 2, 2011, we consummated an exchange offer where weexchanged $250.0 million aggregate principal amount of our Restricted Notes for an equal principal amount of 9.750% Senior Notes due 2017, or theExchange Notes, that were registered under the Securities Act, with substantially identical terms in all respects. 73Table of ContentsOn March 21, 2011, we issued an additional $150.0 million in aggregate principal amount of New Restricted Notes, net of issuance costs of$4.9 million, under the indenture, dated as of May 10, 2010, as supplemented by the First Supplemental Indenture, dated as of March 14, 2011, and theSecond Supplemental Indenture, dated as of March 21, 2011, or together, the Indenture. The net proceeds were used to repurchase all of the remainingSeries A Preferred Stock at the accreted value of approximately $44.0 million and to issue an approximate $106.0 million dividend to our common securityholders. On May 10, 2011, we consummated an exchange offer where we exchanged $150.0 million aggregate principal amount of New Restricted Notes foran equal principal amount of 9.750% Senior Notes due 2017, or the New Exchange Notes, registered under the Securities Act, with substantially identicalterms in all respects.The Exchange Notes and the New Exchange Notes, or together, the Notes, mature on May 15, 2017. Interest on the Notes accrues at a rate of9.750% per year and is payable semiannually in arrears on May 15 and November 15 commencing on November 15, 2010 for the Notes issued on May 10,2010 and May 15, 2011 for the Notes issued on March 21, 2011.In connection with the Restricted Notes issuance, we entered into a revolving facility, or the Old Facility, for total borrowings up to $42.5 million.During 2012, we entered into an unfunded Standby Letter of Credit for up to $8.8 million to support a surety bond related to a statutory decommissioningobligation we have in connection with our Billerica facility. The letter of credit decreased the borrowing availability under the Old Facility by $8.8 million.On July 3, 2013, we entered into an amended and restated asset-based revolving credit facility, or our revolving credit facility, in an aggregateprincipal amount not to exceed $42.5 million. On June 24, 2014, we entered into an amendment of our revolving credit facility, which, among other things,increased the revolving credit commitments under our revolving credit facility to $50.0 million; provided that, subsequent to the amendment, borrowings inexcess of $42.5 million thereunder are subject to certification of compliance with (x) the debt and lien covenants under the indenture for the Notes and (y) anadditional $3.0 million of secured debt capacity under the indenture for the Notes.Subsequent to the amendment, the revolving loans under our revolving credit facility bear interest, with pricing based from time to time at our electionat (i) LIBOR plus a spread of 2.00% or (ii) the Reference Rate (as defined in our revolving credit facility) plus a spread of 1.00%. Our revolving credit facilityalso includes an unused line fee, which, subsequent to the amendment, is set at 0.375%. Our revolving credit facility expires on the earlier of (i) July 3, 2018or (ii) if the outstanding Notes are not refinanced in full, the date that is 91 days before the maturity thereof, at which time all outstanding borrowings are dueand payable.As of December 31, 2014 and 2013, we had an unfunded Standby Letter of Credit for up to $8.8 million. The unfunded Standby Letter of Creditrequires annual fees, payable quarterly, which, subsequent to the amendment, is set at LIBOR plus a spread of 2.00% and expires on February 5, 2016, whichwill automatically renew for a one year period at each anniversary date, unless we elect not to renew in writing within 60 days prior to such expiration.Our revolving credit facility is secured by a pledge of substantially all of the assets of LMI, together with the assets of Lantheus Intermediate and assetsof Lantheus MI Real Estate, LLC, or Lantheus Real Estate, including each such entity’s accounts receivable, inventory and machinery and equipment, and isguaranteed by each of Lantheus Intermediate and Lantheus Real Estate. Borrowing capacity is determined by reference to a borrowing base, or the BorrowingBase, which is based on (i) a percentage of certain eligible accounts receivable, inventory and machinery and equipment minus (ii) any reserves. As ofDecember 31, 2014, the aggregate Borrowing Base was approximately $50.0 million, which was reduced by (i) an outstanding $8.8 million unfundedStandby Letter of Credit and (ii) an $8.0 million outstanding loan balance including interest, resulting in a net borrowing base availability of approximately$33.2 million. 74Table of ContentsOur revolving credit facility contains affirmative and negative covenants, as well as restrictions on the ability of Lantheus Intermediate, us and oursubsidiaries to: (i) incur additional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity; (iii) pay dividendson, repurchase or make distributions in respect of 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 our assets; and (viii) enter into certain transactions with ouraffiliates. Our revolving credit facility also contains customary default provisions as well as cash dominion provisions which allow the lender to sweep ouraccounts during the period (x) certain specified events of default are continuing under our revolving credit facility or (y) excess availability under ourrevolving credit facility falls below (i) the greater of $5.0 million or 15% of the then-current borrowing base for a period of more than five consecutiveBusiness Days or (ii) $3.5 million. During a covenant trigger period, we are required to comply with a consolidated fixed charge coverage ratio of not lessthan 1:00:1:00. The fixed charge coverage ratio is calculated on a consolidated basis for Lantheus Intermediate and its subsidiaries for a trailing four-fiscalquarter period basis, as (i) EBITDA (as defined in the agreement) minus capital expenditures minus certain restricted payments divided by (ii) interest plustaxes paid or payable in cash plus certain restricted payments made in cash plus scheduled principal payments paid or payable in cash.On December 27, 2012, we entered into a second amendment to a license and supply agreement with one of our customers, which extended the termfrom December 31, 2012 to December 31, 2014 and established new pricing and purchase requirements over the extended term. The second amendment alsoprovided for the supply of TechneLite generators containing Moly sourced from LEU targets. The agreement included a $3.0 million upfront payment by ourcustomer to us and during 2013, we received an additional $4.0 million, of which $3.6 million is included in deferred revenue as a current liability atDecember 31, 2013. During 2012, we received the $3.0 million upfront payment, of which $1.5 million was included in deferred revenue as a current liabilityand $1.5 million was included in other long-term liabilities at December 31, 2012. We have recognized the upfront payment as revenue on a straight-linebasis over the term of the two year agreement.Our ability to fund our future capital needs will be affected by our ability to continue to generate cash from operations and may be affected by ourability to access the capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements.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. Theseactions may include open market repurchases of any notes outstanding, prepayments of our term loans or other retirements or refinancing of outstanding debt,privately negotiated transactions or otherwise. The amount of debt that may be repurchased or otherwise retired, if any, would be decided at the solediscretion of our Board of Directors and will depend on market conditions, trading levels of our debt from time to time, our cash position and otherconsiderations.Funding RequirementsOur future capital requirements will depend on many factors, including: • our ability to have product manufactured and released from JHS and other manufacturing sites in a timely manner in the future; • the pricing environment and the level of product sales of our currently marketed products, particularly DEFINITY, and any additional productsthat we may market in the future; • revenue mix shifts and associated volume and selling price changes that could result from contractual status changes with key customers; • the costs of further commercialization of our existing products, particularly in international markets, including product marketing, sales anddistribution and whether we obtain local partners to help share such commercialization costs; • the costs of investing in our facilities, equipment and technology infrastructure; 75Table of Contents • the costs and timing of establishing manufacturing and supply arrangements for commercial supplies of our 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 marketed products; • 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; and • the cost of interest on any additional borrowings which we may incur under our financing arrangements.Until we successfully become dual sourced for our principal products, we are vulnerable to future supply shortages. Disruption in the financialperformance could also occur if we experience significant adverse changes in customer mix, broad economic downturns, adverse industry or companyconditions or catastrophic external events. If we experience one or more of these events in the future, we may be required to implement additional expensereductions, such as a delay or elimination of discretionary spending in all functional areas, as well as scaling back select operating and strategic initiatives.See “Item 1A—Risk Factors—We may not be able to generate sufficient cash flow to meet our debt service obligations.”If our capital resources become insufficient to meet our future capital requirements, we would need to finance our cash needs through public or privateequity offerings, assets securitizations, debt financings, sale-leasebacks or other financing or strategic alternatives, to the extent such transactions arepermissible under the covenants of our revolving credit facility and the Indenture. Additional equity or debt financing, or other transactions, may not beavailable on acceptable terms, if at all. If any of these transactions require an amendment or waiver under the covenants in our revolving credit facility andunder the Indenture, which could result in additional expenses associated with obtaining the amendment or waiver, we will seek to obtain such a waiver toremain in compliance with the covenants of our revolving credit facility and the Indenture. However, we cannot be assured that such an amendment or waiverwould be granted, or that additional capital will be available on acceptable terms, if at all.At December 31, 2014, our only current committed external source of funds is our borrowing availability under our revolving credit facility. Wegenerated a net loss of $1.2 million during the year ended December 31, 2014 and had $17.8 million of cash and cash equivalents at December 31, 2014.Availability under our revolving credit facility is calculated by reference to the Borrowing Base. If we are not successful in achieving our forecasted results,our accounts receivable and inventory could be negatively affected, reducing the Borrowing Base and limiting our borrowing availability.Based on our current operating plans, we believe that our existing cash and cash equivalents, results of operations and availability under our revolvingcredit facility will be sufficient to continue to fund our liquidity requirements for at least the next twelve months. 76Table of ContentsContractual ObligationsContractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent contractualliabilities for which we cannot reasonably predict future payment, including contingencies related to potential future development, financing, certainsuppliers, contingent royalty payments and/or scientific, regulatory, or commercial milestone payments under development agreements. The following tablesummarizes our contractual obligations as of December 31, 2014: Payments Due by Period Total Less than1 Year 1 - 3Years 3 - 5 Years More than5 Years (dollars in thousands) Debt obligations (principal) $400,000 $— $400,000 $— $— Interest on debt obligations 97,500 39,000 58,500 — — Operating leases(1) 3,864 854 1,023 797 1,190 Asset retirement obligation 7,435 — — — 7,435 Other long-term liabilities(2) 32,261 — — — 32,261 Total contractual obligations$541,060 $39,854 $459,523 $797 $40,886 (1)Operating leases include minimum payments under leases for our facilities and certain equipment.(2)Due to the uncertainty related to the timing of the reversal of uncertain tax positions, the liability is not subject to fixed payment terms and the amountand timing of payments, if any, which we will make related to this liability are not known.Off-Balance Sheet ArrangementsWe are required to provide the NRC and Massachusetts Department of Public Health financial assurance demonstrating our ability to fund thedecommissioning of our North Billerica, Massachusetts production facility upon closure, though we do not intend to close the facility. We have providedthis financial assurance in the form of a $28.2 million surety bond and an $8.8 million letter of credit.Since inception, we have not engaged in any other off-balance sheet arrangements, including structured finance, special purpose entities or variableinterest entities.Effects of InflationWe 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 those items will not materially affectour operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase ourlevel of expenses and the rate at which we use our resources. While we generally believe that we will be able to offset the effect of price-level changes byadjusting our product prices and implementing operating efficiencies, any material unfavorable changes in price levels could have a material adverse affecton our financial condition, results of operations and cash flows.Recent Accounting StandardsIn July 2013, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2013-11, “Presentation of anUnrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” or ASU 2013-11. Theamendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, asimilar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning afterDecember 15, 2013. The amendments did not have a material impact on our financial position, results of operations or cash flows. 77Table of ContentsIn April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” or ASU 2014-08. The amendments in ASU 2014-08 changethe criteria for reporting discontinued operations while enhancing disclosures in this area. The new guidance requires expanded disclosures aboutdiscontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinuedoperations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does notqualify for discontinued operations reporting. The amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendaryear ends. Early adoption is permitted. We do not anticipate that this ASU will have a material impact to our financial position, results of operations or cashflows.In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” or ASU 2014-09. ASU 2014-09 supersedesnearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods orservices are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenuerecognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variableconsideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The amendments in ASUNo. 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Earlyapplication is not permitted. We are currently evaluating the impact this ASU will have on our financial position, results of operations and cash flows.In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)” or ASU 2014-12. ASU 2014-12 requires that aperformance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. The amendments inASU No. 2014-12 are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Wedo not anticipate this ASU will have a material impact to our financial position, results of operations or cash flows.In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-4): Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern” or ASU 2014-15. ASU 2014-15 to provide guidance on management’sresponsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnotedisclosures. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016. Early adoption is permitted. We donot anticipate this ASU will have a material impact to our financial position, results of operations or cash flows.Critical Accounting Policies and EstimatesThe discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have beenprepared in accordance with GAAP. These financial statements require us to make estimates and judgments that affect our reported assets and liabilities,revenues and expenses, and other financial information. Actual results may differ materially from these estimates under different assumptions and conditions.In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.We believe the following represent our critical accounting policies and estimates used in the preparation of our financial statements.Revenue RecognitionOur revenue is generated from the sales of our diagnostic imaging agents to wholesalers, distributors, and radiopharmacies and directly to hospitals andclinics. We recognize revenue when evidence of an arrangement 78Table of Contentsexists, title has passed, substantially all the risks and rewards of ownership have transferred to the customer, the selling price is fixed and determinable andcollectability is reasonably assured. For transactions for which revenue recognition criteria have not yet been met, the respective amounts are recorded asdeferred revenue until that point in time when criteria are met and revenue can be recognized. Revenue is recognized net of reserves, which consist ofallowances for returns and sales rebates. The estimates of these allowances are based on historical sales volumes and mix and require assumptions andjudgments to be made in order to make those estimates. In the event that the sales mix is different from our estimates, we may be required to pay higher orlower returns and sales rebates than we previously estimated. Any changes to these estimates are recorded in the current period. In 2014, 2013 and 2012, thesechanges 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 the deliveredelement has stand-alone value to the customer. The arrangement’s consideration is then allocated to each separate unit of accounting based on the relativeselling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specificobjective evidence of fair value; (ii) third party evidence of selling price; and (iii) best estimate of selling price. The best estimate of selling price reflects ourbest estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. The consideration allocated to each unit ofaccounting is then recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables.Supply or service transactions may involve the charge of a nonrefundable initial fee with subsequent periodic payments for future products or services. Theup-front fees, even if nonrefundable, are earned (and revenue is recognized) as the products and/or services are delivered and performed over the term of thearrangement.InventoryInventories 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 title to the product. Any commitment for product ordered but not yet received is included as purchasecommitments in our contractual obligations table. We assess the recoverability of inventory to determine whether adjustments for impairment are required.Inventory that is in excess of future requirements is written down to its estimated net realizable value-based upon estimates of forecasted demand for ourproducts. The estimates of demand require assumptions to be made of future operating performance and customer demand. If actual demand is less than whathas been forecasted by management, additional inventory write downs may be required.Inventory costs associated with product that has not yet received regulatory approval are capitalized if we believe there is probable future commercialuse of the product and future economic benefit of the asset. If future commercial use of the product is not probable, then inventory costs associated with thatproduct are expensed during the period the costs are incurred. For the year ended December 31, 2014, the Company expensed $1.9 million of such productcosts in cost of goods sold relating to Neurolite that was manufactured by JHS. At December 31, 2014 and 2013, the Company had no capitalized inventoriesassociated with product that did not have regulatory approval.Goodwill, Intangibles and Long-Lived AssetsGoodwill is not amortized, but is instead tested for impairment at least annually and whenever events or circumstances indicate that it is more likelythan not that it may be impaired. We have elected to perform the annual test of goodwill impairment as of October 31 of each year.In performing tests for goodwill impairment, we are first permitted to perform a qualitative assessment about the likelihood of the carrying value of areporting unit exceeding its fair value. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amountbased on the qualitative assessment, we are required to perform the two-step goodwill impairment test described below to identify the 79Table of Contentspotential goodwill impairment and measure the amount of the goodwill impairment loss, if any, to be recognized for that reporting unit. However, if weconclude otherwise based on the qualitative assessment, the two-step goodwill impairment test is not required. The option to perform the qualitativeassessment is not an accounting policy election and can be utilized at our discretion. Further, the qualitative assessment need not be applied to all reportingunits in a given goodwill impairment test. For an individual reporting unit, if we elect not to perform the qualitative assessment, or if the qualitativeassessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we must perform the two-stepgoodwill impairment test for the reporting unit. If the implied fair value of goodwill is less than the carrying value, then an impairment charge would berecorded.In performing the annual goodwill impairment test, we bypassed the option to perform a qualitative assessment and proceeded directly to performingthe first step of the two-step goodwill impairment test. We completed our required annual impairment test for goodwill in the fourth quarter of 2014, 2013and 2012 and determined that at each of those periods the carrying amount of goodwill was not impaired. In each year, our fair value was substantially inexcess of our carrying value.During the first quarter of 2013, the strategic shift in how we intend to fund our R&D programs significantly altered the expected future costs andrevenues associated with our agents in development. Accordingly, this action was deemed to be a triggering event for an evaluation of the recoverability ofour goodwill as of March 31, 2013. We performed an interim impairment test and determined that there was no impairment of goodwill as of March 31, 2013.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-termfinancial projections and are discounted using a risk adjusted rate of return, which is determined using estimates of market participant risk-adjusted weightedaverage costs of capital and reflects the risks associated with achieving future cash flows. The market approach is calculated using the guideline companymethod, 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 marketprice for our reporting units or the company as a whole, therefore, a combination of the two methods is utilized to derive the fair value of the business. Weevaluate and weigh the results of these approaches as well as ensure we understand the basis of the results of these two methodologies. We believe the use ofthese two methodologies ensures a consistent and supportable method of determining our fair value that is consistent with the objective of measuring fairvalue. If the fair value were to decline, then we may be required to incur material charges relating to the impairment 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 asset orgroup 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 to futureundiscounted net cash flows expected to be generated by the asset. If those assets are considered to be impaired, the impairment equals the amount by whichthe carrying amount of the assets exceeds the fair value of the assets. Any impairments are recorded as permanent reductions in the carrying amount of theassets. Long-lived assets, other than goodwill and other intangible assets, that are held for sale are recorded at the lower of the carrying value or the fairmarket value less the estimated cost to sell.In the first quarter of 2012, we reviewed the estimated useful life of our Cardiolite trademark as a result of a triggering event. Utilizing the most recentforecasted revenue data, we revised the estimate of the remaining useful life of the Cardiolite trademark to five years. We continue to monitor therecoverability of our branded Cardiolite trademark intangible asset due to the ongoing generic competition based on actual results and existing estimates offuture undiscounted cash flows associated with the branded Cardiolite product. As of December 31, 2013, we conducted, using our revised sales forecast, animpairment analysis and concluded that the estimate of future undiscounted cash flows associated with the Cardiolite trademark intangible did not exceedthe carrying 80Table of Contentsamount of the asset totaling $19.2 million and therefore, the asset has been written down to its fair value. Fair value was calculated by utilizing Level 3inputs in the relief from royalty method, an income-based approach. As a result of this analysis, we recorded an impairment charge of $15.4 million to adjustthe carrying value to its fair value of $3.8 million. This expense was recorded within cost of goods sold in the accompanying consolidated statement ofcomprehensive loss in the fourth quarter of 2013.In the third quarter of 2013, we were in negotiations with a new distributor for the sale of certain products within certain international markets. Thisagreement was signed in October 2013 and as a result we did not renew the agreements with our former distributors in these international markets. Wedetermined the customer relationship intangible related to these former distributors was no longer recoverable and recorded an impairment charge of $1.0million in the third quarter of 2013. In the fourth quarter of 2013, we updated our strategic plan to reflect the non- renewal of these agreements and theuncertainty in the timing of product availability in this region. As a result, we reviewed the recoverability of certain of our customer relationship intangibleassets in the International segment that were impacted by our revised strategic plan. We conducted an impairment analysis and concluded that the estimate offuture undiscounted cash flows associated with the customer relationship intangible asset did not exceed the carrying amount of the asset and therefore, theasset would need to be written down to its fair value. In order to calculate the fair value of the acquired customer relationship intangible assets, we utilizedLevel 3 inputs to estimate the future discounted cash flows associated with remaining customers and as a result of this analysis, recorded an impairmentcharge of $0.7 million in the fourth quarter of 2013. These impairment charges were recorded within cost of goods sold in the accompanying consolidatedstatement of comprehensive loss.During the third quarter of 2013, we committed to a plan to sell certain of our excess land in the U.S. segment, which had a carrying value of $7.5million. This event qualified for held for sale accounting and the excess land was written down to its fair value, less estimated costs to sell. The fair value wasestimated utilizing Level 3 inputs and using a market approach, based on available data for transactions in the region, discussions with real estate brokers andthe asking price of comparable properties in its principal market. This resulted in a loss of $6.4 million, which is included within operating loss as impairmentof land in the accompanying consolidated statement of comprehensive loss. During the fourth quarter of 2013, we sold the excess land for net proceeds of$1.1 million.Fixed assets dedicated to R&D activities, which were impacted by the March 2013 R&D strategic shift, have a carrying value of $4.5 million as ofDecember 31, 2014. We believe these fixed assets will be utilized for either internally funded ongoing R&D activities or R&D activities funded by a strategicpartner. If we are not successful in finding a strategic partner, and there are no alternative uses for those fixed assets, they could be subject to impairment inthe future.We also tested certain long-lived assets utilized in the manufacturing of certain products in the United States for recoverability as of December 31,2013 due to a change in our contract to manufacture Quadramet. The analysis indicated that there was no impairment as of December 31, 2013. We alsoevaluated the remaining useful lives of long-lived assets that were tested for recoverability at December 31, 2013 and determined no revisions were requiredto the remaining periods of depreciation.In the fourth quarter of 2014, we reviewed certain long-lived and intangible assets, associated with U.S. operations, for recoverability as a result of theexpiration of an agreement with a customer. The analysis indicated that there was no impairment as of December 31, 2014. We also evaluated the remaininguseful lives of the long-lived and intangible assets that were tested for recoverability at December 31, 2014 and determined no revisions were required to theremaining periods of depreciation and amortization.Intangible assets, consisting of patents, trademarks and customer relationships related to our products are amortized in a method equivalent to theestimated utilization of the economic benefit of the asset. Trademarks and patents are amortized on a straight-line basis, and customer relationships areamortized on an accelerated basis. 81Table of ContentsAccounting for Stock-Based CompensationOur employees are eligible to receive awards from our 2013 Equity Plan. Our stock-based compensation cost is measured at the grant date based on thefair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period, and includes an estimateof the awards that will be forfeited. We use the Black Scholes valuation model for estimating the fair value on the date of grant of stock options. The fairvalue of stock option awards is affected by the valuation assumptions, including the volatility of market participants, expected term of the option, risk-freeinterest rate and expected dividends as well as the estimated fair value of our common stock. The fair value of our common stock is determined quarterly andeach award is approved by our Board of Directors at the fair value in effect as of such award date. Any material change to the assumptions used in estimatingthe fair value of the options could have a material impact on our results of operations. When a contingent cash settlement of vested options becomesprobable, we reclassify the vested awards to a liability and account for any incremental compensation cost in the period in which the settlement becomesprobable.Income TaxesThe provision for income taxes has been determined using the asset and liability approach of accounting for income taxes. The provision for incometaxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differencesbetween the financial and tax bases of our assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates thatapply to taxable income in effect for the years in which those tax attributes are expected to be recovered or paid, and are adjusted for changes in tax rates andtax 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. The assessment ofwhether or not a valuation allowance is required involves the weighing of both positive and negative evidence concerning both historical and prospectiveinformation with greater weight given to evidence that is objectively verifiable. A history of recent losses is negative evidence that is difficult to overcomewith positive evidence. In evaluating prospective information there are four sources of taxable income: reversals of taxable temporary differences, items thatcan be carried back to prior tax years (such as net operating losses), pre-tax income and tax planning strategies. Any tax planning strategies that areconsidered must be prudent and feasible, and would only be undertaken in order to avoid losing an operating loss carryforward. Adjustments to the deferredtax valuation allowances are made in the period when those assessments are made.We account for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized inthe financial statements are recorded as adjustments to income taxes payable or receivable, or adjustments to deferred taxes, or both. We provide disclosure atthe end of each annual reporting period on a tabular reconciliation of unrecognized tax benefits. We classify interest and penalties within the provision forincome taxes.We have a tax indemnification agreement with BMS related to certain contingent tax obligations arising prior to the acquisition of the business fromBMS. The tax obligations are recognized in liabilities and the tax indemnification receivable is recognized within other noncurrent assets. The changes inthe tax indemnification asset are recognized within other income, net in the statement of comprehensive loss, 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 earnings related tothese liabilities and no net cash outflows.The calculation of our tax liabilities involves certain estimates, assumptions and the application of complex tax regulations in numerous jurisdictionsworldwide. Any material change in our estimates or assumptions, or the tax regulations, may have a material impact on our results of operations. 82Table of ContentsItem 7A.Quantitative and Qualitative Disclosures About Market RiskQuantitative and Qualitative Disclosures About Market RiskWe 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 RiskWe are subject to interest rate risk in connection with our revolving credit facility, which is variable rate indebtedness. Interest rate changes couldincrease the amount of our interest payments and thus negatively impact our future earnings and cash flows. As of December 31, 2014, there was $8.0 millionoutstanding including interest under our revolving credit facility and an $8.8 million unfunded Standby Letter of Credit, which reduced availability to $33.2million on our revolving credit facility. Any increase in the interest rate under our revolving credit facility may have a negative impact on our future earningsto the extent we have outstanding borrowings under our revolving credit facility. The effect of a 100 basis points adverse change in market interest rates onour interest expense for the year ended December 31, 2014, would be approximately $96,000. Historically, we have not used derivative financial instrumentsor other financial instruments to hedge such economic exposures.Foreign Currency RiskWe face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with third partiesthat are denominated in currencies other than ours, or that subsidiary’s, functional currency. Intercompany transactions between entities that use differentfunctional currencies also expose us to foreign currency risk.During years ended December 31, 2014, 2013 and 2012, the net impact of foreign currency changes on transactions was a loss of $279,000, $349,000and $579,000, respectively. Historically, we have not used derivative financial instruments or other financial instruments to hedge these economic exposures.Gross margins for our products that are manufactured in the United States and are sold in currencies other than the U.S. Dollar are also affected byforeign currency exchange rate movements. Our gross margin on revenues was 41.6%, 27.3% and 26.1% during the years ended December 31, 2014, 2013and 2012, respectively. If the U.S. Dollar had been stronger by 1%, 5% or 10%, compared to the actual rates during 2014, we estimate our gross margin onrevenues would have increased by 0.1%, 0.3% and 0.6%, respectively. If the U.S. Dollar had been stronger by 1%, 5% or 10%, compared to the actual ratesduring 2013, we estimate our gross margin on revenues would have increased by 0.0%, 0.2% and 0.4%, respectively. If the U.S. Dollar had been stronger by1%, 5% or 10%, compared to the actual rates during 2012, we estimate our gross margin on revenues would have increased by 0.0%, 0.2% and 0.3%,respectively.In addition, a portion of our earnings is generated by our foreign subsidiaries, whose functional currencies are other than the U.S. Dollar. Our earningscould be materially impacted by movements in foreign currency exchange rates upon the translation of the earnings of those subsidiaries into the U.S. Dollar.The Canadian Dollar presents the primary currency risk on our earnings.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 financial resultsof our foreign subsidiaries, our revenues and net income for the year ended December 31, 2014 would have been impacted by approximately the followingamounts: Increase in U.S. Dollar to Applicable ForeignCurrency Exchange Rate ApproximateChange inRevenues ApproximateChange inNet Income (dollars in thousands) 1% $(433) $52 5% (2,167) 259 10% (4,334) 517 83Table of ContentsIf the U.S. Dollar had been uniformly stronger by 1%, 5% or 10%, compared to the actual average exchange rates used to translate the financial resultsof our foreign subsidiaries, our revenues and net income for the year ended December 31, 2013 would have been impacted by approximately the followingamounts: Increase in U.S. Dollar to Applicable ForeignCurrency Exchange Rate ApproximateChange inRevenues ApproximateChange inNet Income (dollars in thousands) 1% $(487) $38 5% (2,436) 191 10% (4,871) 382 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 financial resultsof our foreign subsidiaries, our revenues and net income for the year ended December 31, 2012 would have been impacted by approximately the followingamounts: Increase in U.S. Dollar to Applicable ForeignCurrency Exchange Rate ApproximateChange inRevenues ApproximateChange inNet Income (dollars in thousands) 1% $(519) $3 5% (2,593) 17 10% (5,187) 34 84Table of ContentsItem 8. Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholder ofLantheus MI Intermediate, Inc.North Billerica, MassachusettsWe have audited the accompanying consolidated balance sheets of Lantheus MI Intermediate, Inc. and subsidiaries (the “Company”) as ofDecember 31, 2014 and 2013, and the related consolidated statements of comprehensive loss, stockholder’s deficit, and cash flows for each of the three yearsin the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion 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 included considerationof internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lantheus MI Intermediate, Inc.and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2014, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLPBoston, MassachusettsMarch 4, 2015 85Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesConsolidated Balance Sheets (in thousands except share data) December 31,2014 December 31,2013 Assets Current assets Cash and cash equivalents $17,817 $16,669 Accounts receivable, net 41,540 38,910 Inventory 15,582 18,310 Income tax receivable 247 325 Deferred tax assets 256 18 Other current assets 3,739 3,087 Total current assets 79,181 77,319 Property, plant and equipment, net 96,014 97,653 Capitalized software development costs, net 2,421 1,470 Intangibles, net 27,191 34,998 Goodwill 15,714 15,714 Deferred financing costs 7,349 9,639 Deferred tax assets 328 15 Other long-term assets 19,318 22,577 Total assets$247,516 $259,385 Liabilities and Stockholder’s DeficitCurrent liabilitiesLine of credit 8,000 8,000 Accounts payable 15,665 18,103 Accrued expenses and other liabilities 24,579 25,492 Deferred tax liability 152 57 Deferred revenue 132 3,979 Total current liabilities 48,528 55,631 Asset retirement obligations 7,435 6,385 Long-term debt, net 399,280 399,037 Deferred tax liability 247 12 Other long-term liabilities 32,995 35,408 Total liabilities 488,485 496,473 Commitments and contingencies (see Notes 14 and 16)Stockholder’s deficitCommon stock ($0.001 par value, 10,000 shares authorized; 1 share issued and outstanding) — — Due from parent (3,766) (1,259) Additional paid-in capital 3,934 2,903 Accumulated deficit (239,507) (238,338) Accumulated other comprehensive loss (1,630) (394) Total stockholder’s deficit (240,969) (237,088) Total liabilities and stockholder’s deficit$247,516 $259,385 See notes to consolidated financial statements. 86Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesConsolidated Statements of Comprehensive Loss Year Ended December 31, (in thousands) 2014 2013 2012 Revenues $301,600 $283,672 $288,105 Cost of goods sold 176,081 206,311 211,049 Loss on firm purchase commitment — — 1,859 Total cost of goods sold 176,081 206,311 212,908 Gross profit 125,519 77,361 75,197 Operating expensesSales and marketing expenses 35,116 35,227 37,437 General and administrative expenses 34,921 33,159 32,520 Research and development expenses 13,673 30,459 40,604 Proceeds from manufacturer — (8,876) (34,614) Impairment on land — 6,406 — Total operating expenses 83,710 96,375 75,947 Operating income (loss) 41,809 (19,014) (750) Interest expense (42,288) (42,915) (42,014) Interest income 27 104 252 Other income (expense), net 478 1,161 (44) Income (loss) before income taxes 26 (60,664) (42,556) Provision (benefit) for income taxes 1,195 1,014 (555) Net loss (1,169) (61,678) (42,001) Foreign currency translation (1,236) (1,729) 964 Total comprehensive loss$(2,405) $(63,407) $(41,037) See notes to consolidated financial statements. 87Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesConsolidated Statements of Stockholder’s Deficit Common Stock Due fromParent AdditionalPaid-InCapital AccumulatedDeficit AccumulatedOtherComprehensiveIncome (Loss) TotalStockholder’sDeficit (in thousands, except share data) Shares Amount Balance at January 1, 2012 1 $— $— $1,085 $(134,659) $371 $(133,203) Net loss — — — — (42,001) — (42,001) Due from parent (see Note 17) — — (1,353) — — — (1,353) Foreign currency translation — — — — — 964 964 Stock-based compensation — — — 1,240 — — 1,240 Balance at December 31, 2012 1 — (1,353) 2,325 (176,660) 1,335 (174,353) Net loss — — — — (61,678) — (61,678) Payments from parent — — 94 — — — 94 Foreign currency translation — — — — — (1,729) (1,729) Stock-based compensation — — — 578 — — 578 Balance at December 31, 2013 1 — (1,259) 2,903 (238,338) (394) (237,088) Net loss — — — — (1,169) — (1,169) Increase in amounts due from parent — — (2,507) — — — (2,507) Foreign currency translation — — — — — (1,236) (1,236) Stock-based compensation — — — 1,031 — — 1,031 Balance at December 31, 2014 1 $— $(3,766) $3,934 $(239,507) $(1,630) $(240,969) See notes to consolidated financial statements. 88Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesConsolidated Statements of Cash Flows Year ended December 31, (in thousands) 2014 2013 2012 Cash flow from operating activities Net loss $(1,169) $(61,678) $(42,001) Adjustments to reconcile net loss to cash flow from operating activities Depreciation 9,901 9,336 9,722 Amortization 8,350 15,819 17,680 Impairment of land — 6,406 — Impairment of intangible assets — 17,175 — Amortization of debt related costs 2,708 2,600 2,403 Write-off of deferred financing costs — 598 — Provision for bad debt 303 63 (117) Provision for excess and obsolete inventory 1,593 4,854 12,809 Stock-based compensation 1,031 578 1,240 Accretion of asset retirement obligations 773 628 553 Loss on firm purchase commitment — — 1,859 Other (215) (237) (143) Long-term income tax receivable 2,719 (566) 299 Long-term income tax payable and other long-term liabilities (2,560) 187 139 Increase (decrease) in cash from operating assets and liabilities Accounts receivable, net (3,563) 2,627 (1,442) Prepaid expenses and other current assets (882) 1,043 1,304 Inventory 1,500 (4,741) (6,903) Deferred revenue (3,881) (4,874) 5,349 Accounts payable (4,047) (1,147) (2,204) Income tax payable 68 410 (2,217) Accrued expenses and other liabilities (1,056) (4,759) 2,193 Cash provided by (used in) operating activities 11,573 (15,678) 523 Cash flows from investing activitiesCapital expenditures (8,137) (5,010) (7,920) Proceeds from sale of property, plant and equipment 227 1,527 — Redemption (purchase) of certificate of deposit 228 — (225) Cash used in investing activities (7,682) (3,483) (8,145) Cash flows from financing activitiesPayments on note payable (71) (1,310) (1,530) Deferred financing costs (175) (1,249) (442) Payments from / (to) parent (2,047) 94 (67) Proceeds from line of credit 5,500 8,000 — Payments on line of credit (5,500) — — Cash (used in) provided by financing activities (2,293) 5,535 (2,039) Effect of foreign exchange rate on cash (450) (1,300) 649 Increase (decrease) in cash and cash equivalents 1,148 (14,926) (9,012) Cash and cash equivalents, beginning of year 16,669 31,595 40,607 Cash and cash equivalents, end of year$17,817 $16,669 $31,595 Supplemental disclosure of cash flow informationInterest paid$39,214 $39,150 $39,020 Income taxes paid, net$508 $118 $1,146 Noncash investing and financing activitiesProperty, plant and equipment included in accounts payable and accrued expenses and other liabilities$2,916 $1,243 $963 Expenses to be paid on behalf of parent included in accounts payable and accrued expenses and other liabilities$460 $— $— See notes to consolidated financial statements. 89Table of ContentsLantheus MI Intermediate, Inc. and subsidiariesNotes to Consolidated Financial StatementsUnless the context otherwise requires, 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 parent ofLantheus Medical Imaging, Inc., references to “Holdings” refer to Lantheus Holdings, Inc. (formerly known as Lantheus MI Holdings, Inc.), the parent ofLantheus Intermediate, and references to “LMI” refer to Lantheus Medical Imaging, Inc., the subsidiary of Lantheus Intermediate. Solely for convenience, werefer to trademarks, service marks and trade names without the TM, SM and ® symbols. Such references are not intended to indicate, in any way, that we willnot assert, to the fullest extent permitted under applicable law, our rights to our trademarks, service marks and trade names.1. Description of BusinessOverviewThe Company develops, manufactures, sells and distributes innovative diagnostic medical imaging agents and products that assist clinicians in thediagnosis of cardiovascular and other diseases. The Company’s commercial products are used by nuclear physicians, cardiologists, radiologists, internalmedicine physicians, technologists and sonographers working in a variety of clinical settings. The Company sells its products to radiopharmacies, hospitals,clinics, group practices, integrated delivery networks, group purchasing organizations and, in certain circumstances, wholesalers. The Company sells itsproducts globally and has operations in the United States, Puerto Rico, Canada and Australia and distribution relationships in Europe, Asia Pacific and LatinAmerica.The Company’s portfolio of 10 commercial products is diversified across a range of imaging modalities. The Company’s imaging agents includemedical radiopharmaceuticals (including technetium generators) and contrast agents, including the following: • DEFINITY is the leading ultrasound contrast imaging agent used by cardiologists and sonographers during cardiac ultrasound, orechocardiography, exams based on revenue and usage. DEFINITY is an injectable agent that, in the United States, is indicated for use in patientswith suboptimal echocardiograms to assist in the visualization of the left ventricle, the main pumping chamber of the heart. The use ofDEFINITY in echocardiography allows physicians to significantly improve their assessment of the function of the left ventricle. • TechneLite is a self-contained system, or generator, of technetium (Tc99m), a radioisotope with a six hour half-life, used by radiopharmacies toprepare various nuclear imaging agents. • Xenon Xe 133 Gas is a radiopharmaceutical gas that is inhaled and used to assess pulmonary function and also to image blood flow. • Cardiolite is an injectable, technetium-labeled imaging agent, also known by its generic name sestamibi, used with Single Photon EmissionComputed Tomography, or SPECT, technology in myocardial perfusion imaging, or MPI, procedures that assess blood flow distribution to theheart. • Neurolite is an injectable, technetium-labeled imaging agent used with SPECT technology to identify the area within the brain where blood flowhas been blocked or reduced due to stroke.In the United States, the Company sells DEFINITY through its sales team that calls on healthcare providers in the echocardiography space, as well asgroup purchasing organizations and integrated delivery networks. The Company’s radiopharmaceutical products are primarily distributed throughapproximately 350 radiopharmacies owned or controlled by third parties. In Canada, Puerto Rico and Australia, the Company owns eight 90Table of Contentsradiopharmacies and sells its own radiopharmaceuticals, as well as others, directly to end users. In Europe, Asia Pacific and Latin America, the Companyutilizes distributor relationships to market, sell and distribute its products.2. Summary of Significant Accounting PoliciesBasis of Consolidation and PresentationThe financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United Statesof America, or U.S. GAAP. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompanyaccounts and transactions have been eliminated in consolidation.The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge ofliabilities in the normal course of business. The Company incurred a net loss of $1.2 million during the year ended December 31, 2014 and had anaccumulated deficit of $239.5 million at December 31, 2014.As of December 31, 2014, the Company had $408.0 million of total principal indebtedness consisting of $400.0 million of senior notes, which matureon May 15, 2017, and $8.0 million outstanding under its revolving credit facility. The Company is obligated to make scheduled interest payments of $39.0million per year on the senior notes.The Company experienced operating losses, resulting from supply shortages beginning in the third quarter of 2011 through the third quarter of 2013 inconnection with the manufacture of DEFINITY, Cardiolite and Neurolite at Ben Venue Laboratories, Inc. in Bedford, Ohio. As of November 2013, BVLceased manufacturing any product for the Company. During 2012, the Company commenced a comprehensive manufacturing diversification strategy andcurrently relies on Jubilant HollisterStier, or JHS, as its sole source manufacturer of DEFINITY, Neurolite and evacuation vials for TechneLite. The Companyhas additional ongoing technology transfer activities at JHS for its Cardiolite product supply, which is currently manufactured by a single manufacturer. Inaddition, the Company has ongoing technology transfer activities at Pharmalucence for the manufacture and supply of DEFINITY, and the Company believesPharmalucence will file for FDA approval to manufacture DEFINITY in 2015.The Company has historically been dependent on key customers and group purchasing organizations for the majority of the sales of its medicalimaging products. Our ability to maintain and profitably renew those contracts and relationships with those key customers and group purchasingorganizations is an important aspect of the Company’s strategy. The Company’s written supply agreements with a major customer relating to TechneLite,Xenon, Neurolite, Cardiolite and certain other products expired in accordance with contract terms on December 31, 2014. Extended discussions with thiscustomer have not yet resulted in new written supply agreements. Consequently, the Company is currently accepting and fulfilling product orders with thiscustomer on a purchase order basis.Until the Company successfully becomes dual sourced for its principal products, the Company is vulnerable to future supply shortages. Disruption inthe financial performance of the Company could also occur if it experiences significant adverse changes in customer mix, broad economic downturns,adverse industry or Company conditions or catastrophic external events. If the Company experiences one or more of these events in the future, it may berequired to implement additional expense reductions, such as a delay or elimination of discretionary spending in all functional areas, as well as scaling backselect operating and strategic initiatives.During 2013 and 2014, the Company has utilized its revolving line of credit as a source of liquidity from time to time. Borrowing capacity under therevolving credit facility, or the Facility, is calculated by reference to a borrowing base consisting of a percentage of certain eligible accounts receivable,inventory and machinery and 91Table of Contentsequipment minus any reserves, or the Borrowing Base. If the Company is not successful in achieving its forecasted operating results, the Company’s accountsreceivable and inventory could be negatively affected, thus reducing the Borrowing Base and limiting the Company’s borrowing capacity. As ofDecember 31, 2014, the aggregate Borrowing Base was approximately $50.0 million, which was reduced by the $8.8 million unfunded Standby Letter ofCredit and the $8.0 million outstanding loan balance, resulting in a net Borrowing Base availability of approximately $33.2 million.Based on the Company’s current operating plans, the Company believes its existing cash and cash equivalents, results of operations and availabilityunder the Facility will be sufficient to continue to fund the Company’s liquidity requirements for at least the next twelve months.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues andexpenses during the reporting period. The more significant estimates reflected in the Company’s consolidated financial statements include certain judgmentsregarding revenue recognition, goodwill, tangible and intangible asset valuation, inventory valuation and potential losses on purchase commitments, assetretirement obligations, income tax liabilities and related indemnification receivable, deferred tax assets and liabilities, accrued expenses and stock-basedcompensation. Actual results could materially differ from those estimates or assumptions.Revenue RecognitionThe Company recognizes revenue when evidence of an arrangement exists, title has passed, the risks and rewards of ownership have transferred to thecustomer, the selling price is fixed and determinable, and collectability is reasonably assured. For transactions for which revenue recognition criteria have notyet been met, the respective amounts are recorded as deferred revenue until such point in time the criteria are met and revenue can be recognized. Revenue isrecognized net of reserves, which consist of allowances for returns and rebates.Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the deliveredelement has stand-alone value to the customer. The arrangement’s consideration is then allocated to each separate unit of accounting based on the relativeselling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specificobjective evidence of fair value; (ii) third-party evidence of selling price; and (iii) best estimate of selling price. The best estimate of selling price reflects theCompany’s best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis. The considerationallocated to each unit of accounting is then recognized as the related goods or services are delivered, limited to the consideration that is not contingent uponfuture deliverables. Supply or service transactions may involve the charge of a nonrefundable initial fee with subsequent periodic payments for futureproducts or services. The up-front fees, even if nonrefundable, are recognized as revenue as the products and/or services are delivered and performed over theterm of the arrangement.On January 1, 2009, LMI executed an amendment to a license and supply agreement (the “Agreement”) with one of its customers, grantingnon-exclusive U.S. license and supply rights to the customer for the period from January 1, 2009 through December 31, 2012. Under the terms of theAgreement, the customer paid LMI $10.0 million in license fees; $8.0 million of which was received upon execution of the Agreement and $2.0 million ofwhich was received in June 2009 upon delivery of a special license as defined in the Agreement. The Company’s product sales under the Agreement arerecognized in the same manner as its normal product sales. The Company recognized the license fees as revenue on a straight-line basis over the term of thefour-year Agreement. The Company recognized $2.5 million in fiscal year 2012 in license fee revenue pursuant to the Agreement. 92Table of ContentsIn February 2012, the Company entered in to the first amendment to the Agreement. The amendment contained obligations for the Company to delivera fixed minimum number of units of the same product at different specified unit prices throughout the 11-month amendment term. The fixed minimumnumber of units shipped at the beginning of the amendment term had a substantially higher unit selling price than the units shipped later in the amendmentterm. The Company determined the total arrangement consideration and allocated this to each unit of product by applying the relative selling price method;therefore, revenue under this arrangement is being recognized at an average selling price as the units are shipped. The Company recognized $5.6 million and$12.8 million in revenue pursuant to the first amendment during the years ended December 31, 2013 and 2012, respectively. There was no deferred revenueattributable to these units at December 31, 2013.On December 27, 2012, the Company entered into the second amendment to the Agreement, which extended the term from December 31, 2012 toDecember 31, 2014 and established new pricing and purchase requirements over the extended term. The second amendment also provided for the supply ofTechneLite generators containing molybdenum-99 sourced from LEU targets. The agreement includes a $3.0 million upfront payment by the customer to theCompany and potential future milestone payments. During 2012, the Company received the $3.0 million upfront payment. During 2013, the Companyreceived an additional $4.0 million upon achievement of the required milestones. At December 31, 2013, $3.6 million is included in deferred revenue as acurrent liability in the accompanying consolidated balance sheets. The Company recognized the upfront payment as revenue on a straight-line basis over theterm of the two year agreement. At December 31, 2014, there was no deferred revenue related to this Agreement.Product ReturnsThe Company provides a reserve for its estimate of sales recorded for which the related products are expected to be returned. The Company does nottypically accept product returns unless an over shipment or non-conforming shipment was provided to the customer, or if the product was defective. TheCompany adjusts its estimate of product returns if it becomes aware of other factors that it believes could significantly impact its expected returns, includingproduct recalls. These factors include its estimate of actual and historical return rates for non-conforming product and open return requests. Historically, theCompany’s estimates of returns have reasonably approximated actual returns.Distributor RelationshipsRevenue for product sold to distributors is recognized at shipment, unless revenue recognition criteria have not been met. In those instances wherecollectability cannot be determined or the selling price cannot be reasonably estimated until the distributor has sold through the goods, the Company defersthat revenue until such time as the goods have been sold through to the end-user customer, or the selling price can be reasonably estimated based on historyof transactions with that distributor.Rebates and AllowancesEstimates for rebates and allowances represent the Company’s estimated obligations under contractual arrangements with third parties. Rebate accrualsand allowances are recorded in the same period the related revenue is recognized, resulting in a reduction to revenue and the establishment of a liabilitywhich is included in accrued expenses in the accompanying consolidated balance sheets. These rebates result from performance-based offers that areprimarily based on attaining contractually specified sales volumes and growth, Medicaid rebate programs for certain products, administration fees of grouppurchasing organizations and certain distributor related commissions. The calculation of the accrual for these rebates and allowances is based on an estimateof the third party’s buying patterns and the resulting applicable contractual rebate or commission rate(s) to be earned over a contractual period.The accrual for rebates and allowances was approximately $2.2 million and $1.7 million at December 31, 2014 and 2013, respectively. Rebate andallowance charges against gross revenues totaled $5.2 million, $4.8 million and $2.8 million for the years ended December 31, 2014, 2013 and 2012,respectively. 93Table of ContentsIncome TaxesThe Company accounts for income taxes using an asset and liability approach. The provision for income taxes represents income taxes paid or payablefor the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of theCompany’s assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effectfor 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 when changes areenacted.Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment ofwhether or not a valuation allowance is required involves the weighing of both positive and negative evidence concerning both historical and prospectiveinformation with greater weight given to evidence that is objectively verifiable. A history of recent losses is negative evidence that is difficult to overcomewith positive evidence. In evaluating prospective information there are four sources of taxable income: reversals of taxable temporary differences, items thatcan be carried back to prior tax years (such as net operating losses), pre-tax income, and tax planning strategies. Any tax planning strategies that areconsidered must be prudent and feasible, and would only be undertaken in order to avoid losing an operating loss carryforward. Adjustments to the deferredtax valuation allowances are made in the period when those assessments are made.The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return. Differences between tax positions taken in a tax return and amounts recognized inthe financial statements are recorded as adjustments to other long-term assets and liabilities, or adjustments to deferred taxes, or both. The Company providesdisclosure at the end of each annual reporting period on a tabular reconciliation of unrecognized tax benefits. The Company classifies interest and penaltieswithin the provision for income taxes.Cash and Cash EquivalentsCash and cash equivalents include savings deposits, certificates of deposit and money market funds that have original maturities of three months orless when purchased.Accounts ReceivableAccounts 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, 2014 and 2013, the Company had allowances for doubtful accounts of approximately $0.6 million and $0.3 million, respectively.Also included in accounts receivable are miscellaneous receivables of approximately $2.0 million and $1.9 million as of December 31, 2014 and 2013,respectively. 94Table of ContentsConcentration of Risks and Limited SuppliersFinancial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. TheCompany periodically reviews its accounts receivable for collectability and provides for an allowance for doubtful accounts to the extent that amounts arenot expected to be collected. The Company sells primarily to large national distributors, which in turn, may resell the Company’s products. There were twocustomers that represented greater than 10% of the total net accounts receivable balance and revenue during the year ended December 31, 2014, the majorityof which is included in the U.S. segment. AccountsReceivable asof December 31, Revenue for the yearended December 31, 2014 2013 2014 2013 2012 Company A 16.5% 16.7% 18.0% 18.8% 27.4% Company B 13.4% 13.2% 11.1% 10.2% 8.4% Company C 9.8% 7.2% 8.8% 9.8% 11.5% 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. FromMay 2009 until August 2010, Nordion, the Company’s largest supplier of Moly, a key raw material in the Company’s TechneLite product, was affected by anuclear reactor shutdown. The Company was not fully able to replace all of the quantity of supply it previously received from Nordion, which had a negativeimpact on the Company’s results of operations. As part of the conditions for the relicensing of the NRU reactor, the Canadian government has asked AtomicEnergy of Canada Limited, or AECL, to shut down the reactor for at least four weeks at least once a year for inspection and maintenance. The scheduled 2012shutdown period ran from mid-April 2012 until mid-May 2012, and during such period, some of LMI’s customers diverted a small amount of business toLMI’s competitor, which correspondingly reduced our aggregate orders during the shutdown period. With this diversion, LMI was able to fulfill all customerdemand for Moly from other suppliers during the shutdown period. During 2012, the Company executed amendments to agreements with Nordion and NTP,the Company’s Moly suppliers, which extended the contract terms of those agreements to December 31, 2015 and December 31, 2017, respectively. Inaddition, because Xenon is a by-product of the Moly production process and is currently captured only by Nordion, the Company is currently reliant onNordion as the sole supplier of Xenon to meet customer demand. In March 2013, the Company entered into an agreement with Institute for Radioelements(“IRE”) who had previously been supplying the Company with Moly under the previous agreement with NTP and this agreement expires on December 31,2017.Historically, the Company has relied on BVL as its sole manufacturer of DEFINITY and Neurolite and one of two manufacturers of its Cardioliteproduct supply. Following extended operational and regulatory challenges at BVL’s Bedford, Ohio facility, as of November 15, 2013, BVL ceasedmanufacturing for the Company any DEFINITY, Cardiolite or Neurolite.Following extensive technology transfer activities, the Company currently relies on JHS as its sole source manufacturer of DEFINITY, Neurolite andevacuation vials for TechneLite. The Company has additional ongoing technology transfer activities at JHS for its Cardiolite product supply. In themeantime, the Company has no other currently active supplier of DEFINITY, Neurolite, and its Cardiolite product supply is manufactured by a singlemanufacturer. 95Table of ContentsBased on current projections, the Company believes that it will have sufficient supply of DEFINITY and Neurolite from JHS to meet expected demandand sufficient Cardiolite product supply from its current supplier to meet expected demand. Currently, the regulatory authorities in certain countries prohibitthe Company from marketing products previously manufactured by BVL, and JHS has not yet obtained approval of such regulatory authorities that wouldpermit the Company to market certain products manufactured by JHS. Accordingly, until such regulatory approvals have been obtained, the Company willnot be able to sell and distribute those products in the relevant markets.The Company is also currently working to secure additional alternative suppliers for its key products as part of its ongoing supply chain diversificationstrategy. On November 12, 2013, the Company entered into a Manufacturing and Supply Agreement with Pharmalucence to manufacture and supplyDEFINITY. However, the Company is uncertain on the timing in which the Pharmalucence arrangement or any other arrangements could provide meaningfulquantities of product. The Company believes Pharmalucence will file for FDA approval to manufacture DEFINITY in 2015.The following table sets forth revenues for the Company’s products that represented greater than 10% of total revenue for the years endedDecember 31, 2014, 2013 and 2012. Year EndedDecember 31, 2014 2013 2012 DEFINITY 31.8% 27.5% 17.9% TechneLite 31.0% 32.5% 39.7% Xenon 12.1% 11.3% 10.4% Cardiolite 6.2% 9.2% 12.1% InventoryInventory includes material, direct labor and related manufacturing overhead, and is stated at the lower of cost or market on a first-in, first-out basis.The Company does have consignment arrangements with certain customers where the Company retains title and the risk of ownership of the inventory, whichis 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. Inventory thatis in excess of future requirements is written down to its estimated net realizable value based upon forecasted demand for its products. If actual demand is lessfavorable than what has been forecasted by management, additional inventory write-downs may be required.Inventory costs associated with product that has not yet received regulatory approval are capitalized if the Company believes there is probable futurecommercial use of the product and future economic benefits of the asset. If future commercial use of the product is not probable, then inventory costsassociated with such product are expensed during the period the costs are incurred. For the year ended December 31, 2014, the Company expensed$1.9 million of such product costs in cost of goods sold relating to Neurolite that was manufactured by JHS. At December 31, 2014 and 2013, the Companyhad no capitalized inventories associated with product that did not have regulatory approval. 96Table of ContentsProperty, Plant and EquipmentProperty, 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 computed on astraight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are asfollows: Buildings50 yearsLand improvements15 - 40 yearsMachinery and equipment3 - 20 yearsFurniture and fixtures15 yearsLeasehold improvementsLesser of lease term or 15 yearsUpon 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 comprehensiveloss.Capitalized Software Development CostsCertain costs to obtain internal use software for significant systems projects are capitalized and amortized over the estimated useful life of the software,which ranges from 3 to 5 years. Costs to obtain software for projects that are not significant are expensed as incurred. Capitalized software development costs,net of accumulated amortization, were $2.4 million and $1.5 million at December 31, 2014 and 2013, respectively. Approximately $1.7 million and$0.7 million of software development costs were capitalized in the years ended December 31, 2014 and 2013, respectively. Amortization expense related tothe capitalized software was $0.7 million, $1.5 million and $1.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.Goodwill, Intangibles and Long-Lived AssetsGoodwill is not amortized, but is instead tested for impairment at least annually and whenever events or circumstances indicate that it is more likelythan not that they may be impaired. The Company has elected to perform the annual test for goodwill impairment as of October 31 of each year.In performing tests for goodwill impairment, the Company is first permitted to perform a qualitative assessment about the likelihood of the carryingvalue of a reporting unit exceeding its fair value. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than itscarrying amount based on the qualitative assessment, it is required to perform the two-step goodwill impairment test described below to identify the potentialgoodwill impairment and measure the amount of the goodwill impairment loss, if any, to be recognized for that reporting unit. However, if the Companyconcludes otherwise based on the qualitative assessment, the two-step goodwill impairment test is not required. The option to perform the qualitativeassessment is not an accounting policy election and can be utilized at the Company’s discretion. Further, the qualitative assessment need not be applied toall reporting units in a given goodwill impairment test. For an individual reporting unit, if the Company elects not to perform the qualitative assessment, or ifthe qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Companymust perform the two-step goodwill impairment test for the reporting unit. If the implied fair value of goodwill is less than the carrying value, then animpairment charge would be recorded.In performing the annual goodwill impairment test in 2014 and 2013, the Company bypassed the option to perform a qualitative assessment andproceeded directly to performing the first step of the two-step goodwill impairment test. 97Table of ContentsThe Company calculates the fair value of its reporting units using the income approach, which utilizes discounted forecasted future cash flows, and themarket approach 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 the guidelinecompany method, where the Company uses market multiples derived from stock prices of companies engaged in the same or similar lines of business. There isnot a quoted market price for the Company’s reporting units or the company as a whole, therefore, a combination of the two methods is utilized to derive thefair value of the business. The Company evaluated and weighed the results of these approaches as well as ensures it understands the basis of the results ofthese two methodologies. The Company believes the use of these two methodologies ensures a consistent and supportable method of determining its fairvalue that is consistent with the objective of measuring fair value. If the fair value were to decline, then the Company may be required to incur materialcharges relating to the impairment of those assets. The Company completed its required annual impairment test for goodwill in the fourth quarter of 2014,2013 and 2012 and determined that at each of those periods, the Company’s fair value was substantially in excess of its carrying value. Goodwill is notdeductible for tax purposes.During the first quarter of 2013, the strategic shift in how the Company funds its R&D programs significantly altered the expected future costs andrevenues associated with our agents in development. Accordingly, this action was deemed to be a triggering event for an evaluation of the recoverability ofthe Company’s goodwill as of March 31, 2013. The Company performed an interim impairment test and determined that there was no impairment of goodwillas of March 31, 2013.The Company tests intangible and long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value ofan asset or group of assets may not be recoverable. The Company measures the recoverability of assets to be held and used by comparing the carrying amountof the asset to future undiscounted net cash flows expected to be generated by the asset. If those assets are considered to be impaired, the impairment equalsthe amount by which the carrying amount of the assets exceeds the fair value of the assets. Any impairments are recorded as permanent reductions in thecarrying amount of the assets. Long-lived assets, other than goodwill and other intangible assets, that are held for sale are recorded at the lower of the carryingvalue or the fair market value less the estimated cost to sell.In the first quarter of 2012, the Company reviewed the estimated useful life of its Cardiolite trademark as a result of a triggering event. Utilizing themost recent forecasted revenue data, the Company revised the estimate of the remaining useful life of the Cardiolite trademark to five years. The Companymonitors the recoverability of its branded Cardiolite trademark intangible asset due to the ongoing generic competition based on actual results and existingestimates of future undiscounted cash flows associated with the branded Cardiolite product. As of December 31, 2013, the Company conducted, using itsrevised sales forecast, an impairment analysis and concluded that the estimate of future undiscounted cash flows associated with the Cardiolite trademarkintangible did not exceed the carrying amount of the asset totaling $19.2 million and therefore, the asset has been written down to its fair value. Fair valuewas calculated by utilizing Level 3 inputs in the relief-from-royalty method, an income-based approach. As a result of this analysis, the Company recorded animpairment charge of $15.4 million to adjust the carrying value to its fair value of $3.8 million. This expense was recorded within cost of goods sold in theaccompanying consolidated statement of comprehensive loss in the fourth quarter of 2013.In the third quarter of 2013, the Company was in negotiations with a new distributor for the sale of certain products within certain internationalmarkets. This agreement was signed in October 2013 and as a result the Company did not renew the agreements with its former distributors in theseinternational markets. The Company determined the customer relationship intangible related to these former distributors was no longer recoverable andrecorded an impairment charge of $1.0 million in the third quarter of 2013. In the fourth quarter of 2013, the Company updated its strategic plan to reflect thenon-renewal of these agreements and the uncertainty in the timing of product availability in this region. As a result, the Company reviewed the recoverabilityof certain of its 98Table of Contentscustomer relationship intangible assets in the International segment that were impacted by the Company’s revised strategic plan. The Company conducted animpairment analysis and concluded that the estimate of future undiscounted cash flows associated with the customer relationship intangible asset 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 theacquired customer relationship intangible assets, the Company utilized Level 3 inputs to estimate the future discounted cash flows associated with remainingcustomers and as a result of this analysis, recorded an impairment charge of $0.7 million in the fourth quarter of 2013. These impairment charges wererecorded within cost of goods sold in the accompanying consolidated statement of comprehensive loss.During the third quarter of 2013, the Company committed to a plan to sell certain of its excess land in the U.S. segment, which had a carrying value of$7.5 million. This event qualified for held for sale accounting and the excess land was written down to its fair value, less estimated costs to sell. The fair valuewas estimated utilizing Level 3 inputs and using a market approach, based on available data for transactions in the region, discussions with real estate brokersand the asking price of comparable properties in its principal market. This resulted in a loss of $6.4 million, which is included within operating loss asimpairment of land in the accompanying consolidated statement of comprehensive loss. During the fourth quarter of 2013, the Company sold the excess landfor net proceeds of $1.1 million.Fixed assets dedicated to R&D activities, which were impacted by the March 2013 R&D strategic shift, have a carrying value of $4.5 million as ofDecember 31, 2014. The Company believes these fixed assets will be utilized for either internally funded ongoing R&D activities or R&D activities fundedby a strategic partner. If the Company is not successful in finding a strategic partner, and there are no alternative uses for those fixed assets, they could besubject to impairment in the future.The Company also tested certain long-lived assets utilized in the manufacturing of certain products in the U.S. for recoverability as of December 31,2013, due to a change in the Company’s contract to manufacture Quadramet. The analysis indicated that there was no impairment as of December 31, 2013.The Company also evaluated the remaining useful lives of these long-lived assets that were tested for recoverability at December 31, 2013 and determined norevisions were required to the remaining periods of depreciation.In the fourth quarter of 2014, the Company tested certain long-lived and intangible assets, associated with its U.S. operations, for recoverability as aresult of the expiration of an agreement with a customer. The analysis indicated that there was no impairment as of December 31, 2014. The Company alsoevaluated the remaining useful lives of the long-lived and intangible assets that were tested for recoverability at December 31, 2014 and determined norevisions were required to the remaining periods of depreciation and amortization.Intangible assets, consisting of patents, trademarks and customer relationships related to the Company’s products are amortized in a method equivalentto the estimated utilization of the economic benefit of the asset. Trademarks and patents are amortized on a straight-line basis, and customer relationships areamortized on an accelerated basis.Deferred Financing CostsDeferred financing costs are capitalized and amortized to interest expense using the effective interest method. As of December 31, 2014 and 2013, theunamortized deferred financing costs were $7.3 million and $9.6 million, respectively. The expense associated with the amortization of deferred financingcosts was $2.5 million, $2.4 million and $2.2 million for the years ended December 31, 2014, 2013 and 2012, respectively, and was included in interestexpense. In connection with the Facility, the Company wrote off $0.6 million of the existing unamortized deferred financing costs related to the previousfacility, which is included in interest expense in the accompanying consolidated statements of comprehensive loss during the year ended December 31, 2013. 99Table of ContentsContingenciesIn the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, thatcover a wide range of matters, including, among others, product and environmental liability. The Company records accruals for those loss contingencieswhen it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company does not recognize gain contingenciesuntil realized.Fair Value of Financial InstrumentsThe estimated fair values of the Company’s financial instruments, including its cash and cash equivalents, receivables, accounts payable and accruedexpenses approximate the carrying values of these instruments due to their short term nature. Assets measured at fair value on a nonrecurring basis includelong-lived assets held for sale and certain intangible assets. The estimated fair value of the debt, at December 31, 2014, based on Level 2 inputs of recentmarket activity available to the Company was $384.0 million compared to the face value of $400.0 million. At December 31, 2013, the estimated fair valueof the debt based on Level 2 inputs of recent market activity available to the Company was $356.0 million compared to the face value of $400.0 million.Shipping and Handling Revenues and CostsThe Company typically does not charge customers for shipping and handling costs, but any shipping and handling costs charged to customers areincluded in revenues. Shipping and handling costs are included in cost of goods sold and were $19.4 million, $20.5 million and $20.4 million for the yearsended December 31, 2014, 2013 and 2012, respectively.Advertising and Promotion CostsAdvertising and promotion costs are expensed as incurred and totaled $2.8 million, $2.7 million and $3.2 million for the years ended December 31,2014, 2013 and 2012, respectively, and are included in sales and marketing expenses.Research and DevelopmentResearch and development costs are expensed as incurred and relate primarily to the development of new products to add to the Company’s portfolioand costs related to its medical affairs and medical information functions. Nonrefundable advance payments for goods or services that will be used orrendered for future research and development activities are deferred and recognized as an expense as the goods are delivered or the related services areperformed.Foreign CurrencyThe consolidated statements of comprehensive loss of the Company’s foreign subsidiaries are translated into U.S. Dollars using average exchange rates.The net assets of the Company’s foreign subsidiaries are translated into U.S. Dollars using the end of period exchange rates. The impact from translating thenet assets of these subsidiaries at changing rates are recorded in the foreign currency translation adjustment account, which is included in consolidatedaccumulated other comprehensive loss.For the years ended December 31, 2014, 2013 and 2012, losses arising from foreign currency transactions totaled approximately $0.3 million,$0.3 million and $0.6 million, respectively. Transaction gains and losses are reported as a component of other income (expense), net. 100Table of ContentsStock-Based CompensationThe 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 will beforfeited. The Company uses the Black-Scholes valuation model for estimating the fair value of stock options. The fair value of stock option awards isaffected by the valuation assumptions, including the estimated fair value of the Company’s common stock, the expected volatility based on comparablemarket participants, expected term of the option, risk-free interest rate and expected dividends. When a contingent cash settlement of vested options becomesprobable, the Company reclassifies its vested awards to a liability and accounts for any incremental compensation cost in the period in which the settlementbecomes probable.Accumulated Other Comprehensive LossComprehensive loss is comprised of net loss, plus all changes in equity of a business enterprise during a period from transactions and other events andcircumstances from non-owner sources, including any foreign currency translation adjustments. These changes in equity are recorded as adjustments toaccumulated other comprehensive loss in the Company’s consolidated balance sheet. The components of accumulated other comprehensive loss consist offoreign currency translation adjustments.Asset Retirement ObligationsThe Company’s compliance with federal, state, local and foreign environmental laws and regulations may require it to remove or mitigate the effects ofthe disposal or release of chemical substances in jurisdictions where it does business or maintains properties. The Company establishes accruals when thosecosts are legally obligated and 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, 2014 and 2013 were $7.4 million and $6.4 million,respectively.Self Insurance ReservesThe Company’s consolidated balance sheet at both December 31, 2014 and 2013 includes approximately $0.4 million of accrued liabilities associatedwith employee medical costs that are retained by the Company. The Company estimates the required liability of those claims on an undiscounted basis basedupon various assumptions which include, but are not limited to, the Company’s historical loss experience and projected loss development factors. Therequired 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 claims andmust maintain a minimum balance as determined by the plan administrator. The balance of this restricted cash account was approximately $0.1 million and$0.2 million at December 31, 2014 and 2013, respectively, and is included in other current assets.Recent Accounting StandardsIn July 2013, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2013-11, “Presentation of anUnrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” or ASU 2013-11. Theamendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, asimilar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning afterDecember 15, 2013. The amendments did not have a material impact on the Company’s financial position, results of operations or cash flows. 101Table of ContentsIn April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” or ASU 2014-08. The amendments in ASU 2014-08 changethe criteria for reporting discontinued operations while enhancing disclosures in this area. The new guidance requires expanded disclosures aboutdiscontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinuedoperations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does notqualify for discontinued operations reporting. The amendments in the ASU are effective in the first quarter of 2015 for public companies with calendar yearends. Early adoption is permitted. The Company does not anticipate this ASU will have a material impact to the Company’s financial position, results ofoperations or cash flows.In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” or ASU 2014-09. ASU 2014-09 supersedesnearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods orservices are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenuerecognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variableconsideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The amendments in ASUNo. 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Earlyapplication is not permitted. The Company is currently evaluating the impact this ASU will have on the Company’s financial position, results of operationsand cash flows.In June 2014, the FASB issued ASU No. 2014-12, “Compensation—Stock Compensation (Topic 718)” or ASU 2014-12. ASU 2014-12 requires that aperformance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. The amendments inASU 2014-12 are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. TheCompany does not anticipate this ASU will have a material impact to the Company’s financial position, results of operations or cash flows.In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-4): Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern” or ASU 2014-15. ASU 2014-15 to provide guidance on management’sresponsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnotedisclosures. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016. Early adoption is permitted. TheCompany does not anticipate this ASU will have a material impact to the Company’s financial position, results of operations or cash flows.3. Financial Instruments and Fair Value MeasurementsFair 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 at themeasurement date.Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilitiesin markets that are not active, inputs other than quoted prices that 102Table of Contentsare observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observablemarket data by correlation or other means (market corroborated inputs).Level 3—Unobservable inputs that reflect a Company’s estimates about the assumptions that market participants would use in pricing the assetor liability. The Company develops these inputs based on the best information available, including its own data.At December 31, 2014 and 2013, 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 investmentsand reflects these amounts in cash and cash equivalents on the consolidated balance sheet using quoted prices in active markets for identical assets(Level 1).The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31,2014 and 2013: (in thousands) Total fairvalue atDecember 31,2014 Quotedprices inactivemarkets(Level 1) Significantotherobservableinputs(Level 2) Significantunobservableinputs(Level 3) Money market $1,505 $1,505 $— $— Certificates of deposit—restricted 89 — 89 — $1,594 $1,505 $89 $— (in thousands) Total fairvalue atDecember 31,2013 Quotedprices inactivemarkets(Level 1) Significantotherobservableinputs(Level 2) Significantunobservableinputs(Level 3) Money market $1,236 $1,236 $— $— Certificates of deposit—restricted 322 — 322 — $1,558 $1,236 $322 $— At December 31, 2013, the Company had a $0.2 million certificate of deposit for which the Company’s use of such cash was restricted and is includedin the line item “Certificates of deposit—restricted” above. This investment was classified in other current assets on the consolidated balance sheet and wasredeemed during the quarter ended September 30, 2014. The remaining $0.1 million at both December 31, 2014 and 2013, represents a certificate of depositthat is collateral for a long-term lease and is included in other long-term assets on the consolidated balance sheet. Certificates of deposit are classified withinLevel 2 of the fair value hierarchy, as these are not traded on the open market.At December 31, 2014, the Company had total cash and cash equivalents of $17.8 million, which included approximately $1.5 million of moneymarket funds and $16.3 million of cash on-hand. At December 31, 2013, the Company had total cash and cash equivalents of $16.7 million, which includedapproximately $1.2 million of money market funds and $15.5 million of cash on-hand. 103Table of ContentsThe table below presents information about the Company’s assets and liabilities that are measured at fair value on a nonrecurring basis during the yearended December 31, 2013, due to the remeasurement of assets resulting in impairment charges. Year ended December 31, 2013(in thousands) Total fairvalue Quotedprices inactivemarkets(Level 1) Significantotherobservableinputs(Level 2) Significantunobservableinputs(Level 3) Cardiolite trademark $3,800 $— $— $3,800 Customer relationships — — — — Total$3,800 $— $— $3,800 During the third quarter of 2013, the Company recorded an impairment charge of $6.4 million to write down the carrying value of excess land held forsale in the U.S. segment totaling $7.5 million to its fair value, less estimated costs to sell. See Note 6 for further discussion regarding the impairment charge.The fair value of land held for sale was determined using Level 3 inputs and was estimated using a market approach, based on available data for transactionsin the region, discussions with real estate brokers and the asking price of comparable properties in its principal market. Unobservable inputs obtained fromthird parties are adjusted as necessary for the condition and attributes of the specific asset. The land sale was completed in the fourth quarter of 2013.During the third and fourth quarters of 2013, the Company recorded an impairment charge of $1.0 million and $0.7 million, respectively, to write downthe carrying value of a customer relationship intangible asset in the International segment totaling $1.8 million and $0.7 million, respectively, to its fairvalue of zero. See Note 8 for further discussion regarding the impairment charge. The determination of the customer relationship intangible assets impairmentcharge was based on Level 3 measurements under the fair value hierarchy. The Company utilized an income approach to calculate the discounted cash flowsthat would be generated by its remaining customer base. The unobservable inputs utilized by the Company included management’s assumptions regardingfuture revenues and profitability from the remaining customers and a discount rate of 15% as of September 30, 2013 and December 31, 2013, respectively.During the fourth quarter of 2013, the Company recorded an impairment charge of $15.4 million to write down the Cardiolite trademark intangibleasset in the U.S. segment totaling $19.2 million to its fair value of $3.8 million. See Note 8 for further discussion regarding the impairment charge. The fairvalue measurements were determined using a relief-from-royalty method, which incorporates unobservable inputs, thereby classifying the fair valuemeasurements as a Level 3 measurement within the fair value hierarchy. The primary inputs used in the relief-from-royalty method, an income-basedapproach, included estimated prospective cash flows expected to be generated by Cardiolite and an estimated royalty rate that would be used by a marketparticipant. The unobservable inputs utilized by the Company included management’s assumptions regarding future revenues and profitability from thebranded Cardiolite product, a royalty rate of 6%, a discount rate of 15% and a life of 15 years.4. Income TaxesThe components of income (loss) before income taxes for the years ended December 31 were: (in thousands) 2014 2013 2012 United States $4,593 $(58,093) $(43,868) International (4,567) (2,571) 1,312 $26 $(60,664) $(42,556) 104Table of ContentsThe provision (benefit) for income taxes as of December 31 was: (in thousands) 2014 2013 2012 Current Federal $(208) $(782) $(3,508) State 1,285 1,712 2,763 International 325 356 618 1,402 1,286 (127) DeferredFederal (277) — 200 State — — — International 70 (272) (628) (207) (272) (428) $1,195 $1,014 $(555) The Company’s provision (benefit) for income taxes in the years ended December 31, 2014, 2013 and 2012 was different from the amount computedby applying the statutory U.S. Federal income tax rate to (loss) income from operations before income taxes, as a result of the following: (in thousands) 2014 2013 2012 U.S. statutory rate $9 35.0% $(21,224) 35.0% $(14,895) 35.0% Permanent items and foreign tax credits 149 569.4% 292 (0.5)% (1,200) 2.8% Uncertain tax positions 817 3,129.4% 809 (1.3)% 892 (2.1)% Research credits (1,204) (4,608.8)% (1,346) 2.2% — — State and local taxes 234 895.0% (1,780) 3.0% (1,821) 4.3% Impact of rate change on deferred taxes 61 233.2% 31 (0.1)% (974) 2.3% True-up of prior year tax 1,065 4,083.0% (1,422) 2.3% (2,345) 5.5% Foreign tax rate differential 437 1,673.2% 92 (0.2)% (455) 1.1% Valuation allowance 121 464.6% 25,674 (42.3)% 20,243 (47.6)% Tax on repatriation (500) (1,915.4)% (18) 0.0% — — Other 6 23.1% (94) 0.2% — — $1,195 4,581.7% $1,014 (1.7)% $(555) 1.3% The components of deferred income tax assets (liabilities) at December 31 were: (in thousands) 2014 2013 Deferred Tax Assets Federal benefit of state tax liabilities $10,950 $11,541 Reserves, accruals and other 38,285 29,242 Capitalized research and development 26,471 30,057 Capital loss carryforward — 2,309 Amortization of intangibles other than goodwill 36,523 52,665 Net operating loss carryforwards 43,202 31,405 Deferred tax assets 155,431 157,219 Deferred Tax LiabilitiesReserves, accruals and other (642) (500) Customer relationships (6,012) (7,860) Depreciation (95) (360) Deferred tax liability (6,749) (8,720) Less: Valuation allowance (148,497) (148,535) $185 $(36) 105Table of Contents 2014 2013 Recorded in the accompanying consolidated balance sheet as: Current deferred tax assets $256 $18 Current deferred tax liabilities (152) (57) Noncurrent deferred tax assets 328 15 Noncurrent deferred tax liability (247) (12) Net deferred tax liabilities$185 $(36) The Company files separate federal income tax returns for Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. For state tax purposes,the Company files combined tax returns with Lantheus Holdings, Inc. For income tax provision purposes, the Company uses the separate return method incalculating its state tax provision. As of December 31, 2014 and 2013, the Company reflects an amount payable to Lantheus Holdings of $85,000 for the taxbenefit of losses incurred by Lantheus Holdings, which is included in due from parent on the consolidated balance sheets.A reconciliation of the Company’s changes in uncertain tax positions for 2014, 2013 and 2012 is as follows: (in thousands) Beginning balance of uncertain tax positions as of January 1, 2012 $15,378 Additions related to current year tax positions 301 Reductions related to prior year tax positions — Settlements (651) Lapse of statute of limitations (1,122) Balance of uncertain tax positions as of December 31, 2012 13,906 Additions related to current year tax positions 18 Reductions related to prior year tax positions — Settlements (34) Lapse of statute of limitations (763) Balance of uncertain tax positions as of December 31, 2013 13,127 Additions related to current year tax positions — Reductions related to prior year tax positions (8) Settlements (1,434) Lapse of statute of limitations (416) Balance of uncertain tax positions as of December 31, 2014$11,269 As of December 31, 2014 and 2013, the total amount of unrecognized tax benefits was $11.3 million and $13.1 million, respectively, all of whichwould affect the effective tax rate, if recognized. These amounts are primarily associated with domestic state tax issues, such as the allocation of incomeamong various state tax jurisdictions and transfer pricing. Since the Company operates in a number of countries in which it has income tax treaties, it believesthat it is more-likely-than-not that the Company should be able to receive competent authority relief for potential adjustments in those countries. Included inthe Company’s uncertain tax positions for transfer pricing exposures are $0.5 million, which is reflected within other long-term liabilities, and an offset of$0.2 million for expected competent authority relief, which is reflected in other long-term assets. The tabular rollforward reflected above is net of the$0.2 million of competent authority relief as of December 31, 2014. Within the next twelve months, unrecognized tax benefits of $0.2 million may berecognized associated with transfer pricing due to the closing of the statute of limitations.As of December 31, 2014 and 2013, total liabilities for tax obligations and associated interest and penalties were $32.3 million and $34.9 million,respectively, consisting of income tax provisions for uncertain tax benefits 106Table of Contentsof $11.5 million and $14.1 million, interest accruals of $18.6 million and $18.2 million and penalty accruals of $2.2 million and $2.6 million, respectively,which were included in other long-term liabilities on the consolidated balance sheets. Included in the 2014, 2013 and 2012 tax provision is $0.4 million,$1.9 million and $2.6 million, respectively, relating to interest and penalties, net of benefits for reversals of uncertain tax position interest and penaltiesrecognized upon settlements and lapse of statute of limitations.In accordance with the Company’s acquisition of the medical imaging business from Bristol Myers Squibb (“BMS”) in 2008, the Company obtained atax indemnification agreement with BMS related to certain tax obligations arising prior to the acquisition of the Company, for which the Company has theprimary legal obligation. The tax indemnification receivable is recognized within other noncurrent assets. The total noncurrent asset related to theindemnification was $17.8 million and $19.7 million as of December 31, 2014 and 2013, respectively. The changes in the tax indemnification asset arerecognized within other income (expense), net in the consolidated statement of comprehensive loss. In accordance with the Company’s accounting 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 withinthe tax provision. Accordingly, as these reserves change, adjustments are included in the tax provision while the offsetting adjustment is included in otherincome (expense), net. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there is no net effect on earningsrelated to these liabilities and no net cash outflows.During the year ended December 31, 2014 and 2012, BMS, on behalf of the Company, made payments totaling $6.3 million and $0.7 million,respectively, 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, includedwithin other long-term assets, decreased by $2.9 million and $0.7 million, respectively, which represented the release of asset balances associated with pre-acquisition years. There were no payments made on behalf of the Company in 2013.Included in other income (expense), net for the year ended December 31, 2014, is an expense of $1.1 million relating to the reduction in theindemnification receivable from BMS associated with the expiration of statute of limitations and income of $1.9 million relating to the increase in theindemnification receivable for current year interest and penalties.The Company has generated domestic pre-tax losses in two of the past three years. This loss history demonstrates negative evidence concerning theCompany’s ability to utilize its domestic gross deferred tax assets. In order to overcome the presumption of recording a valuation allowance against thedeferred tax assets, the Company must have sufficient positive evidence that it can generate sufficient taxable income to utilize these deferred tax assetswithin the carryover or forecast period. Although the Company has no history of expiring net operating losses or other tax attributes, based on the cumulativedomestic loss incurred over the three-year period ended December 31, 2014, management determined that the net U.S. deferred tax assets are notmore-likely-than-not recoverable. As a result of this analysis, the Company continues to maintain a full valuation allowance primarily against its net U.S.deferred tax assets in the amount of $148.5 million at both December 31, 2014 and 2013. 107Table of ContentsThe following is a reconciliation of the Company’s valuation allowance for the years ending December 31, 2014, 2013, and 2012. (in thousands) Balance at January 1, 2012 $102,692 Charged to provision for income taxes 20,243 Deductions — Balance at December 31, 2012 122,935 Charged to provision for income taxes 25,600 Deductions — Balance at December 31, 2013 148,535 Charged to provision for income taxes 121 Foreign currency (159) Deductions — Balance at December 31, 2014$148,497 The Company’s U.S. income tax returns remain subject to examination for three years. The state income tax returns remain subject to examination forthree to four years depending on the state’s statute of limitations.At December 31, 2014, the Company has federal net operating loss carryovers of $114.0 million, which will begin to expire in 2031. The Company has$2.4 million of federal research credits, which begin to expire in 2029. The Company has foreign tax credits of approximately $4.7 million that will begin toexpire in 2020. The Company has state research credits of $2.8 million, which will expire between 2024 and 2029. The Company has Massachusettsinvestment tax credits of approximately $0.5 million, which have no expiration date.In 2010, the Company was granted a tax holiday from the Commonwealth of Puerto Rico, which expires on January 1, 2024. This grant provides for a4% 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 $0.1 million, $0.3 million and$0.3 million in 2014, 2013 and 2012, respectively.In September 2013, the Internal Revenue Service released final Tangible Property Regulations (the “Final Regulations”). The Final Regulationsprovide guidance on applying Section 263(a) of the Code to amounts paid to acquire, produce or improve tangible property, as well as rules for materials andsupplies (Code Section 162). These regulations contain certain changes from the temporary and proposed tangible property regulations that were issued onDecember 27, 2011. The Final Regulations are generally effective for taxable years beginning on or after January 1, 2014. In addition, taxpayers arepermitted to early adopt the Final Regulations for taxable years beginning on or after January 1, 2012. The Final Regulations did not have a material effecton the Company’s results of operations or financial condition during the year ended December 31, 2014. 108Table of Contents5. InventoryThe 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: (in thousands) December 31,2014 December 31,2013 Raw materials $6,043 $7,063 Work in process 1,788 5,849 Finished goods 7,751 5,398 Inventory 15,582 18,310 Other long-term assets 1,156 1,687 Total$16,738 $19,997 At December 31, 2014 and 2013, inventories reported as other long-term assets included $1.2 million and $1.7 million of raw materials, respectively.The Company’s Ablavar product was commercially launched in January 2010. The revenues for this product through December 31, 2014 have notbeen significant. At December 31, 2014 and 2013, the balances of inventory on-hand reflect approximately $0.9 million and $1.5 million, respectively, offinished products and raw materials related to Ablavar. At December 31, 2013, approximately $0.5 million of Ablavar inventory were included in long-termassets. At December 31, 2014, there was no Ablavar inventory included in long-term assets.The Company entered into an agreement and subsequent amendments with a supplier to provide Active Pharmaceutical Ingredient (“API”) andfinished products for Ablavar under which the Company was required to purchase future minimum quantities. At December 31, 2013, the remaining purchasecommitment under the amended agreement was approximately $1.8 million, of which the Company had accrued a loss of $1.3 million associated with thisfuture purchase commitment. At December 31, 2014, there were no remaining purchase commitments. The Company records the inventory when it takesdelivery, at which time the Company assumes title and risk of loss.In 2013, the Company transitioned the sales and marketing efforts for Ablavar from its direct sales force to the Company’s customer service team.During the fourth quarter of 2013, the Company updated its strategic plan, which had a significant impact on the Ablavar sales forecast. The Companyperformed an inventory reserve analysis using its expected future Ablavar sales and recorded an additional write-down of $1.6 million related to the API thatthe Company would not be able to convert or be able to sell prior to its expiry as of December 31, 2013. In the event that the Company does not meet itsrevised sales expectations for Ablavar or cannot sell the product prior to its expiration, the Company could incur additional inventory write-downs.6. Property, Plant and Equipment, netProperty, plant and equipment consisted of the following at December 31: (in thousands) 2014 2013 Land $14,950 $14,950 Buildings 67,571 65,787 Machinery, equipment and fixtures 65,179 65,026 Construction in progress 9,746 8,029 Accumulated depreciation (61,432) (56,139) Property, plant and equipment, net$96,014 $97,653 109Table of ContentsDepreciation expense related to property, plant and equipment was $9.9 million, $9.3 million and $9.7 million for the years ended December 31, 2014,2013 and 2012, respectively.Included within machinery, equipment and fixtures are spare parts of approximately $2.5 million as of December 31, 2014 and 2013, respectively.Spare parts include replacement parts relating to plant and equipment and are either recognized as an expense when consumed or re- classified andcapitalized as part of the related plant and equipment and depreciated over a time period not exceeding the useful life of the related asset.Long-Lived Assets Held for SaleDuring the third quarter of 2013, the Company committed to a plan to sell certain of its excess land in the U.S. segment, which had a carrying value of$7.5 million. This event qualified for held for sale accounting and the excess land was written down to its fair value, less estimated costs to sell. The fair valuewas estimated utilizing Level 3 inputs and using a market approach, based on available data for transactions in the region, discussions with real estate brokersand the asking price of comparable properties in its principal market. This resulted in a loss of $6.4 million, which is included within operating loss asimpairment of land in the accompanying consolidated statement of comprehensive loss. During the fourth quarter of 2013, the Company sold the excess landfor net proceeds of $1.1 million.Long-Lived Assets to Be Disposed of Other than by SaleIn November 2014, the Company announced its plans to decommission certain long-lived assets associated with its R&D operations in the UnitedStates. The Company expects the decommissioning to begin in the second half of 2015. As a result, the Company revised its estimates of the remaining usefullives of the affected long-lived assets to seven months, which increased depreciation expense by $1.2 million included in R&D expenses in the consolidatedstatement of comprehensive loss during the quarter ended December 31, 2014. At December 31, 2014, the net book value of these assets totaled $7.4 million.7. Asset Retirement ObligationsThe 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, Puerto Ricosites.The Company is required to provide the U.S. Nuclear Regulatory Commission and Massachusetts Department of Public Health financial assurancedemonstrating the Company’s ability to fund the decommissioning of the North Billerica, Massachusetts production facility upon closure, although theCompany does not intend to close the facility. The Company has provided this financial assurance in the form of a $28.2 million surety bond, which itself iscurrently secured by an $8.8 million unfunded Standby Letter of Credit provided to the third party issuer of the bond.The fair value of a liability for asset retirement obligations is recognized in the period in which the liability is incurred. As of December 31, 2014, theliability is measured at the present value of the obligation expected to be incurred, of approximately $26.0 million, and is adjusted in subsequent periods asaccretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets anddepreciated over the asset’s useful life. 110Table of ContentsThe following is a reconciliation of the Company’s asset retirement obligations for the years ended December 31, 2014, 2013 and 2012: (in thousands) Balance at January 1, 2012 $4,868 Capitalization — Net decrease due to changes in estimated future cash flows (5) Accretion expense 553 Balance at December 31, 2012 5,416 Capitalization — Net increase due to changes in estimated future cash flows 341 Accretion expense 628 Balance at December 31, 2013 6,385 Capitalization 277 Accretion expense 773 Balance at December 31, 2014$7,435 The Company revises the asset retirement obligation as information about material changes to the liability becomes known. During the year endedDecember 31, 2013, the Company revised the asset retirement obligation, which resulted in an additional asset capitalization, in the amount of $0.3 million.8. Intangibles, netIntangibles, net consisted of the following: December 31, 2014 (in thousands) Cost Accumulatedamortization Net AmortizationMethod Trademarks $13,540 $5,116 $8,424 Straight-line Customer relationships 105,373 88,931 16,442 Accelerated Other patents 42,780 40,455 2,325 Straight-line $161,693 $134,502 $27,191 December 31, 2013 (in thousands) Cost Accumulatedamortization Net AmortizationMethod Trademarks $13,540 $3,298 $10,242 Straight-line Customer relationships 106,298 84,476 21,822 Accelerated Other patents 42,780 39,846 2,934 Straight-line $162,618 $127,620 $34,998 The Company recorded amortization expense for its intangible assets of $7.6 million, $14.4 million and $16.1 million for the years endedDecember 31, 2014, 2013 and 2012, respectively. 111Table of ContentsExpected future amortization expense related to the intangible assets is as follows (in thousands): Years ended December 31, 2015 $5,997 2016 5,318 2017 3,506 2018 2,780 2019 1,906 2020 and thereafter 7,684 $27,191 Changes in the gross carrying amount of intangible assets for the year ended December 31, 2014 and 2013, were as follows (in thousands): (in thousands) Balance at December 31, 2012 $210,170 Asset impairment (46,592) Effect of currency translation (960) Balance at December 31, 2013 162,618 Effect of currency translation (925) Balance at December 31, 2014$161,693 9. Accrued Expenses and Other LiabilitiesAccrued expenses are comprised of the following at December 31: (in thousands) 2014 2013 Compensation and benefits $11,198 $10,209 Accrued interest 4,994 4,989 Accrued professional fees 1,508 1,361 Research and development services 248 338 Freight, distribution and operations 3,069 3,432 Accrued loss on firm purchase commitment — 1,315 Marketing expense 978 749 Accrued rebates, discounts and chargebacks 2,164 1,739 Other 420 1,360 $24,579 $25,492 As of December 31, 2013, the Company had accrued a contract loss of $1.3 million associated with the portion of the committed purchases of Ablavarproduct from the Company’s supplier that the Company did not believe it would sell prior to expiry. As of December 31, 2014, the accrued contract loss hasbeen reclassified to a reserve against the Ablavar inventory balance, because the Company satisfied the remaining purchase commitments in the first quarterof 2014.10. Financing ArrangementsOn 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 were issuedas additional debt securities under the Indenture pursuant to which LMI previously issued in May 2010 $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 Senior Notes, except that 112Table of Contentsthe New Restricted Notes were subject to a separate registration rights agreement. The New Restricted Notes and the Senior Notes, or together, the Notes, voteas one class under the Indenture. As a result of the issuance of the New Restricted Notes, LMI has $400.0 million in aggregate principal amount of Notesoutstanding. The Notes bear interest at a rate of 9.750% per year, payable on May 15 and November 15 of each year, beginning May 15, 2011 with respect tothe New Restricted Notes. Interest on the Senior Notes accrued from November 15, 2010. The Notes mature on May 15, 2017. The net proceeds of the SeniorNotes were used to repay $77.9 million due under LMI’s then outstanding credit agreement to repay a $75.0 million demand note and to repurchase$90.0 million of the outstanding Series A Preferred Stock of Holdings at the accreted value. The net proceeds of the New Restricted Notes were used to fullyredeem the balance of the then outstanding Series A Preferred Stock of Holdings at the accreted value of $44.0 million, to pay a $106.0 million dividend tothe holders of common stock and to fund dividend equivalent rights granted to holders of Holdings stock options. In conjunction with the issuance of theNew Restricted Notes, LMI also made a cash payment of $3.75 million to the then Holders of the Senior Notes in exchange for their consent to amend theIndenture to modify the restricted payments covenant to provide for additional restricted payment capacity in order to accommodate the dividend payment.The premium of $2.25 million and the consent fee of $3.75 million were capitalized and are being amortized over the term of the Notes as an adjustment tointerest expense. All of the Notes have been registered with the Securities and Exchange Commission.RedemptionLMI 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: Year Percentage 2014 104.875% 2015 102.438% 2016 100.000% 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% of theprincipal 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 those sales inthat business within a specified period of time, prepay certain indebtedness or make an offer to purchase a principal amount of the Notes equal to the excessnet 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 secured creditfacilities, subject to the security interest thereof. LMI’s obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on anunsecured senior basis by Lantheus Intermediate and by one of LMI’s subsidiaries, and the obligations of those guarantors under their guarantees are equal inright of payment to all of their existing and future senior debt.Revolving Line of CreditLMI had a Facility with an original aggregate principal amount not to exceed $42.5 million. On June 24, 2014, the Company executed an amendmentto the Facility, which (i) increased the committed availability for total borrowings under the Facility from $42.5 million to $50.0 million, (ii) set the interestat LIBOR plus 2.00% or the Reference Rate (as defined in the agreement) plus 1.00%, (iii) set the unused line fee at 0.375%, and (iv) further modified certaindefinitions. In connection with the amendment, LMI incurred approximately $0.2 million in fees and expenses during the year ended December 31, 2014,which will be amortized on a straight-line basis over the term of the Facility. 113Table of ContentsThe Facility expires on the earlier of (i) July 3, 2018, or (ii) if the outstanding Notes are not refinanced in full, the date that is 91 days before thematurity thereof, at which time all outstanding borrowings are due and payable.As of December 31, 2014 and 2013, the Company has an unfunded Standby Letter of Credit for up to $8.8 million. The unfunded Standby Letter ofCredit requires an annual fee, payable quarterly, which is set at LIBOR plus a spread of 2.00% and expires on February 5, 2016, which will automaticallyrenew for a one year period at each anniversary date, unless the Company elects not to renew in writing within 60 days prior to that expiration.The Facility is secured by a pledge of substantially all of the assets of each of the Company, LMI and Lantheus Real Estate, including each entity’saccounts receivable, inventory and machinery and equipment, and is guaranteed by each of Lantheus Intermediate and Lantheus Real Estate. Borrowingcapacity is determined by reference to a Borrowing Base, which is based on a percentage of certain eligible accounts receivable, inventory and machineryand equipment minus any reserves. As of December 31, 2014, the aggregate Borrowing Base was approximately $50.0 million, which was reduced by (i) anoutstanding $8.8 million unfunded Standby Letter of Credit and (ii) an $8.0 million outstanding loan balance including interest, resulting in a net BorrowingBase availability of approximately $33.2 million.CovenantsThe Facility is secured by a pledge of substantially all of the assets of each of the Company, LMI and Lantheus Real Estate, including each entity’saccounts receivable, inventory and machinery and equipment, and is guaranteed by each of Lantheus Intermediate and Lantheus Real Estate. Borrowingcapacity is determined by reference to a borrowing base, which is based on (i) a percentage of certain eligible accounts receivable, inventory and machineryand equipment minus (ii) any reserves.The Facility contains affirmative and negative covenants, as well as restrictions on the ability of the Company and its subsidiaries to: (i) incuradditional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity; (iii) pay dividends on, repurchase or makedistributions in respect of 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 its assets; and (viii) enter into certain transactions with its affiliates. The Facilityalso contains customary default provisions as well as cash dominion provisions which allow the lender to sweep its accounts during the period certainspecified events of default are continuing under the Facility or excess availability under the New Facility falls below (i) the greater of $5.0 million or 15% ofthe then-current borrowing base for a period of more than five consecutive Business Days or (ii) $3.5 million. During a cash dominion period, the Company isrequired to comply with a consolidated fixed charge coverage ratio of not less than 1:00:1:00. The fixed charge coverage ratio is calculated on aconsolidated basis for Lantheus Intermediate and its subsidiaries for a trailing four fiscal quarter period basis, as (i) EBITDA (as defined in the agreement)minus capital expenditures minus certain restricted payments divided by (ii) interest plus taxes paid or payable in cash plus certain restricted payments madein cash plus scheduled principal payments paid or payable in cash.Financing CostsDuring the year ended December 31, 2013, the Company wrote off $0.6 million of the existing unamortized deferred financing costs related to aprevious facility, which is included in interest expense in the accompanying consolidated statements of comprehensive loss.During the years ended December 31, 2014 and 2013, LMI incurred approximately $0.2 million and $1.1 million in fees and expenses, in connectionwith the Facility and amendments under the previous facility, which are being amortized on a straight-line basis over the term of the Facility. 114Table of Contents11. Stockholder’s EquityAs of December 31, 2014 and 2013, the authorized capital stock of the Company consisted of 10,000 shares of voting common stock with a par valueof $0.001 per share and 1 share outstanding.12. Stock-Based CompensationThe Company’s employees are eligible to receive awards under the Holdings 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan isadministered by the Holdings Board of Directors and permits the granting of nonqualified stock options, stock appreciation rights (or SARs), restricted stockand restricted stock units to employees, officers, directors and consultants of Holdings or any subsidiary of Holdings (including Lantheus Intermediate andLMI). On August 5, 2013, the Holdings Board of Directors adopted a resolution providing that no further grants be made under the Holdings 2008 EquityIncentive Plan (the “2008 Plan”). At the same time, the maximum number of shares that may be issued pursuant to awards under the 2013 Plan was increasedfrom 1,500,000 to 2,700,000. Option awards under the 2013 Plan are granted with an exercise price equal to the fair value of Holdings’ stock at the date ofgrant, as determined by the Board of Directors of Holdings. Time based option awards vest based on time, either four or five years, and performance basedoption awards vest based on the performance criteria specified in the grant. All option awards have a ten-year contractual term. The Company recognizescompensation costs for its time based awards on a straight-line basis equal to the vesting period. The compensation cost for performance based awards isrecognized on a graded vesting basis, based on the probability of achieving the performance targets over the requisite service period. The fair value of eachoption award is estimated on the date of grant using a Black-Scholes valuation model that uses the assumptions noted in the following table. Expectedvolatilities are based on the historic volatility of a selected peer group. Expected dividends represent the dividends expected to be issued at the date of grant.The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free interest rate assumption is theU.S. Treasury rate at the date of the grant which most closely resembles the expected life of the options. The Company uses the following Black-Scholesinputs to determine the fair value of new stock option grants. Years Ended December 31, 2014 2013 2012Expected volatility 27 – 35% 30 – 37% 36 – 41%Expected dividends — — — Expected life (in years) 3.1 – 7.0 3.6 – 6.3 5.5 – 6.5Risk-free interest rate 1.1 – 2.0% 0.5 – 1.7% 0.7 – 1.4%A summary of option activity for 2014 is presented below: TimeBased PerformanceBased Total WeightedAverageExercisePrice WeightedAverageRemainingContractualTerm AggregateIntrinsicValue Outstanding at January 1, 2014 2,761,037 1,097,425 3,858,462 $4.89 6.9 $6,777,000 Options granted 527,153 3,696 530,849 4.64 Options cancelled (26,150) (8,174) (34,324) 5.68 Options exercised (4,500) (1,737) (6,237) 2.00 Options forfeited and expired (35,850) (10,480) (46,330) 7.56 Outstanding at December 31, 2014 3,221,690 1,080,730 4,302,420 $4.83 6.4 $3,979,000 Vested and expected to vest at December 31, 2014 3,106,583 713,091 3,819,674 $4.61 6.1 $3,979,000 Exercisable at December 31, 2014 1,867,059 562,432 2,429,491 $3.66 4.6 $3,979,000 115Table of ContentsThe weighted average grant-date fair value of options granted during the years ended December 31, 2014, 2013 and 2012 was $1.70, $2.45 and $3.29,respectively.During the year ended December 31, 2013, 631,518 stock options were exercised on a cashless basis for which 459,171 shares of Holdings’ commonstock were issued. No stock options were exercised on a cashless basis for the year ended December 31, 2014, but 6,237 options were exercised on a cashbasis. The intrinsic value for the options exercised during the years ended December 31, 2014 and 2013, was approximately $25,000 and $3.4 million,respectively.Stock-based compensation expense for both time based and performance based awards was recognized in the consolidated statements ofcomprehensive loss as follows: Years Ended December 31, (in thousands) 2014 2013 2012 Cost of goods sold $135 $41 $79 Sales and marketing 154 93 111 General and administrative 621 429 982 Research and development 121 15 68 Total stock-based compensation expense$1,031 $578 $1,240 Stock-based compensation expense recognized in the consolidated statement of comprehensive loss for the years ended December 31, 2014, 2013, and2012 are based on awards ultimately expected to vest as well as any changes in the probability of achieving certain performance features as required. Upontermination of employment, Holdings has the right to call shares held by employees that were purchased or acquired through option exercise. As a result ofthis right, upon termination of service, vested stock-based awards are reclassified to liability-based awards when it is probable the employee will exercise theoption and Holdings will exercise its call right. The Company did not reclassify any equity awards to liability-based awards as of December 31, 2014 and2013, since the Company concluded it was not probable that Holdings would exercise its call right. There were no liability awards paid out during the yearsended December 31, 2014, 2013 and 2012.The Company did not recognize an income tax benefit for the years ended December 31, 2014, 2013 and 2012. As of December 31, 2014, there wasapproximately $2.6 million of total unrecognized compensation costs related to non-vested stock options granted under the 2013 and 2008 Plans. Thesecosts are expected to be recognized over a weighted-average remaining period of 1.4 years. In addition, performance based awards contain certain contingentfeatures, such as change in control provisions, which allow for the vesting of previously forfeited and unvested awards. As of December 31, 2014, there wasapproximately $1.0 million of unrecognized compensation expense relating to these features, which could be recognized through 2018 or longer.13. Other Income (Expense), netOther income, net consisted of the following: Years Ended December 31, (in thousands) 2014 2013 2012 Foreign currency losses $(279) $(349) $(579) Tax indemnification income 754 1,141 346 Other income 3 369 189 Total other income (expense), net$478 $1,161 $(44) 116Table of Contents14. CommitmentsThe 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 purchase commitments under noncancelable arrangements are as follows (in thousands): Years ended December 31, OperatingLeases 2015 $854 2016 568 2017 455 2018 400 2019 397 2020 and thereafter 1,190 $3,864 Lease expense was $1.0 million, $0.9 million and $1.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.The Company has entered into agreements which contain certain percentage volume purchase requirements. The Company has excluded these futurepurchase commitments from the table above since there are no minimum purchase commitments or payments under these agreements.15. 401(k) PlanThe 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 meet certaineligibility requirements. Under the terms of the 401(k) Plan, the employees may elect to make tax-deferred contributions through payroll deductions withinstatutory and plan limits, and the Company may elect to make non-elective discretionary contributions. Effective April 2012, the employer match wassuspended and was subsequently reinstated in January 2013. The Company did not contribute any additional non-elective discretionary match during theyears ended December 31, 2014, 2013 and 2012. 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 $1.5 million, $1.2 million and $0.4 million for the yearsended December 31, 2014, 2013 and 2012, respectively.16. Legal ProceedingsFrom time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. In addition, the Company has in thepast been, and may in the future be, subject to investigations by governmental and regulatory authorities, which expose it to greater risks associated withlitigation, regulatory or other proceedings, as a result of which the Company could be required to pay significant fines or penalties. The outcome oflitigation, regulatory or other proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed ofunfavorably to the Company. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, couldmaterially and adversely affect its financial condition or results of operations. As of December 31, 2014, the Company had no material ongoing litigation inwhich the Company was a defendant or any material ongoing regulatory or other proceedings and had no knowledge of any investigations by government orregulatory authorities in which the Company is a target that could have a material adverse effect on its current business.On December 16, 2010, LMI filed suit against one of its insurance carriers seeking to recover business interruption losses associated with the NRUreactor shutdown and the ensuing global Moly supply shortage. The claim is the result of the shutdown of the NRU reactor in Chalk River, Ontario. The NRUreactor was off-line 117Table of Contentsfrom May 2009 until August 2010. The defendant answered the complaint on January 21, 2011, denying substantially all of the allegations, presentingcertain defenses and requesting dismissal of the case with costs and disbursements. Discovery, including international discovery and related motion practice,has been on-going for more than three years. The defendant filed a motion for summary judgment on July 14, 2014. The Company filed a memorandum oflaw in opposition to defendant’s motion for summary judgment on August 25, 2014. The defendant filed a reply memorandum of law in further support of itsmotion for summary judgment on September 15, 2014. Expert witness discovery was completed on October 31, 2014. The Company cannot be certain whatamount, if any, or when, if ever, it will be able to recover for business interruption losses related to this matter.17. Related Party TransactionsIn the third quarter of 2012, LMI reclassified the then outstanding receivable from Holdings of $1.2 million to stockholder’s deficit since Holdings didnot and continues to not have assets sufficient to repay amounts due to LMI. At December 31, 2014 and 2013, LMI had outstanding receivables fromHoldings in the amount of $3.8 million and $1.3 million, respectively, which was included in due from parent within stockholder’s deficit.Avista, the majority shareholder of Holdings, provides certain advisory services to the Company pursuant to an advisory services and monitoringagreement. The Company is required to pay an annual fee of $1.0 million and other reasonable and customary advisory fees, as applicable, paid on aquarterly basis. The initial term of the agreement is seven years. Upon termination, all remaining amounts owed under the agreement shall become dueimmediately. The Company incurred costs associated with this agreement totaling $1.0 million for each of the years ended December 31, 2014, 2013 and2012. At December 31, 2014 and 2013, $10,000 and $30,000, respectively, was included in accrued expenses.The Company had a Master Contract Research Organization Services Agreement with INC Research, LLC, or INC, to provide clinical developmentservices in connection with the flurpiridaz F 18 Phase III program. Avista and certain of its affiliates are principal owners of both INC and the Company. Theagreement was cancelled during May 2014. The agreement had a term of five years and the Company did not incur any costs associated with this agreementin the year ended December 31, 2014. The Company incurred costs associated with this agreement of approximately $0.5 million and $0.9 million during theyears ended December 31, 2013 and 2012, respectively At December 31, 2014 and 2013, there was no balance outstanding.The Company purchases inventory supplies from VWR Scientific, or VWR. Avista and certain of its affiliates are principal owners of both VWR andthe Company. The Company made purchases of approximately $0.5 million, $0.3 million and $0.3 million during each of the years ended December 31,2014, 2013 and 2012, respectively. At December 31, 2014 and 2013, $21,000 and $1,000, respectively, was included in accounts payable and accruedexpenses.The Company retains Marsh for insurance brokering and risk management. In November 2013, Donald Bailey, brother of the Company’s President andChief Executive Officer, Jeffrey Bailey, was appointed head of sales for Marsh’s U.S. and Canada division. In 2014, the Company paid Marsh approximately$0.3 million. At both December 31, 2014 and 2013, there was a prepaid of $43,000 included in other current assets.At December 31, 2013, the Company had $0.1 million due from an officer of the Company included in accounts receivable, net. This amountrepresented federal and state tax withholdings paid by the Company on behalf of the officer. During the second quarter of 2014, this amount was fully repaidby the officer.18. Segment InformationThe Company reports two operating segments, U.S. and International, based on geographic customer base. The results of these operating segments areregularly reviewed by our chief operating decision maker, the President and Chief Executive Officer. The Company’s segments derive revenues through themanufacturing, 118Table of Contentsmarketing, selling and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging. The U.S. segment comprises78.4%, 75.3% and 72.9% of consolidated revenues in 2014, 2013 and 2012, respectively, and 90.3% and 89.8% of consolidated assets at December 31, 2014and 2013, respectively. All goodwill has been allocated to the U.S. operating segment.Selected information for each business segment are as follows (in thousands): (in thousands) 2014 2013 2012 Revenues U.S. $258,148 $234,567 $229,926 International 65,080 70,033 78,094 Total revenue, including inter-segment 323,228 304,600 308,020 Inter-segment revenue (21,628) (20,928) (19,915) $301,600 $283,672 $288,105 Revenues from external customersU.S.$236,520 $213,639 $210,011 International 65,080 70,033 78,094 $301,600 $283,672 $288,105 Revenues by productDEFINITY$95,760 $78,094 $51,431 TechneLite 93,588 92,195 114,249 Xenon 36,549 32,125 30,075 Cardiolite 18,823 26,137 34,995 Other 56,880 55,121 57,355 $301,600 $283,672 $288,105 Geographical revenueU.S.$236,520 $213,639 $210,011 Canada 31,363 35,502 37,017 All other 33,717 34,531 41,077 $301,600 $283,672 $288,105 Operating income/(loss)U.S.$40,802 $(18,904) $(11,104) International 353 703 9,820 Total operating income (loss), including inter-segment 41,155 (18,201) (1,284) Inter-segment operating income (loss) 654 (813) 534 Operating income (loss) 41,809 (19,014) (750) Interest expense (42,288) (42,915) (42,014) Interest income 27 104 252 Other income (expense), net 478 1,161 (44) Income (loss) before income taxes$26 $(60,664) $(42,556) Depreciation and amortizationU.S.$16,055 $22,146 $23,918 International 2,196 3,009 3,484 $18,251 $25,155 $27,402 Capital expendituresU.S.$7,811 $4,903 $7,353 International 326 107 567 $8,137 $5,010 $7,920 119Table of Contents 2014 2013 Assets U.S. $223,492 $232,973 International 24,024 26,412 $247,516 $259,385 2014 2013 Long-lived assets U.S. $91,346 $91,683 International 4,668 5,970 $96,014 $97,653 19. Valuation and Qualifying Accounts (in thousands) Balance atBeginning ofFiscal Year Charge to CostsandExpenses(Recovery ofwrite-offs) DeductionsFromReserves Balance at Endof Fiscal Year Year ended December 31, 2014: Allowance for doubtful accounts $290 $303 $(8) $585 Year ended December 31, 2013: Allowance for doubtful accounts $301 $63 $(74) $290 Year ended December 31, 2012: Allowance for doubtful accounts $462 $(117) $(44) $301 Amounts charged to deductions from reserves represent the write-off of uncollectible balances.20. Guarantor Financial InformationThe Notes, issued by LMI, are guaranteed by Lantheus Intermediate (the “Parent Guarantor”) and Lantheus Real Estate, one of Lantheus Intermediate’swholly- owned consolidated subsidiaries (the “Guarantor Subsidiary”). The guarantees are full and unconditional and joint and several. The followingsupplemental financial information sets forth, on a condensed consolidating basis, balance sheet information as of December 31, 2014 and 2013, andcomprehensive (loss) income and cash flow information for the years ended December 31, 2014, 2013 and 2012 for Lantheus Intermediate, LMI, theGuarantor Subsidiary and Lantheus Intermediate’s other wholly-owned subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financialinformation have been prepared on the same basis as the consolidated financial statements of Lantheus Intermediate. The equity method of accounting isfollowed within this financial information. 120Table of ContentsConsolidating Balance Sheet InformationDecember 31, 2014 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Assets: Current assets Cash and cash equivalents $— $12,586 $— $5,231 $— $17,817 Accounts receivable, net — 32,280 — 9,260 — 41,540 Intercompany accounts receivable — 7,444 — — (7,444) — Inventory — 12,638 — 2,944 — 15,582 Income tax receivable — 178 — 69 — 247 Deferred tax assets — 239 — 17 — 256 Other current assets — 3,544 — 195 — 3,739 Total current assets — 68,909 — 17,716 (7,444) 79,181 Property, plant and equipment, net — 75,811 15,535 4,668 — 96,014 Capitalized software development costs, net — 2,421 — — — 2,421 Intangibles, net — 24,891 — 2,300 — 27,191 Goodwill — 15,714 — — — 15,714 Deferred financing costs — 7,349 — — — 7,349 Deferred tax assets — 277 — 51 — 328 Investment in subsidiaries (240,969) 32,511 — — 208,458 — Intercompany note receivable — — — 5,626 (5,626) — Other long-term assets — 19,132 — 186 — 19,318 Total assets$(240,969) $247,015 $15,535 $30,547 $195,388 $247,516 Liabilities and (deficit) equity:Current liabilitiesLine of credit$— $8,000 $— $— $— $8,000 Accounts payable — 14,027 — 1,638 — 15,665 Intercompany accounts payable — — — 7,444 (7,444) — Accrued expenses and other liabilities — 21,022 — 3,557 — 24,579 Deferred tax liability — — — 152 — 152 Deferred revenue — 132 — — — 132 Total current liabilities — 43,181 — 12,791 (7,444) 48,528 Asset retirement obligations — 7,232 — 203 — 7,435 Long-term debt, net — 399,280 — — — 399,280 Intercompany note payable — 5,626 — — (5,626) — Deferred tax liability — 239 — 8 — 247 Other long-term liabilities — 32,426 — 569 — 32,995 Total liabilities — 487,984 — 13,571 (13,070) 488,485 (Deficit) equity (240,969) (240,969) 15,535 16,976 208,458 (240,969) Total liabilities and (deficit) equity$(240,969) $247,015 $15,535 $30,547 $195,388 $247,516 121Table of ContentsConsolidating Balance Sheet InformationDecember 31, 2013 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Assets: Current assets Cash and cash equivalents $— $11,995 $— $4,674 $— $16,669 Accounts receivable, net — 28,099 — 10,811 — 38,910 Intercompany accounts receivable — 2,671 — — (2,671) — Inventory — 15,414 — 2,896 — 18,310 Income tax receivable — 297 — 28 — 325 Deferred tax assets — — — 18 — 18 Other current assets — 2,906 — 181 — 3,087 Total current assets — 61,382 — 18,608 (2,671) 77,319 Property, plant and equipment, net — 76,068 15,615 5,970 — 97,653 Capitalized software development costs, net — 1,468 — 2 — 1,470 Intangibles, net — 31,838 — 3,160 — 34,998 Goodwill — 15,714 — — — 15,714 Deferred financing costs — 9,639 — — — 9,639 Deferred tax assets — — — 15 — 15 Investment in subsidiaries (237,088) 40,289 — — 196,799 — Intercompany note receivable — — — 5,396 (5,396) — Other long-term assets — 22,370 — 207 — 22,577 Total assets$(237,088) $258,768 $15,615 $33,358 $188,732 $259,385 Liabilities and (deficit) equity:Current liabilitiesLine of Credit$— $8,000 $— $— $— $8,000 Accounts payable — 16,672 — 1,431 — 18,103 Intercompany accounts payable — — — 2,671 (2,671) — Accrued expenses and other liabilities — 21,409 — 4,083 — 25,492 Deferred tax liability — — — 57 — 57 Deferred revenue — 3,979 — — — 3,979 Total current liabilities — 50,060 — 8,242 (2,671) 55,631 Asset retirement obligations — 6,212 — 173 — 6,385 Long-term debt, net — 399,037 — — — 399,037 Intercompany note payable — 5,396 — — (5,396) — Deferred tax liability — — — 12 — 12 Other long-term liabilities — 35,151 — 257 — 35,408 Total liabilities — 495,856 — 8,684 (8,067) 496,473 (Deficit) equity (237,088) (237,088) 15,615 24,674 196,799 (237,088) Total liabilities and (deficit) equity$(237,088) $258,768 $15,615 $33,358 $188,732 $259,385 122Table of ContentsConsolidating Comprehensive Loss InformationYear Ended December 31, 2014 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues $— $268,204 $— $55,024 $(21,628) $301,600 Cost of goods sold — 144,286 — 53,423 (21,628) 176,081 Gross profit — 123,918 — 1,601 — 125,519 Operating expensesSales and marketing expenses — 31,505 — 3,611 — 35,116 General and administrative expenses — 32,529 80 2,312 — 34,921 Research and development expenses — 13,252 — 421 — 13,673 Operating income (loss) — 46,632 (80) (4,743) — 41,809 Interest expense — (42,518) — — 230 (42,288) Interest income — 1 — 256 (230) 27 Other income (expense) — 558 — (80) — 478 Equity in earnings (losses) of affiliates (1,169) (5,042) — — 6,211 — (Loss) income before income taxes (1,169) (369) (80) (4,567) 6,211 26 Provision (benefit) for income taxes — 800 — 395 — 1,195 Net (loss) income (1,169) (1,169) (80) (4,962) 6,211 (1,169) Foreign currency translation — — — (1,236) — (1,236) Equity in other comprehensive income (loss) of subsidiaries (1,236) (1,236) — — 2,472 — Total other comprehensive (loss) income$(2,405) $(2,405) $(80) $(6,198) $8,683 $(2,405) 123Table of ContentsConsolidating Comprehensive Loss InformationYear Ended December 31, 2013 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues $— $243,079 $— $61,521 $(20,928) $283,672 Cost of goods sold — 169,334 — 57,905 (20,928) 206,311 Gross profit — 73,745 — 3,616 — 77,361 Operating expensesSales and marketing expenses — 31,668 — 3,559 — 35,227 General and administrative expenses — 30,785 80 2,294 — 33,159 Research and development expenses — 30,138 — 321 — 30,459 Proceeds from manufacturer — (8,876) — — — (8,876) Impairment on land — — 6,406 — — 6,406 Operating loss — (9,970) (6,486) (2,558) — (19,014) Interest expense — (43,011) — — 96 (42,915) Interest income — 1 — 199 (96) 104 Other income (expense) — 1,373 — (212) — 1,161 Equity in earnings (losses) of affiliates (61,678) (9,142) — — 70,820 — (Loss) income before income taxes (61,678) (60,749) (6,486) (2,571) 70,820 (60,664) Provision (benefit) for income taxes — 929 — 85 — 1,014 Net (loss) income (61,678) (61,678) (6,486) (2,656) 70,820 (61,678) Foreign currency translation — — — (1,729) — (1,729) Equity in other comprehensive income (loss) ofsubsidiaries (1,729) (1,729) — — 3,458 — Total other comprehensive (loss) income$(63,407) $(63,407) $(6,486) $(4,385) $74,278 $(63,407) 124Table of ContentsConsolidating Comprehensive Loss InformationYear Ended December 31, 2012 (in thousands) LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Revenues $— $241,406 $— $66,614 $(19,915) $288,105 Cost of goods sold — 171,257 — 59,707 (19,915) 211,049 Loss on firm purchase commitment — 1,859 — — — 1,859 Total cost of goods sold — 173,116 — 59,707 (19,915) 212,908 Gross profit — 68,290 — 6,907 — 75,197 Operating expensesSales and marketing expenses — 34,220 — 3,217 — 37,437 General and administrative expenses — 30,112 80 2,328 — 32,520 Research and development expenses — 40,457 — 147 — 40,604 Proceeds from manufacturer — (34,614) — — — (34,614) Operating income (loss) — (1,885) (80) 1,215 — (750) Interest expense — (42,014) — — — (42,014) Interest income — 1 — 251 — 252 Other income (expense) — 110 — (154) — (44) Equity in earnings (losses) of affiliates (42,001) 1,242 — — 40,759 — (Loss) income before income taxes (42,001) (42,546) (80) 1,312 40,759 (42,556) Provision (benefit) for income taxes — (545) — (10) — (555) Net (loss) income (42,001) (42,001) (80) 1,322 40,759 (42,001) Foreign currency translation — 200 — 764 — 964 Equity in other comprehensive income (loss) of subsidiaries 964 764 — — (1,728) — Total other comprehensive (loss) income$(41,037) $(41,037) $(80) $2,086 $39,031 $(41,037) 125Table of ContentsCondensed Consolidating Cash Flow InformationYear Ended December 31, 2014 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cash provided by operating activities $— $10,240 $— $2,833 $(1,500) $11,573 Cash flows from investing activitiesCapital expenditures — (7,811) — (326) — (8,137) Payments from subsidiary 2,047 — — — (2,047) — Proceeds from sale of property, plant and equipment — 227 — — — 227 Redemption of certificate of deposit — 228 — — — 228 Cash used in investing activities 2,047 (7,356) — (326) (2,047) (7,682) Cash flows from financing activitiesPayments on note payable — (71) — — — (71) Payments of deferred financing costs — (175) — — — (175) Due from parent (2,047) (2,047) — — 2,047 (2,047) Proceeds from line of credit — 5,500 — — — 5,500 Payments on line of credit — (5,500) — — — (5,500) Payment of dividend — — — (1,500) 1,500 — Cash provided by (used in) financing activities (2,047) (2,293) — (1,500) 3,547 (2,293) Effect of foreign exchange rate on cash — — — (450) — (450) Increase in cash and cash equivalents — 591 — 557 — 1,148 Cash and cash equivalents, beginning of year — 11,995 — 4,674 — 16,669 Cash and cash equivalents, end of year$— $12,586 $— $5,231 $— $17,817 126Table of ContentsCondensed Consolidating Cash Flow InformationYear Ended December 31, 2013 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cash provided by operating activities $— $(17,273) $— $3,333 $(1,738) $(15,678) Cash flows from investing activitiesCapital expenditures — (4,903) — (107) — (5,010) Proceeds from dividend — 5,268 — — (5,268) — Proceeds from sale of property, plant and equipment — 433 1,094 — — 1,527 Cash provided by (used in) investing activities — 798 1,094 (107) (5,268) (3,483) Cash flows from financing activitiesProceeds on line of credit — 8,000 — — — 8,000 Payments on note payable — (1,310) — — — (1,310) Payments of deferred financing costs — (1,249) — — — (1,249) Due from parent — 94 — — — 94 Intercompany note — 5,300 — (5,300) — — Payment of dividend — — (1,094) (5,912) 7,006 — Cash provided by (used in) financing activities — 10,835 (1,094) (11,212) 7,006 5,535 Effect of foreign exchange rate on cash — — — (1,300) — (1,300) Decrease in cash and cash equivalents — (5,640) — (9,286) — (14,926) Cash and cash equivalents, beginning of year — 17,635 — 13,960 — 31,595 Cash and cash equivalents, end of year$— $11,995 $— $4,674 $— $16,669 127Table of ContentsCondensed Consolidating Cash Flow InformationYear Ended December 31, 2012 LantheusIntermediate LMI GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Total Cash provided by operating activities $— $3,829 $— $4,568 $(7,874) $523 Cash flows from investing activitiesCapital expenditures — (7,353) — (567) — (7,920) Purchase of certificate of deposit — (225) — — — (225) Proceeds from dividend — 2,949 — — (2,949) — Cash provided by (used in) investing activities — (4,629) — (567) (2,949) (8,145) Cash flows from financing activitiesPayments on note payable — (1,530) — — — (1,530) Payments of deferred financing costs — (442) — — — (442) Due from parent — (67) — — — (67) Payment of dividend — — — (10,823) 10,823 — Cash used in financing activities — (2,039) — (10,823) 10,823 (2,039) Effect of foreign exchange rate on cash — — — 649 — 649 Decrease in cash and cash equivalents — (2,839) — (6,173) — (9,012) Cash and cash equivalents, beginning of year — 20,474 — 20,133 — 40,607 Cash and cash equivalents, end of year$— $17,635 $— $13,960 $— $31,595 128Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresUnder 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 theSecurities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financialofficer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.Management’s Annual Report on Internal Control Over Financial ReportingOur 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 Exchange Act. Our internal controlsystem is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of publishedfinancial statements.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. 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 (2013). Based on this assessment, management concluded that, as of December 31, 2014, ourinternal control over financial reporting was effective.We do not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting in thisannual report. Our report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the Dodd-Frank WallStreet Reform and Consumer Protection Act signed into law on July 21, 2010 (“Dodd-Frank”). Dodd-Frank provides a permanent exemption from therequirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 for those entities that are neither large accelerated filers nor accelerated filers. As a result,we were not required to have our independent registered public accounting firm attest to, and report on, internal controls over financial reporting.Changes in Internal Control Over Financial ReportingThere have been no changes during the quarter ended December 31, 2014 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 financial reporting.Item 9B. Other InformationNone. 129Table of ContentsPART IIIAll information contained in Part III is included in this annual report and not incorporated by reference because we do not have any public equity thatrequires us to file a definitive proxy statement.Item 10. Directors, Executive Officers and Corporate GovernanceThe following table sets forth the names, ages and positions of the executive officers and directors of Holdings and other key employees of Lantheus,as of March 4, 2015. Holdings is our ultimate parent company, and the Board of Directors of Holdings is the primary board that takes action with respect toour business and strategic planning. Name Age PositionExecutive Officers and Key Employees Jeffrey Bailey 52 President, Chief Executive Officer and DirectorJohn Bakewell 53 Chief Financial OfficerWilliam Dawes 43 Vice President, Manufacturing and OperationsMichael Duffy 54 Vice President, General Counsel and SecretaryMary Anne Heino 55 Chief Commercial OfficerMichael Heslop 55 Vice President, Business Development and Strategic PlanningCesare Orlandi 64 Chief Medical OfficerSimon Robinson 55 Vice President, Research and Pharmaceutical DevelopmentCyrille Villeneuve 63 Vice President, InternationalCarol Walker 52 Vice President, QualityNon-Employee Directors Brian Markison 55 Director and Non-Executive Chairman of the BoardDavid Burgstahler 46 DirectorSamuel Leno 69 DirectorPatrick O’Neill 65 DirectorSriram Venkataraman 42 DirectorSet forth below is a description of the business experience of the foregoing persons.Jeffrey Bailey is our President and Chief Executive Officer since January 2013 and is a Director. Mr. Bailey has more than 26 years of diversepharmaceutical leadership experience across multiple functions, including sales, marketing, manufacturing, supply chain and operations. Prior to joiningLantheus, Mr. Bailey served from July 2011 to July 2012 as Chief Operating Officer and a member of the executive committee of FougeraPharmaceuticals, Inc. prior to its sale to Sandoz. Before joining Fougera, from April 2010 to June 2011, Mr. Bailey served as Chief Commercial Officer ofKing-Pfizer Pharmaceuticals. From January 2008 to April 2010, he worked with Novartis Pharmaceuticals as President and General Manager of the NorthwestOperating Unit, and from June 1984 to June 2006, he served in several roles with increasing responsibilities across manufacturing operations, commercialoperations and general management at the Johnson & Johnson Family of Companies. Mr. Bailey holds a Bachelor of Arts in Business from RutgersUniversity. Mr. Bailey was chosen to serve as a Director because of his extensive experience in the healthcare industry in senior commercial and operatingpositions. As our President and Chief Executive Officer and the only management representative on our Board of Directors, Mr. Bailey has significantknowledge of the pharmaceutical industry and provides valuable insight into a variety of business issues and challenges we face.John Bakewell joined Lantheus in June 2014 as our Chief Financial Officer. Mr. Bakewell previously served as Chief Financial Officer of InterlineBrands, Inc., or Interline, from June 2013 to May 2014. Prior to joining Interline, Mr. Bakewell served as the Executive Vice President and Chief FinancialOfficer of RegionalCare Hospital Partners from January 2010 to December 2011. In addition, Mr. Bakewell held the same position with 130Table of ContentsWright Medical Group, a global orthopedic medical device manufacturer from 2000 to 2009. Mr. Bakewell also served as Chief Financial Officer of AltraEnergy Technologies from 1998 to 2000, Cyberonics, Inc. from 1993 to 1998, and Zeos International from 1990 to 1993. Mr. Bakewell also serves on theBoard of Keystone Dental, Inc. Mr. Bakewell holds a Bachelor of Arts in Accounting from the University of Northern Iowa and is a certified publicaccountant (Minnesota and Iowa licensure, current status inactive).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. Dawesbegan 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 as SeniorVice President, General Counsel and Secretary of Point Therapeutics, Inc., a Boston-based biopharmaceutical company. Between 1999 and 2001, Mr. Duffyserved as Senior Vice President, General Counsel and Secretary of Digital Broadband Communications, Inc., a competitive local exchange carrier which filedfor protection under Chapter 11 of the United States Bankruptcy Code in December 2000. After the filing, Mr. Duffy served as the court-appointedliquidating trustee of the bankruptcy estate. From 1996 to 1999, Mr. Duffy served as Senior Vice President, General Counsel and Secretary of ETC w/tci, asub-portfolio of TCI Ventures, Inc./Liberty Media Corporation. Mr. Duffy began his legal career with the law firm Ropes & Gray and holds law degrees fromthe University of Pennsylvania and Oxford University and a Bachelor’s degree in History of Science from Harvard College. Mr. Duffy is also the currentChairman of the Board of Directors of CORAR, the Council on Radionuclides and Radiopharmaceuticals, an international trade association for theradiopharmaceutical industry.Mary Anne Heino joined Lantheus in April 2013 as Chief Commercial Officer. Ms. Heino brings more than 25 years of diverse pharmaceutical industryexperience. Prior to joining Lantheus, Ms. Heino led Angelini Labopharm LLC and Labopharm USA in the roles of President and Senior Vice President ofWorld Wide Sales and Marketing from February 2007 to March 2012. From May 2000 until February 2007, Ms. Heino served in numerous capacities atCentocor, Inc., a Johnson & Johnson Company, including Vice President Strategic Planning and Competitive Intelligence, Vice President Sales, ExecutiveDirector Customer Relationship Management and Senior Director Immunology Marketing. Ms. Heino began her professional career with JanssenPharmaceutica as a Sales Representative in June 1989 and worked her way up to the role of Field Sales Director in 1999. Ms. Heino received her Master’s inBusiness Administration from New York University. She earned a Bachelor’s of Science in Nursing from the City University of New York and a Bachelor’s ofScience in Biology from the State University of New York at Stony Brook.Michael Heslop joined Lantheus in June 2012 as our Vice President, International and became our Vice President, Business Development and StrategicPlanning in April 2013. Mr. Heslop possesses more than 25 years of general management and commercial experience. Prior to joining Lantheus, Mr. Heslopwas General Manager and Senior Vice President, Biosurgical Specialties at Genzyme Corporation from 2009 to 2011. While at Genzyme, Mr. Heslop alsoheld the positions of General Manager and Senior Vice President, Endocrinology from 2003 to 2009, and Vice President, Global Marketing, PGH Businessfrom 2000 to 2003. Previously Mr. Heslop held the positions of Vice President, Business Development at Sciptgen Pharmaceuticals from 1998 to 2000 andDirector, Marketing Anti-Infectives at Glaxo Welcome USA from 1996 to 1998. Mr. Heslop received a B.S. degree in Biology from McGill University and anM.B.A. from Concordia University.Dr. Cesare Orlandi joined Lantheus in March 2013 as Chief Medical Officer. Dr. Orlandi brings more than 20 years of diverse pharmaceutical industryexperience. Prior to joining Lantheus, Dr. Orlandi served from January 2012 until February 2013 as Senior Vice President and Chief Medical Officer ofTransTech Pharma, Inc., a clinical stage pharmaceutical company focused on discovery and development of human therapeutics. From 2007 until 2011,Dr. Orlandi served as Senior Vice President and Chief Medical Officer of 131Table of ContentsCardiokine, Inc., a specialty pharmaceutical company developing hospital products for cardiovascular indications. From 1998 until 2007, Dr. Orlandi served,in among other positions, as Vice President, Global Clinical Development of Otsuka Pharmaceuticals, a large Japanese pharmaceutical company. Earlier inhis career, Dr. Orlandi served in increasing roles of clinical research responsibility at Medco Research, Inc. and the Radiopharmaceutical Division of TheDuPont Merck Pharmaceutical Company, a predecessor organization to Lantheus, and The Upjohn Company. Dr. Orlandi received his medical degree fromthe University of Pavia Medical School in Pavia, Italy. He is currently an Adjunct Assistant Professor of Medicine at Tufts University School of Medicine inBoston, Massachusetts, and he is a founding member of the American Society of Nuclear Cardiology and a Fellow of the American College of Cardiology,the European Society of Cardiology and the American College of Angiology.Dr. 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 to joiningus, he held research positions at BMS, Sphinx Pharmaceuticals, BASF and Dupont Pharmaceuticals. He holds a Ph.D. and B.Sc. in Pharmacology from theUniversity of Leeds, England and did post-doctoral training at the University of Wisconsin Clinical Cancer Center.Cyrille Villeneuve is our Vice President, International and previously served as Chief Commercial Officer from October 2011 to April 2013, responsiblefor global sales and marketing. Previously Mr. Villeneuve was our Vice President and General Manager, International, a position he held since November2008. Prior to joining us in 1985, Mr. Villeneuve held positions at the Montreal Heart Institute and Hospital Hotel-Dieu Montreal. He holds a Bachelor ofArts from Montreal University and a Master of Public Administration from the Ecole Nationale Administration Publique.Carol Walker joined Lantheus Medical Imaging in February 2015 as Vice President, Quality. Ms. Walker brings more than 30 years of industryexperience in quality and medical technology primarily the medical device area. Prior to joining Lantheus, Ms. Walker served as Vice President of Qualityfor Intelligent Medical Devices, Inc. from 2012 to 2015. Previously she held a number of successive Quality management roles at Siemens HealthcareDiagnostics (formerly Bayer Healthcare Diagnostics) including Vice President, Quality Assurance from 2007 to 2011 and Director, Quality Assurance from2001 to 2007. Ms. Walker received a B.S. degree in Medical Technology from the Rochester Institute of Technology.Brian Markison is our Non-Executive Chairman of the Board of Directors. Mr. Markison joined the Board in September 2012 and was elevated toChairman in January 2013. Mr. Markison has been a Healthcare Industry Executive for Avista since September 2012. Mr. Markison is a seasoned executivewith more than 30 years of operational, marketing, commercial development and sales experience with international pharmaceutical companies. He mostrecently held the position of President and Chief Executive Officer and member of the Board of Directors of Fougera Pharmaceuticals Inc., a specialtypharmaceutical company in dermatology, prior to its sale to Sandoz, the generics division of Novartis AG. Before leading Fougera, Mr. Markison wasChairman and Chief Executive Officer of King Pharmaceuticals, which he joined as Chief Operating Officer in March 2004, and was promoted to Presidentand CEO later that year and elected Chairman in 2007. Prior to joining King, Mr. Markison held various senior leadership positions at BMS, includingPresident of Oncology, Virology and Oncology Therapeutics Network; President of Neuroscience, Infectious Disease and Dermatology; and Senior VicePresident, Operational Excellence and Productivity. Mr. Markison also serves on the Board of Directors of Immunomedics, Inc. and PharmAthene, Inc. Healso serves as Board Chairman for Rosetta Genomics, Ltd. and Executive Chairman of Vertical/Trigen Holdings, LLC. He is also a Director of the College ofNew Jersey. Mr. Markison holds a B.S. degree from Iona College. Mr. Markison was chosen as a Director because of his strong commercial and operationalmanagement background and extensive experience in the pharmaceutical industry.David Burgstahler is a Director and the Chairman of our Compensation Committee, serving on our Board of Directors since January 2008. He was afounding partner of Avista in 2005 and, since 2009, has been President of 132Table of ContentsAvista. Prior to forming Avista, 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, he worked at Andersen Consulting (now known as Accenture) and McDonnell Douglas (now known as Boeing). He currently serves as a Directorof AngioDynamics Inc. (Nasdaq: ANGO), Armored AutoGroup Inc., ConvaTec Inc., INC Research Holdings, Inc. (Nasdaq: INCR), Strategic Partners, Inc.,Vertical/Trigen Holdings, LLC, Visant Corporation and WideOpenWest, LLC. He previously served as a Director of a number of public and privatecompanies, including Warner Chilcott plc (Nasdaq: WCRX) and BioReliance Holdings, Inc. He holds a Bachelor of Science in Aerospace Engineering fromthe University of Kansas and a Master of Business Administration from Harvard Business School. Mr. Burgstahler is also a Trustee of the Trinity School inNew York City. Mr. Burgstahler was chosen as a Director because of his strong finance and management background, with over 19 years in banking andprivate equity finance. He has extensive experience serving as a director for a diverse group of private and public companies.Samuel Leno is a Director and the Chairman of our Audit Committee, serving on the Board of Directors since May 2012. Mr. Leno is a strategicexecutive with more than 40 years of experience with complex multinational companies. He most recently held the positions of Executive Vice President andChief Operations Officer at Boston Scientific. He previously served as Executive Vice President, Finance and Information Systems and Chief FinancialOfficer. He retired from Boston Scientific in December 2011. Prior to joining Boston Scientific, Mr. Leno served as Executive Vice President, Finance andCorporate Services and Chief Financial Officer at Zimmer Holdings, Inc. and Chief Financial Officer positions at Arrow Electronics, Inc., CorporateExpress, Inc. and Coram Healthcare. Previously, he held a variety of senior financial positions at Baxter International, Inc. and American Hospital SupplyCorporation. He is a member of the Board of Directors and the audit committee of Omnicare, is the Chairman of the Board of Zest Anchors, Inc. and serves as aDirector of Endotronix Inc. He is also a member of the Advisory Board of the Harvard Business School Healthcare Initiative. He previously served on theBoard and audit committee of Tomotherapy, Inc. Mr. Leno served as a Lieutenant in the United States Navy and is a Vietnam veteran. He holds a Bachelor ofScience in Accounting from Northern Illinois University and an MBA from Roosevelt University. Mr. Leno was chosen as a Director because of his financialexpertise and industry background.Dr. Patrick O’Neill is a Director, serving on the Board of Directors since February 2008. He is also an Industry Advisor for Avista, a position he hasheld since 2008. Dr. O’Neill was at Johnson & Johnson from 1976 to 2006, holding Research and Development and New Business Development leadershippositions in Johnson & Johnson’s pharmaceutical business, their Medical Devices and Diagnostics Group, and the surgical and interventionalcardiology/radiology business units until he retired in February 2006. He served as Executive in Residence at New Enterprise Associates from March 2006through 2007. Dr. O’Neill holds a Bachelor of Science in Pharmacy and Ph.D. in Pharmacology from The Ohio State University. He currently serves asDirector of OptiNose US Inc. and Zest Anchors, Inc. Dr. O’Neill was chosen as a Director because of his experience in the pharmaceutical industry. Dr. O’Neillhas participated directly in the development of pharmaceutical products for other companies, which provides valuable insight into strategic businessdecisions.Sriram Venkataraman is a Director, serving on the Board of Directors since November 2010. He is also a Partner of Avista, having joined in May 2007.Prior to joining Avista, Mr. Venkataraman was a Vice President in the Healthcare Investment Banking group at Credit Suisse Group 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 inElectrical Engineering from the University of Illinois, Urbana-Champaign and a Master of Business Administration with Honors from The Wharton School.He currently serves as a Director of AngioDynamics, Inc., OptiNose Inc., Zest Anchors, Inc. and Vertical/Trigen Holdings, LLC. Mr. Venkataraman was chosenas a Director because of his experience in the healthcare industry and his strong finance and management background. He also has experience serving as adirector of private and public companies. 133Table of ContentsBoard of DirectorsOur Board of Directors is responsible for the management of our business and is comprised of six directors who are elected to serve in their positionuntil their next election and until their successors are elected and qualified. Pursuant to the management and employee Shareholders Agreements described in“Item 13—Certain Relationships and Related Transactions, and Director Independence—Transactions with Related Persons—Shareholders Agreement,”Avista has designation rights with respect to the composition of the Holdings board of directors and Avista is entitled to majority representation on anycommittee that the Board creates. Messrs. 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 national securitiesexchange, we believe that Mr. Markison, Mr. Leno and Dr. O’Neill would be considered independent for our Board of Directors and that Mr. Leno would beconsidered independent for our Audit Committee and that Mr. Markison would be considered independent for our Compensation Committee andNominating and Governance Committee based upon the listing standards of the New York Stock Exchange.Board CommitteesOur Board of Directors has the authority to appoint committees to perform certain management and administration functions. Our Board of Directorshas three committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.Audit CommitteeThe primary purpose of the Audit Committee is to assist the Board’s oversight of: • the integrity of our financial statements; • our systems of internal control over financial reporting and disclosure controls and procedures; • our independent auditors’ qualifications, engagement, compensation and independence; • the performance of our independent auditors and our internal audit function; • our legal and regulatory compliance; • our related person transaction policy; and • our codes of business conduct and ethics.The Audit Committee is composed of Messrs. Leno and Venkataraman. Mr. Leno, the Chairman of the Audit Committee, has been designated by theBoard of Directors of Holdings as our “Audit Committee Financial Expert” as that term has been defined by the SEC in Item 407(d)(5) of Regulation S-K. OurBoard of Directors has affirmatively determined that Mr. Leno meets the definition of “independent director” for the purposes of serving on the AuditCommittee under the SEC rules.Compensation CommitteeThe primary purpose of our Compensation Committee is to assist the Board’s oversight of: • our management compensation policies and practices; • the determination and approval of the compensation of our executive officers and other members of senior management; • the review, approval and administration of our incentive compensation policies and programs; 134Table of Contents • the review, approval and administration of our equity compensation programs; and • the preparation of the Compensation Committee report required by the SEC rules to be included in our annual report.Messrs. Burgstahler and Markison currently serve on our Compensation Committee.Nominating and Governance CommitteeThe primary purpose of our Nominating and Governance Committee is to: • identify and recommend to the Board individuals qualified to serve as directors of our company and on committees of the Board; • assist the Board in overseeing our policies and procedures for the receipt of stockholder suggestions regarding Board compensation andrecommendations of the Board; • develop, recommend to the Board and oversee the implementation of a set of corporate governance guidelines and principles applicable to us;and • review the overall corporate governance of our Company and recommend improvements when necessary.Messrs. Markison and Burgstahler currently serve on our Nominating and Governance Committee.Code of EthicsWe have a code of conduct and ethics for all of our employees, including our principal executive, financial and accounting officers and our controller,or persons performing similar functions, and each of the non-employee directors on our Board of Directors. Our Company Code of Conduct is currentlyavailable 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 toprovide any required disclosure of any amendment to or waiver from such code that applies to our principal executive officer, principal financial officer,principal accounting officer or controller, or persons performing similar functions, in a Current Report on Form 8-K filed with the Commission.Item 11. Executive CompensationCompensation Discussion and AnalysisThe Compensation Committee is generally charged with the oversight of our executive compensation program. The Compensation Committee iscomposed of Messrs. Burgstahler and Markison. 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 assessment of theCompany. 135Table of ContentsThe Compensation Committee engaged the services of an independent compensation consultant, Pearl Meyers & Partners, to assist in the strategicreview 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 and decisionsincluding material elements of compensation for our named executive officers. Our named executive officers for 2014 were: • Jeffrey Bailey, President and Chief Executive Officer; • John Bakewell, Chief Financial Officer; • John Golubieski, (former) Interim Chief Financial Officer; • Mary Anne Heino, Chief Commercial Officer; • Dr. Cesare Orlandi, Chief Medical Officer; and • Michael Duffy, Vice President, General Counsel and Secretary;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 ObjectivesThe core philosophy of our executive compensation program is to support our primary objective of providing innovative medical imaging solutions toimprove 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 named executiveofficers: • 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.The Compensation Committee considers the following factors when determining compensation for our executive officers, including our namedexecutive officers: • 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; • the requirements of any applicable employment agreements; • 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 facts andcircumstances. 136Table of ContentsThe 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 agreements withour executives. This flexibility is important to ensure our compensation programs are competitive and that our compensation decisions appropriately reflectthe unique contributions and characteristics of the Company executive officers.Compensation BenchmarkingThe 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 our compensationobjectives and reflect the unique attributes of the Company and each executive.For 2014 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 at compensationdata for life sciences companies, which most closely approximated our size, and, to the extent possible, had comparable position matches and compensationcomponents.For 2014 compensation for our President and Chief Executive Officer, data were also collected from a review of the following industry peers:Abiomed, Accuray, Accorda Therapeutics, AngioDynamics, Atrion, Auxilium Pharmaceuticals, Cyrolife, DepoMed, Emergent BioSolutions, GenomicHealth, ICU Medical, Impax Laboratories, Lannett Company, Luminex, Merit Medical Systems, Nordion, The Medicines Company and Volcano. The dataused were from the most recent proxy available as of February 2014. This peer group had mean revenue of $312 million and a mean enterprise value of$804 million. This peer group selection included 18 life science and specialty pharmaceutical companies. It was selected to best reflect similarly-sizedcompanies in our industry with mature products and full field sales operations.Employment AgreementsThe compensation committee determined that it was appropriate to enter into employment agreements with each of our named executive officers.Among other things, these agreements set the executives’ compensation terms, their rights upon a termination of employment, and restrictive covenantsrelating to non-competition, non-solicitation and confidentiality. See “—Potential Payment Upon Termination or Change of Control—EmploymentAgreements and Arrangements” for the material terms of these employment agreements.Mr. Golubieski’s Consulting AgreementMr. Golubieski, our former interim Chief Financial Officer, had a consulting agreement with us which provided that he will serve as our interim ChiefFinancial Officer on a month-to-month basis unless otherwise terminated by the parties. His compensation was $25,000 per month plus reimbursement forreasonable and necessary travel expenses. The agreement was terminated on June 2, 2014. Mr. Golubieski was paid a bonus, as determined by theCompensation Committee, in recognition of his contribution as interim Chief Financial Officer in 2013, but was not eligible for a bonus in 2014. 137Table of ContentsElements of CompensationOur compensation program is heavily weighted towards performance-based compensation, reflecting our philosophy of increasing our long-term valueand 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 not supportexecutive perquisites or other supplemental programs targeted to executives.Base SalaryBase salaries are intended to provide reasonable and competitive fixed compensation for regular job duties. In 2014, the Compensation Committeeapproved adjustments to Mr. Bailey’s, Ms. Heino’s, Dr. Orlandi’s and Mr. Duffy’s respective salaries to $500,000, $360,000, $376,000 and $334,000,respectively, in recognition of their performance and roles within the Company. Mr. Bakewell’s salary was negotiated as part of his employment offer and wasdeemed to be in line with our assessment of competitive salaries for his respective roles.Our general practice with respect to cash compensation is that executive base salaries and annual cash incentive compensation values should generallyposition total annual cash compensation at or below market median of similarly-sized life science companies. See “—Compensation Discussion and Analysis—Compensation Benchmarking.” Cash compensation is generally between the 25th percentile and the median relative to our peers.As of December 31, 2014, the base salaries of Mr. Bailey, Mr. Bakewell, Ms. Heino, Dr. Orlandi, and Mr. Duffy, were as follows: Name BaseSalary Jeffrey Bailey $500,000 John Bakewell $400,000 Mary Anne Heino $360,000 Cesar Orlandi $376,000 Michael Duffy $334,000 Annual Cash Incentive CompensationOur 2014 Executive Leadership Team Incentive Bonus Plan (the “Bonus Plan”) was 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 exceeding certainshort-term objectives.Cash incentive compensation under the Bonus Plan is subject to the achievement of a certain EBITDA target. For purposes of the Bonus Plan, weutilize management EBITDA, see “Item 6—Selected Financial Data—Non-GAAP Financial Measures” for the calculation of EBITDA as defined in the awardagreements. The Bonus Plan provides for adjustments to the EBITDA targets by the Compensation Committee for extraordinary and unforeseen events. 138Table of ContentsThe Compensation Committee chose EBITDA as the primary performance measure from which to structure annual incentives. EBITDA was selected asthe primary metric 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.The EBITDA target should not be understood as management’s predictions of future performance or other guidance, and investors should not applythese in any other context. EBITDA targets were linked to our short-term and long-term business objectives to ensure incentives are provided for appropriateperformance.The Compensation Committee believes our cash incentive compensation structure is consistent with competitive practice.The potential bonus payouts under various scenarios in 2014 for our named executive officers were as follows: Named Executive Officer Threshold Bonus(1)(as % of Base Salary) Target Bonus(as % of Base Salary) Above Target Bonus(as % of Base Salary) Jeffrey Bailey 50% 100% 180% John Bakewell 30% 60% 108% John Golubieski(2) N/A N/A N/A Mary Anne Heino 22.5% 45% 81% Cesare Orlandi 20% 40% 72% Michael Duffy 20% 40% 72% (1)Assuming that the EBITDA threshold was achieved and the named executive achieved his/her department and individual performance goals.(2)Mr. Golubieski was not eligible for a bonus under the Bonus Plan in 2014.For our participating named executives, pursuant to their employment agreements, payout of the target level bonus was tied to the achievement of theEBITDA target and other corporate performance goals established by the Compensation Committee.Pursuant to the Bonus Plan, payout of the target level bonus for our other named executive officers was tied to the achievement of the EBITDA targetand the achievement of certain department performance and individual performance goals.If we did not meet the threshold of 90% of the EBITDA target of $64.5 million, no bonus would be awarded under the plan. If we achieve the stretchgoals above the EBITDA targets established for the year, each participating named executive offer would be eligible for additional payout above their targetbonus subject to the application of their individual performance multiplier.The achievement of department performance and individual performance goals is applied as a multiplier from 0% to a maximum of 150%. Departmentperformance goals are recommended and approved by our Chief Executive Officer at the start of each year. Achievement of individual performance goals areassessed by our Chief Executive Officer at the end of each year. These targets were intended to provide a meaningful incentive for executives to achieve orexceed performance goals. 139Table of ContentsOur EBITDA target relative to the Bonus Plan for the fiscal year ended December 31, 2014 was established at $64.5 million. In the fiscal year endedDecember 31, 2014, our Adjusted EBITDA was approximately $70.8 million.For Mr. Bailey in 2014, performance goals included: in addition to our EBITDA goals: driving revenue from DEFINITY and the nuclear productportfolio; advancing numerous growth initiatives including commercial expansion (e.g., expanding the International business into China), product pipeline(e.g., advancing flupiridaz F 18 in Phase 3) and business development milestones, improving the yield and reliability of product suppliers, drivingefficiencies and cost control, and delivering on initiatives to improve the balance sheet.For Mr. Bakewell, performance goals included: in addition to our EBITDA goals: quickly coming up to speed in the business and industry (new hire in2014) as necessary to be effective as Chief Financial Officer role, leading and supporting all aspects of a potential initial public offering, developing andinstituting company-wide disciplines for success in the public markets; developing and refining the Company’s financial planning capabilities to improvethe predictability of the business and improving the Company’s decision-making capabilities from a financial perspective.For Ms. Heino, performance goals included: in addition to our EBITDA goals: achieving worldwide revenue targets for key products, defining andlaunching formal global expansion initiatives relative to DEFINITY, evolving the international business unit model, fostering the adoption of TechneLiteLEU, and driving operational efficiencies throughout the Commercial organization.For Dr Orlandi, performance goals included: in addition to our EBITDA goals: providing strategic leadership for the flurpiridaz F18 program,supporting commercial activities via medical affairs, medical information, investigator trials and direct support with key opinion leaders, supportingpartnering efforts for flurpiridaz, CNA and VRI, and maintaining, safety, pharmacovigilance and global regulatory compliance.For Mr. Duffy, performance goals included: in addition to our EBITDA goals: leading consummation of corporate financing transactions, enhancingthe patent portfolio with an emphasis on DEFINITY, obtaining optimal results in our business interruption insurance litigation with Zurich, consummatingdevelopment pipeline and supply chain transactions, leading public disclosure and corporate compliance activities, and supporting the operating businessfrom a legal perspective.The Compensation Committee reviewed each executive’s performance relative to the goals set forth above and recognized significant achievementsand attainment of most individual objectives. The Compensation Committee concluded that cash incentives should be paid as detailed in the SummaryCompensation Table for each participating executive.Long-Term Equity Incentive AwardsIn connection with the Acquisition, the Board of Directors approved and adopted the Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan and theLantheus MI Holdings, Inc. 2013 Equity Incentive Plan, or the Equity Plans, which allow grants of equity awards and options for shares of Holdings. Thepurpose of the Equity Plans are to: • promote our long-term financial interests and growth by attracting and retaining management and other personnel and key service providers withthe 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. 140Table of ContentsWe look at competitive long-term equity incentive award values when assessing our compensation programs, as described above under “—Compensation Discussion and Analysis—Compensation Benchmarking”. In the five year period following the Acquisition, we issued large upfront stockoption grants that vested over time and with the achievement of certain performance goals in lieu of annual grants. In 2014, the Committee did not grant anyoptions to the management team other than the new hire grant options to our Chief Financial Officer.Options granted have an exercise price equal 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.Options are generally issued either as time based options, or the Time Vesting Options or EBITDA-based performance options, or the PerformanceVesting Options.The Performance Vesting Options are intended to motivate financial performance in line with investors’ outlook for performance during our first fiveyears. We chose EBITDA as the performance metric since it is a key driver of our valuation and for the reasons described above in “Annual Cash IncentiveCompensation.” 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 Services Agreement withAvista, dated as of January 8, 2008, and as from time to time in effect, 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 bonuses paidin fiscal year 2008; all extraordinary losses; less all extraordinary gains in each case determined in accordance with GAAP.The Time Vesting Options are also granted to align our executives with factors that drive the valuation of the Company and to aid in their long- termretention. The combination of time and performance-based vesting of these awards is designed to compensate our executive officers, including our namedexecutive officers, for their long-term commitment to us.All of our stock options are issued with provisions that join the optionees to the Lantheus Shareholder Agreement in the event of an exercise of theiroptions. The provisions for control, forfeiture and ownership of the Shareholder Agreements are designed to help ensure that the investors have received anappropriate return on their invested capital before executive officers receive significant value from these options.Options granted to Mr. Bakewell were 100% Time Vesting Options in which 339,367 options will vest ratably on the anniversary of his date ofemployment over a four year period and 113,122 options will cliff vest on the fourth anniversary of his date of employment.The EBITDA targets 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 an EBITDAtarget 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 and 2013 Equity Plans 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, 141Table of Contentschanges in accounting rules and other customary adjustment events. We believe these adjustments may be necessary in order to effectuate the intents andpurposes of our compensation plans and to avoid unintended consequences that are inconsistent with these intents and purposes. If our EBITDA is below theEBITDA target but is equal to at least 90% of the EBITDA target, then a percentage of the Performance Vesting Options vests in that year, calculated asfollows: (Incremental EBITDA over (10% of possible90% of EBITDA target)(90% of possiblevested Performance×+vested PerformanceVesting Options)(EBITDA target—10% ofVesting Options)EBITDA target)Our EBITDA target relative to performance vesting of options in 2014 was $64.5 million. In the fiscal year ended December 31, 2014, our actualEBITDA relative to performance vesting of options in 2014 was $70.2 million.Our EBITDA target relative to performance vesting of options in 2013 was $49.5 million. In the fiscal year ended December 31, 2013, our actualEBITDA relative to performance vesting of options in 2013 was $46.4 million. As a result, 94% of the Performance Vesting Options vested in 2013. A carryback of $5.7 million was applied from 2014 to Performance Vesting Options in 2013 which resulted in those options becoming 100% vested.For additional information concerning the options awarded in 2014, 2013 and 2012, see “—2014 Grants of Plan-Based Awards” and “—OutstandingEquity Awards at 2014 Fiscal Year-End.”Other BenefitsRetirement PlansWe offer a 401(k) qualified defined contribution retirement plan for U.S.-based employees, including named executive officers, with a 4.5% companymatch of the contributor’s base salary.Personal BenefitsExcept as otherwise discussed herein, other welfare and employee-benefit programs are the same for all of our eligible employees, including our namedexecutive officers. Our other named executive officers do not receive additional benefits outside of those offered to our other employees.Ownership GuidelinesIn the event of exercise of an option grant, the resulting shares are subject to the provisions of the Employee Shareholder Agreement which restrictstransfer and voting rights to ensure alignment with the initial investors. For example, Employee Shareholders (as defined in the Employee ShareholderAgreement) are restricted from transferring any of our securities, subject to certain exceptions outlined in the Employee Shareholder Agreement. We do notmaintain formal ownership guidelines.Severance and Change in Control BenefitsWe 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. 142Table of ContentsMr. Bailey’s employment agreement provides for 12 months of salary, bonus and health benefit subsidies in the event of termination by the companywithout cause or by Mr. Bailey with good reason. If his termination under these provisions is within 12 months following a change of control, the agreementprovides for 12 months of 2 times his salary, 2 times in bonus and 12 months of certain benefit subsidies. See “—Potential Payment Upon Termination orChange in Control.”All of our other current named executive officers are covered by employment agreements which provide for 12 months of salary, prorated bonus andcertain benefit subsidies in the event of termination by the company without cause. If their termination is by the company without cause or by the executivefor good reason within 12 months following a change of control, the agreements provides for 12 months salary, full target bonus and 12 months of certainbenefit subsidies. See “—Potential Payment Upon Termination or Change in Control.”Tax and Accounting ImplicationsWe were not subject to Section 162(m) of the Internal Revenue Code. For 2013 and beyond, the Compensation Committee will consider the impact ofSection 162(m) in the design of its compensation strategies. Under Section 162(m), compensation paid to executive officers in excess of $1,000,000 cannotbe taken by us as a tax deduction unless the compensation qualifies as performance-based compensation. We have determined, however, that we will notnecessarily seek to limit executive compensation to amounts deductible under Section 162(m) if such limitation is not in the best interests of ourstockholders. While considering the tax implications of its compensation decisions, the Compensation Committee believes its primary focus should be toattract, 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 the requirements ofASC 718.Compensation Risk AssessmentIn 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 and policies.Although a significant portion of our executive compensation program is performance-based, the Compensation Committee has focused on aligning ourcompensation 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 on us. 143Table of ContentsSummary Compensation TableThe following table sets forth certain information with respect to compensation for the years ended December 31, 2014, 2013 and 2012 earned by orpaid to our named executive officers. Name and Principal Position Year Salary($) Bonus($)(1) OptionAwards($)(2)(3) Non-EquityIncentive PlanCompensation($)(4) All OtherCompensation($)(5)(6)(7) Total($) Jeffrey Bailey 2014 $484,615 $— $— $635,000 $39,269 $1,158,884 President & ChiefExecutive Officer 2013 $401,538 $— $2,440,000 $500,000 $79,281 $3,420,819 2012 (New hire in 2013) John Bakewell 2014 $215,385 $— $744,344 $139,000 $28,551 $1,127,280 Chief FinancialOfficer 20132012 (New hire in 2014) John Golubieski 2014 $— $— $— $— $— $— (Former) Interim ChiefFinancial Officer 2013 $— $70,000 $— $— $120,415 $190,415 2012 (New hire in 2013) Mary Anne Heino 2014 $353,846 $— $— $210,000 $45,052 $608,898 Chief CommercialOfficer 2013 $228,846 $— $312,500 $112,000 $150,432 $803,778 2012 (New hire in 2013) Dr. Cesare Orlandi 2014 $372,616 $— $— $179,000 $13,010 $564,626 Chief Medical Officer 2013 $287,787 $30,000 $211,750 $108,000 $9,172 $646,709 2012 (New hire in 2013) Michael Duffy 2014 $328,154 $— $— $167,000 $9,215 $504,369 Vice President, GeneralCounsel & Secretary 2013 $304,581 $— $177,100 $129,000 $10,876 $621,557 2012 $268,163 $— $— $— $248,933 $517,096 (1)Mr. Golubieski was awarded a bonus in recognition of his contributions as interim Chief Financial Officer in 2013. Dr. Orlandi was granted a $30,000sign-on bonus to offset certain reimbursements required of his previous employer.(2)Mr. Bakewell received initial stock option grants in conjunction with his employment offer in 2014. Mr. Bailey, Ms. Heino and Dr. Orlandi receivedinitial stock option grants in conjunction with their employment offer in 2013. Dr. Orlandi and Mr. Duffy were granted supplemental grants in August2013 in recognition of their performance and to improve our competitive position.(3)Includes the grant date fair value of the stock option awards granted during the fiscal years ended December 31, 2014, 2013 and 2012, in accordancewith ASC 718 with respect to options to purchase shares of our common stock awarded to the named executive officers in 2014, 2013 and 2012 underour 2008 and 2013 Equity Plans. See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—CriticalAccounting Policies and Estimates—Accounting for Stock-Based Compensation.”(4)For 2014, the Compensation Committee awarded bonuses to Mr. Bailey, Mr. Bakewell, Ms. Heino, Dr. Orlandi, and Mr. Duffy under the Bonus Plan.For 2013, the Compensation Committee awarded bonuses to Mr. Bailey, Ms. Heino, Dr. Orlandi, and Mr. Duffy under the Bonus Plan. For 2012,Mr. Duffy did not earn a bonus under the Bonus Plan.(5)For Mr. Bailey, Mr. Bakewell, Ms. Heino, Dr. Olandi and Mr. Duffy, the amounts reflect matching contributions to our defined contribution retirementplans in 2014 of $9,750, $692, $11,700, $11,700 and $7,905, respectively. For Mr. Bailey, Ms. Heino, Dr. Orlandi, and Mr. Duffy, the amounts reflectmatching contributions to our defined contribution retirement plans in 2013 of $7,057, $2,877, $4,853 and $9,566, respectively. For Mr. Duffy, theamounts reflect matching contributions to our defined contribution retirement plans in 2012 of $3,082. 144Table of Contents(6)For Mr. Bailey, Mr. Bakewell, Ms. Heino, Dr. Orlandi and Mr. Duffy, the amounts reflect employer contributions to our long term disability insurancepremiums in 2014 of $1,310, $706, $1,310, $1,310 and $1,310, respectively. For Mr Bailey, Ms. Heino, Dr. Orlandi, and Mr. Duffy, the amounts reflectemployer contributions to our long term disability insurance premiums in 2013 of $1,159, $907, $1,058 and $1,310, respectively. For Mr. Duffy, theamounts reflect employer contributions to our long term disability insurance premiums in 2012 of $1,310.(7)As part of Mr. Bailey’s agreement he had been compensated for his commuting expenses from his former home in New Jersey and temporary housingexpenses in Massachusetts, and that compensation arrangement terminated as of March 31, 2014. Included in his “All Other Compensation” is $28,209and $71,065 for these expenses which included a tax gross up on aggregate basis in 2014 and 2013, respectively. As part of Mr. Bakewell’s agreementhe has been compensated for basic transition-related expenses in connection with temporary housing expenses in Massachusetts. Included in his “AllOther Compensation” is $27,153 for these expenses which included a tax gross up on aggregate basis in 2014. As part of Ms. Heino’s agreement shewas reimbursed for certain relocation expenses from her former home in New Jersey to Massachusetts. Included in her “All Other Compensation” is$32,042 and $146,639 for taxable expenses associated with her home sales, temporary housing and physical move which includes the associated taxgross up on an aggregate basis for 2014 and 2013, respectively. As part of Dr. Orlandi’s agreement he was reimbursed for certain relocation expenses.Included in his “All Other Compensation” is $3,261 for taxable expenses associated with the physical move which includes the associated tax gross upon an aggregate basis for 2013.2014 Grants of Plan-Based AwardsThe following table sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 2014 with respect to thenamed executive officers. Estimated Future Payouts Under Non-EquityIncentive Plan Awards Estimated Future PayoutsUnder Equity Incentive PlanAwards All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions(#) Exercise orBase Priceof OptionAwards($/Sh) Name Grant Date Threshold($)(1) Target($)(2) Maximum($)(3) Threshold(#) Target(#) Maximum(#) Jeffrey Bailey $250,000 $500,000 $900,000 John Bakewell $69,699 $139,397 $250,915 12/31/14(4) 339,367 $4.42 12/31/14(4) 113,122 $4.42 John Golubieski — — — Mary Anne Heino $81,000 $162,000 $291,600 Cesare Orlandi $75,200 $150,400 $270,720 Michael Duffy $66,800 $133,600 $240,480 (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 shown in the “Target” column is the potential cash incentive award given to our named executive officers if the EBITDA target is hit in2014. For Mr. Bailey that amount is 100% of his respective 2014 base salary. For Mr. Bakewell that amount is 60% of his respective 2014 base salaryprorated for his time in service during 2014. For Ms. For Ms. Heino, Dr. Orlandi and Mr. Duffy that amount is 45%, 40% and 40% of their respective2014 base salaries. See “—Compensation Discussion and Analysis—Elements of Compensation—Annual Cash Incentive Compensation.”(3)The amount shown in the “Maximum” column is 180% of the amount shown in the “Target” column. Pursuant to the Bonus Plan, if we achieve anEBITDA level that is at the stretch target, the Bonus Plan specifies a cap of 120% target with an individual multiplier capped at 150% for amountsachieved above the 145Table of Contents Target. The maximum payment from the Bonus Pool for Mr. Bailey is 180% of his base salary. The maximum for all other participants, including ourother named executive officers, ranges from 71% to 82% of their respective base salaries. See “—Compensation Discussion and Analysis—Elements ofCompensation—Annual Cash Incentive Compensation.”(4)The supplemental options granted to Mr. Bakewell were 100% Time Vesting Option in which 339,367 options will vest ratably on the anniversary ofhis date of employment over a four year period and 113,122 options will cliff vest on the fourth year of his date of employment. See “—CompensationDiscussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Awards.”Outstanding Equity Awards at 2014 Fiscal Year-EndThe following table includes certain information with respect to options held by the named executive officers as of December 31, 2014. Option Awards Name Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable Equity IncentivePlan Awards:Securities ofUnderlyingUnexercisedUnearnedOptions (#) OptionExercisePrice($) OptionExpirationDate Jeffrey Bailey Stock Options(2) 239,583 260,417 500,000 $6.80 05/07/23 John Bakewell Stock Options(1) — 339,367 — $4.42 12/31/2024 Stock Options(1) — 113,122 — $4.42 12/31/2024 John Golubieski(5) — — — — — Mary Anne Heino Stock Options(2) 31,250 46,875 46,875 $6.80 04/14/23 Cesare Orlandi Stock Options(2) 18,750 28,125 28,125 $7.51 03/03/23 Stock Options(3) 6,250 18,750 — $6.64 08/04/23 Michael Duffy Stock Options(3) 17,500 52,500 — $6.64 08/04/23 Stock Options(4) 173,250 — 76,750 $2.00 04/03/18 (1)The options granted to Mr. Bakewell in conjunction with his employment offer are 100% Time Vesting Options. 339,367 Time Vesting Options willvest ratably on the anniversary of his date of employment over a four year period and 113,122 Time Vesting Options will cliff vest on the fourth year ofhis date of employment. See “—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Awards.”(2)The options granted to Mr. Bailey in conjunction with his employment offer are 50% Time Vesting Options and 50% EBITDA-based performanceoptions. Mr. Bailey’s Time Vesting Options vest ratably each month over a four year period from his date of hire; the options granted to Ms. Heino andDr. Orlandi in conjunction with their employment offers vest ratably on the anniversary of grant date over a four year period; 50% are Time Vestingand Options and 50% are EBITDA-based performance options. See “—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Awards.”(3)In 2013, the supplemental options granted to Mr. Duffy and Dr. Orlandi were 100% Time Vesting Option which will vest ratably on the anniversary ofgrant date over a four year period. 146Table of Contents(4)Relative to Mr. Duffy’s grant in 2008, 100% of his Time Vesting Options were vested as of December 31, 2013 with 20% vesting in each of January2009, 2010, 2011, 2012 and 2013. Upon the Compensation Committee’s determination that we achieved the EBITDA performance targets, 20% of thePerformance Vesting Options vested in April 2009 and 18.6% vested in April 2010. We did not meet our EBITDA targets in 2010, 2011 or 2012, and assuch, none of the Performance Vesting Options vested for those years. As EBITDA targets were not met for 2012, these options will remain unvested,subject to other vesting opportunities under the 2008 Equity Plan.(5)As a consultant and interim CFO, Mr. Golubieski has not been granted equity in the company (see “Mr. Golubieski’s Consulting Agreement”).No other named executive officers exercised any options during 2014. We do not offer any stock awards, other than stock options, from which vestingwould occur.2014 Pension BenefitsWe 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% employer matchof the contributor’s salary and a corresponding international plan.Nonqualified Deferred CompensationWe do not offer our executives any nonqualified deferred compensation.Potential Payment Upon Termination or Change in ControlThe information below describes and quantifies certain compensation that would become payable under certain named executive officer’s employmentagreements if, as of December 31, 2014, his or her employment had terminated or there was a change in control. Due to the number of factors that affect thenature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that couldaffect these amounts include the timing during the year of any such event.Employment Agreements and ArrangementsJeffrey BaileyMr. Bailey’s employment agreement provides for 12 months of salary of $500,000, a bonus of $500,000 and health benefit subsidies of $21,289 in theevent of termination by the company without cause or by Mr. Bailey with good reason totaling to $1,021,289. If his termination under these provisions iswithin 12 months following a change of control, the agreement provides for 12 months of two times his salary in the amount of $1,000,000, two times inbonus payment of $1,000,000 and 12 months of certain benefit subsidies of $31,934 totaling to $2,031,934.Other Active Named Executive OfficersThe following table sets forth certain information with respect to agreements for Mr. Bakewell, Ms. Heino, Dr. Orlandi and Mr. Duffy who are coveredby employment agreements which provide for 12 months of salary, prorated bonus and 12 months of certain benefit subsidies in the event of termination bythe company without cause. Name Salary Bonus Benefits Total John Bakewell $400,000 $140,000 $21,289 $561,289 Mary Anne Heino $360,000 $162,000 $21,289 $543,289 Cesare Orlandi $376,000 $150,400 $14,908 $541,308 Michael Duffy $334,000 $133,600 $22,652 $490,252 147Table of ContentsIf their termination is by the company without cause or by the executive for good reason within 12 months following a change of control, theagreements provides for 12 months salary, full target bonus and 12 months of certain benefit subsidies. Name Salary Bonus Benefits Total John Bakewell $400,000 $240,000 $21,289 $661,289 Mary Anne Heino $360,000 $162,000 $21,289 $543,289 Cesare Orlandi $376,000 $150,400 $14,908 $541,308 Michael Duffy $334,000 $133,600 $22,652 $490,252 The Equity PlansThe Equity Plans and each individual Stock Option Agreement provides for accelerated vesting of both Time Vesting Options and PerformanceVesting Options granted under the 2008 and 2013 Equity Plans upon a change of control if net cumulative cash proceeds received by our investors exceedcertain multiples of their initial investment. If such a change in control occurred on December 31, 2014, each named executive officer’s unvested TimeVesting Options and Performance Vesting Options would immediately vest and become exercisable. The aggregate dollar value of unvested stock optionsheld by such named executive officer on December 31, 2014 as listed below. Name Aggregate DollarValue of Options(1) Jeffrey Bailey $— John Bakewell $— Mary Anne Heino $— Cesare Orlandi $— Michael Duffy $185,735 (1)The aggregate dollar value is the difference between the fair market value of shares of common stock on December 31, 2014 based upon an internalvaluation model and the per share exercise price of each option, multiplied by the number of shares subject to the unvested option.Director CompensationThe compensation paid to Messrs. Bailey, our President and CEO, and Directors, is reported in the Summary Plan Compensation Table as they werepaid only as named executive officers. We do not compensate our board members with per meeting fees. Our directors are reimbursed for any expensesincurred in connection with their services and as detailed in the table and notes below. Name Fees Earned orPaid in Cash($) All OtherCompensation($) Total($) Brian Markison(1) $75,000 $69,852 $144,852 David Burgstahler(2) $— $— $— Samuel Leno(3) $48,750 $32,930 $81,680 Dr. Patrick O’Neill(4) $37,500 $34,595 $72,095 Sriram Venkataraman(2) $— $— $— (1)On January 23, 2013, Mr. Markison was appointed Non-Executive Chairman of the Board. For 2014, Mr. Markison was compensated with an annualretainer for his services on the Board of Directors of $100,000, paid in quarterly increments. On January 23, 2014, Mr. Markison received a grant of32,949 time vesting option shares that have a ten- year term and vest monthly over a 12-month basis, and on each anniversary date of his appointment,in consideration of his services as Chairman and for so long as he 148Table of Contents serves in that capacity, he will be granted a stock option to purchase $200,000 worth of common stock, calculated as the multiple of the then fairmarket value times the number of shares necessary to equal $200,000.(2)Messrs. Burgstahler and Venkataraman are Principals of Avista and do not receive any direct compensation for their services as Directors. We payAvista a management fee of $1,000,000 annually pursuant to the Advisory Services and Management Agreement, dated as of January 8, 2008. See“Item 13—Certain Relationships and Related Party Transactions, and Director Independence—Transactions with Related Persons—Advisory andMonitoring Services Agreement.”(3)Samuel Leno is compensated with an annual retainer for his services on the Board of Directors of $50,000, paid in quarterly increments. In addition,Mr. Leno receives $15,000, paid in quarterly increments for his role as Chairman of the Audit Committee. Effective May 16, 2014, Mr. Leno received agrant of 17,241 time vesting option shares that have a ten- year term and vest monthly over a 12-month basis, and on each anniversary date of hisappointment, in consideration of his services as a Director of Holdings and for so long as he serves in that capacity, he will be granted a stock option topurchase $100,000 worth of common stock, calculated as the multiple of the then fair market value times the number of shares necessary to equal$100,000.(4)Dr. Patrick O’Neill is compensated with an annual retainer for his services on the Board of Directors of $50,000, paid in quarterly increments. EffectiveFebruary 26, 2014, Dr. O’Neill received a grant of 16,474 time vesting option shares that have a ten- year term and vest monthly over a 12-month basis,and on each anniversary date of his appointment, in consideration of his services as a Director of Holdings and for so long as he serves in that capacity,he will be granted a stock option to purchase $100,000 worth of common stock, calculated as the multiple of the then fair market value times thenumber of shares necessary to equal $100,000.Compensation Committee Interlocks and Insider ParticipationDuring 2014, the members of our Compensation Committee were Messrs. Burgstahler and Markison. Mr. Burgstahler is the President of Avista.Mr. Markison is a Healthcare Industry Executive with Avista. Avista provides us with advisory services pursuant to the Advisory Services and MonitoringAgreement (as defined below) and has entered into other transactions with us. See “Item 13—Certain Relationships and Related Person Transactions, andDirector Independence—Transactions with Related Persons—Advisory and Monitoring Services Agreement.”Compensation Committee ReportOur Compensation Committee has reviewed and discussed the “Item 11—Executive Compensation—Compensation Discussion and Analysis” sectionwith 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 fiscal year endedDecember 31, 2014.Respectfully submitted by the Compensation Committee of the Board of Directors.David BurgstahlerBrian MarkisonThe 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. 149Table of ContentsItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersPrincipal StockholdersHoldings 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, collectively ownapproximately 98.4% of Holdings’ issued and outstanding capital stock. Avista Capital Partners GP, LLC ultimately exercises voting and dispositive powerover the shares held by Avista Capital Partners, L.P., Avista Capital Partners (Offshore), L.P. and ACP-Lantern Co- Invest, LLC. Voting and dispositiondecisions at Avista Capital Partners GP, LLC with respect to such shares are made by an investment committee, the members of which are Thompson Dean,Steven Webster, David Burgstahler and David Durkin. In connection with the Acquisition, certain members of management purchased shares of Holdings’common stock equaling approximately 0.5% of Holdings’ issued and outstanding capital stock.Securities Authorized for Issuance Under Equity Compensation PlansThe following table gives information as of December 31, 2014 about the common stock that may be issued under all of our existing equitycompensation plans. Plan 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 plans approved by securityholders 5,071,790 $4.59 465,670 Equity compensation plans not approved bysecurity holders(1) — — — Total 5,071,790 $4.59 465,670 (1)Represents the Lantheus MI Holdings, Inc. 2008 and 2013 Equity Incentive Plans.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe 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 the review,approval or ratification of such transactions.Transactions with Related PersonsShareholders AgreementsIn connection with the Acquisition, Holdings entered into (i) a Shareholders Agreement with the Avista Entities and Don Kiepert, our prior Presidentand Chief Executive Officer, as Management Shareholder, dated January 8, 2008 and subsequently amended on February 26, 2008, or the Initial ShareholdersAgreement, and (ii) an Employee Shareholders Agreement with the Avista Entities and certain employee shareholders named therein, dated as of May 30,2008, or the Employee Shareholders Agreement and, collectively with the Initial Shareholders Agreement, the Shareholders Agreements. Messrs. Markison,Bailey and Leno and Dr. O’Neill joined as parties to the Initial Shareholders Agreement. The Shareholders Agreements govern the parties’ respective rights,duties and obligations with respect to the ownership of Holdings securities. The Initial Shareholders Agreement includes provisions regarding tag-alongrights in favor of the Management Shareholders 150Table of Contents(which terminate upon the consummation of an initial public offering), demand registration rights in favor of the Avista Entities and piggy-back registrationrights in favor of the Avista Entities and the Management Shareholders. Both Shareholders Agreements contain provisions for drag-along rights in favor ofthe Avista Entities (which terminate upon the consummation of an initial public offering), and regarding the right of Holdings to repurchase shares held byManagement Shareholders or employee shareholders who cease to be employed by Holdings, the Company or any of their subsidiaries (which terminate oneyear after the consummation of an initial public offering). The Shareholders Agreements contain restrictions on the ability of the Management Shareholdersand employee shareholders to transfer shares of Holdings that they own, including provisions that only allow Management Shareholders and employeeshareholders to transfer shares of Holdings for one year following the consummation of an initial public offering, but only in proportion with any transfers bythe Avista Entities (which terminate one year after the consummation of an initial public offering). Pursuant to the option award agreements betweenHoldings and its options holders, as a condition to a valid exercise of any such options, the optionee is obligated to join either the Initial ShareholdersAgreement or the Employee Shareholders Agreement, as applicable, with respect to the shares of Holdings it is to receive upon exercise of any such option.Following the consummation of an initial public offering, Avista will have the right to nominate two directors to the Board for so long as it owns 25% ormore of our issued and outstanding common stock and the right to nominate one director for election to the Board for so long as it beneficially owns 10% ormore, but less than 25%, of our issued and outstanding common stock.Advisory and Monitoring Services AgreementIn connection with the closing of the Acquisition, LMI entered into an advisory services and monitoring agreement with Avista Capital Holdings, L.P.,or Avista Capital Holdings, dated as of January 8, 2008, or the Advisory Services and Monitoring Agreement, pursuant to which ACP LanternAcquisition, 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 theconsulting and advisory and monitoring services to us, our subsidiaries and our parent companies, in connection with the Acquisition. In addition, theagreement provided for the payment of an annual fee equal to $1 million as consideration for ongoing advisory services. Under the agreement, to the extentof any future transaction entered into by us or our affiliates, Avista Capital Holdings was entitled to receive an additional fee that is reasonable andcustomary for the services it provided in connection with such a future transaction. In addition, we are required to pay directly, or reimburse Avista CapitalHoldings for, its out-of-pocket expenses in connection with its performance of services under the Advisory Services and Monitoring Agreement. TheAdvisory Services and Monitoring Agreement has a seven-year term and automatically renews on each anniversary of its execution date such that it has aseven-year term from the date of each such renewal.INC Research Master Services AgreementIn 2012, we entered into a Master Contract Research Organization Services Agreement with INC Research, LLC, or INC, to provide clinicaldevelopment services in connection with the flurpiridaz F 18 Phase 3 program. The agreement was terminated during May 2014. The agreement had a term offive years, and we incurred costs associated with this agreement of approximately $0.5 million and $0.9 million in the years ended December 31, 2013 and2012, respectively. Avista and its affiliates are principal owners of both INC and the Company.VWR Scientific PurchasesWe purchase inventory supplies from VWR Scientific, VWR. Avista and certain affiliates, our principal stockholder, is a minority owner of VWR. Wemade purchases of approximately $0.5 million, $0.3 million and $0.3 million during each of the years ended December 31, 2014, 2013 and 2012. 151Table of ContentsMarshWe retain Marsh for insurance brokering and risk management. In November 2013, Donald Bailey, brother of our President and Chief ExecutiveOfficer, Jeffrey Bailey, was appointed head of sales for Marsh’s U.S. and Canada division. In 2014, we paid Marsh approximately $0.3 million.Director IndependenceAs disclosed in “Item 10—Directors, Executive Officers and Corporate Governance,” although not formally considered by the Board of Directors ofHoldings because our securities are not registered or traded on any national securities exchange, we believe that Mr. Markison, Mr. Leno and Dr. O’Neillwould be considered independent for our Boards of Directors, that Mr. Leno would be considered independent for our Audit Committee and thatMr. Markison would be considered independent for our Compensation Committee and Nominating and Governance Committee, based upon the listingstandards of the New York Stock Exchange.Item 14. Principal Accountant Fees and ServicesDeloitte & Touche LLP, or Deloitte, serves as our independent registered public accounting firm. The following table presents fees paid for the audit ofour annual consolidated financial statements and all other professional services rendered by Deloitte for the years ended December 31, 2014 and 2013: Year Ended December 31, 2014 2013 Audit Fees $1,236,402 $1,439,170 Audit-Related Fees — — Tax Fees 6,800 — Total Fees$1,243,202 $1,439,170 Audit FeesThese 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 registered publicaccounting firm in connection with statutory or regulatory filings or engagements. All other fees consist primarily of the reimbursement of expensesassociated with completion of services noted above.Audit-Related FeesThese 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 attestation services for such matters as required for consents related tofinancings, registration statements and other filings with the Commission.Tax FeesThese are fees billed for professional services for tax compliance, tax advice and tax planning services.Pre-Approval PoliciesThe 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-relatedfees, tax fees and all other similar fees. 152Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a)(1) Financial StatementsIncluded in Part II of this annual report: Page Report of Independent Registered Public Accounting Firm 85 Consolidated Balance Sheets as of December 31, 2014 and 2013 86 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2014, 2013 and 2012 87 Consolidated Statements of Stockholder’s (Deficit) Equity for the Years Ended December 31, 2014, 2013 and 2012 88 Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012 89 Notes to Consolidated Financial Statements as of and for the Years Ended December 31, 2014, 2013 and 2012 90 (a)(2) SchedulesNone. 153Table of Contents(a)(3) Exhibits Exhibit Description 3.1 Certificate of Incorporation of Lantheus Medical Imaging, Inc., as amended (incorporated by reference to Exhibit 3.1 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 3.2 Second Amended and Restated By-Laws of Lantheus Medical Imaging, Inc (incorporated by reference to Exhibit 3.2 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.1 Indenture, dated as of May 10, 2010, among Lantheus Medical Imaging, Inc., Lantheus MI Intermediate, Inc. and Lantheus MI RealEstate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form 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. andLantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to LantheusMedical Imaging, Inc.’s Current Report 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. andLantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to LantheusMedical Imaging, Inc.’s Current Report 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. andLantheus MI Real Estate, LLC, as guarantors, and Jefferies & Company, Inc. (incorporated by reference to Exhibit 4.2 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.5 Registration Rights Agreement, dated March 21, 2011, by and among Lantheus Medical Imaging, Inc., Jefferies & Company, Inc., asrepresentative of the initial purchasers and the guarantors party thereto (incorporated by reference to Exhibit 4.2 to Lantheus MedicalImaging, Inc.’s Current Report on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). 4.6 Form of 9.750% Senior Notes due 2017 (included in Exhibit 4.1).10.1 Advisory Services and Monitoring Agreement, dated January 8, 2007, by and between ACP Lantern Acquisition, Inc. (now known asLantheus Medical Imaging, Inc.) and Avista Capital Holdings, L.P. (incorporated by reference to Exhibit 10.3 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.2 Amended and Restated Shareholders Agreement, dated as of February 26, 2008 among Lantheus MI Holdings, Inc., Avista CapitalPartners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain management shareholders named therein(incorporated by reference to Exhibit 10.4 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commissionon October 6, 2010 (file number 333-169785)).10.3 Employee Shareholders Agreement, dated as of May 8, 2008, among Lantheus MI Holdings, Inc., Avista Capital Partners, L.P., Avista CapitalPartners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain employee shareholders named therein (incorporated by reference toExhibit 10.5 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (filenumber 333-169785)). 154Table of ContentsExhibit Description10.4† Sales Agreement, dated as of April 1, 2009, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated byreference to Exhibit 10.9 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission onDecember 23, 2010 (file number 333-169785)).10.5† Amendment No. 1 to Sales Agreement, dated as of January 1, 2010, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.10 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with theCommission on December 1, 2010 (file number 333-169785)).10.6† Amendment No. 2 to Sales Agreement, dated as of January 1, 2010, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2011 (file number 333-169785)).10.7† Purchase and Supply Agreement, dated as of April 1, 2010, between Lantheus Medical Imaging, Inc. and Nordion (Canada) Inc. (formerlyknown as MDS Nordion, a division of MDS (Canada) Inc.) (incorporated by reference to Exhibit 10.12 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)).10.8† Amendment No. 1 to the Purchase and Supply Agreement, dated as of December 1, 2010, between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (incorporated by reference to Exhibit 10.13 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for thefiscal year ended December 31, 2010 (file number 333-169785)).10.9† Amendment No. 1 to the Amended and Restated Supply Agreement (Thallium and Generators), dated as of December 29, 2009 betweenLantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.26 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on December 1, 2010 (file number 333-169785)).10.10† Amended and Restated Supply Agreement (Thallium and Generators), dated October 1, 2004, by and between Lantheus MedicalImaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.14 to Lantheus Medical Imaging, Inc.’s RegistrationStatement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)).10.11† Distribution Agreement, dated as of October 31, 2001, by and between Bristol-Myers Squibb Pharma Company (now known as LantheusMedical Imaging, Inc.) and Medi-Physics Inc., doing business as Amersham Health (incorporated by reference to Exhibit 10.16 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on December 29, 2010 (file number 333-169785)).10.12† First Amendment to Distribution Agreement, dated as of January 1, 2005, by and between Bristol-Myers Squibb Medical Imaging, Inc.(formerly known as Bristol-Myers Squibb Pharma Company and now known 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)).10.13 Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.18 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.14 Amendment No. 1 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.19 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 155Table of ContentsExhibit Description10.15 Amendment No. 2 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.20 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.16 Form of Option Grant Award Agreement (incorporated by reference to Exhibit 10.21 to Lantheus Medical Imaging, Inc.’s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.17 Lantheus Medical Imaging, Inc. Severance Plan Policy (incorporated by reference to Exhibit 10.24 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.18† Second Amendment, effective as of January 1, 2012, to the Distribution Agreement, dated as of October 31, 2001, by and between LantheusMedical Imaging, Inc., formerly known as Bristol-Myers Squibb Medical Imaging, Inc., and Medi-Physics, Inc., doing business as G.E.Healthcare Inc. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for thequarterly period ended March 31, 2012 (file number 333-169785)).10.19† Manufacturing and Supply Agreement, dated as of February 1, 2012, for the manufacture of DEFINITY® by and between Lantheus MedicalImaging, Inc. and Jubilant HollisterStier LLC (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.’s QuarterlyReport on Form 10-Q for the quarterly period ended March 31, 2012 (file number 333-169785)).10.20† First Amendment to Manufacturing and Supply Agreement, dated as of May 3, 2012, for the manufacture of DEFINITY® by and betweenLantheus Medical Imaging, Inc. and Jubilant HollisterStier LLC (incorporated by reference to Exhibit 10.1 to Lantheus MedicalImaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (file number 333-169785)).10.21† Amendment No. 2, dated as of October 15, 2012, to the Purchase and Supply Agreement between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for theyear ended December 31, 2012 (file number 333-169785)).10.22† Amendment No. 3, effective as of October 1, 2012, to Sales Agreement between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2012 (file number 333-169785)).10.23† Amendment No. 2, effective as of December 27, 2012, to the Amended and Restated Supply Agreement (Thallium and Generators) betweenLantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.1 to Lantheus MedicalImaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 (file number 333-169785)).10.24 Separation Agreement, dated February 19, 2013, by and between Lantheus Medical Imaging, Inc. and Don Kiepert (incorporated by referenceto Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 (filenumber 333-169785)).10.25 Fission Mo-99 Supply Agreement, effective January 1, 2013, by and between Lantheus Medical Imaging, Inc. and the Institut National desRadioelements (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for thequarterly period ended March 31, 2013 (file number 333-169785)).10.26 Lantheus MI Holdings, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’sCurrent Report on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)). 156Table of ContentsExhibit Description10.27 Form of Employee Option Grant Award Agreement (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.’s CurrentReport on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)).10.28 Form of Non-Employee Director Option Grant Award Agreement (incorporated by reference to Exhibit 10.3 to Lantheus MedicalImaging, Inc.’s Current Report on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)).10.29 Employment Agreement, dated May 8, 2013, by and between Lantheus Medical Imaging, Inc. and Jeffrey Bailey (incorporated by reference toExhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 (filenumber 333-169785).10.30 Amended and Restated Credit Agreement date as of July 3, 2013, by and among Lantheus Medical Imaging Inc., Lantheus MIIntermediate Inc., Lantheus MI Real Estate, LLC, the lenders from time to time party thereto, and Well Fargo Bank, National Associationcollateral agent and administrative agent and as sole lead arranger, book runner and syndication agent (incorporated by reference toExhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (filenumber 333-169785)).10.32 Employment Agreement, effective August 12, 2013, by and between Lantheus Medical Imaging, Inc. and Mary Anne Heino (incorporated byreference to Exhibit 10.47 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013 (filenumber 333-169785)).10.33 Employment Agreement, effective August 12, 2013, by and between Lantheus Medical Imaging, Inc. and Cesare Orlandi (incorporated byreference to Exhibit 10.48 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013 (filenumber 333-169785)).10.34 Amendment to Amended and Restated Credit Agreement, dated June 24, 2014, by and among Lantheus Medical Imaging Inc., Lantheus MIIntermediate Inc., Lantheus MI Real Estate, LLC, the lenders from time to time party thereto, and Wells Fargo Bank, National Associationcollateral agent and administrative agent and as sole lead arranger, book runner and syndication agent (incorporated by reference toExhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 (filenumber 333-169785)).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 to Exhibit 14.1 to Lantheus MedicalImaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 (file number 333-169785)).14.2 Lantheus Medical Imaging, Inc. Compliance Code. (incorporated by reference to Exhibit 14.2 to Lantheus Medical Imaging, Inc.’s AnnualReport on Form 10-K for the year ended December 31, 2010 (file number 333-169785)).21.1 Subsidiaries of Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. (incorporated by reference to Exhibit 21.1 to LantheusMedical Imaging, Inc.’s Annual Report on Form 10-K for the year ended 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 tosection 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 tosection 302 of the Sarbanes-Oxley Act of 2002. 157Table of ContentsExhibit Description 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 theSarbanes-Oxley Act of 2002.101.INS* XBRL Instance101.SCH* XBRL Taxonomy Extension Schema101.CAL* XBRL Taxonomy Extension Calculation101.DEF* XBRL Taxonomy Extension Definition101.LAB* XBRL Taxonomy Extension Labels101.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 and Exchange Commission. 158Table of ContentsSIGNATURESPursuant 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 signed on itsbehalf by the undersigned, thereunto duly authorized. LANTHEUS MEDICAL IMAGING, INC.By: /s/ JEFFREY BAILEYName: Jeffrey BaileyTitle: President and Chief Executive OfficerDate: March 4, 2015We, the undersigned directors and officers of Lantheus Medical Imaging, Inc., hereby severally constitute and appoint Jeffrey Bailey, John Golubieskiand Michael P. Duffy, and each of them individually, with full powers of substitution and resubstitution, our true and lawful attorneys, with full powers tothem and each of them to sign for us, in our names and in the capacities indicated below, any and all amendments to this Annual Report on Form 10-K filedwith the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and performeach and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do inperson, 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 byvirtue 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. Signature Title Date/S/ JEFFREY BAILEYJeffrey Bailey President, Chief Executive Officer and Director(Principal Executive Officer) March 4, 2015/S/ JOHN BAKEWELLJohn Bakewell Chief Financial Officer (Principal Financial Officer) March 4, 2015/S/ BRIAN MARKISONBrian Markison Chairman of the Board of Directors March 4, 2015/S/ DAVID BURGSTAHLERDavid Burgstahler Director March 4, 2015/S/ SAMUEL R. LENOSamuel R. Leno Director March 4, 2015/S/ PATRICK J. O’NEILLPatrick J. O’Neill Director March 4, 2015/S/ SRIRAM VENKATARAMANSriram Venkataraman Director March 4, 2015 159Table of ContentsEXHIBIT INDEX Exhibit Description 3.1 Certificate of Incorporation of Lantheus Medical Imaging, Inc., as amended (incorporated by reference to Exhibit 3.1 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 3.2 Second Amended and Restated By-Laws of Lantheus Medical Imaging, Inc (incorporated by reference to Exhibit 3.2 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.1 Indenture, dated as of May 10, 2010, among Lantheus Medical Imaging, Inc., Lantheus MI Intermediate, Inc. and Lantheus MI RealEstate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form 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. andLantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to LantheusMedical Imaging, Inc.’s Current Report 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. andLantheus MI Real Estate, LLC as guarantors, and Wilmington Trust FSB, as trustee (incorporated by reference to Exhibit 4.1 to LantheusMedical Imaging, Inc.’s Current Report 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. andLantheus MI Real Estate, LLC, as guarantors, and Jefferies & Company, Inc. (incorporated by reference to Exhibit 4.2 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 4.5 Registration Rights Agreement, dated March 21, 2011, by and among Lantheus Medical Imaging, Inc., Jefferies & Company, Inc., asrepresentative of the initial purchasers and the guarantors party thereto (incorporated by reference to Exhibit 4.2 to Lantheus MedicalImaging, Inc.’s Current Report on Form 8-K filed with the Commission on March 21, 2011 (file number 333-169785)). 4.6 Form of 9.750% Senior Notes due 2017 (included in Exhibit 4.1).10.1 Advisory Services and Monitoring Agreement, dated January 8, 2007, by and between ACP Lantern Acquisition, Inc. (now known asLantheus Medical Imaging, Inc.) and Avista Capital Holdings, L.P. (incorporated by reference to Exhibit 10.3 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)).10.2 Amended and Restated Shareholders Agreement, dated as of February 26, 2008 among Lantheus MI Holdings, Inc., Avista CapitalPartners, L.P., Avista Capital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain management shareholders named therein(incorporated by reference to Exhibit 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)).10.3 Employee Shareholders Agreement, dated as of May 8, 2008, among Lantheus MI Holdings, Inc., Avista Capital Partners, L.P., AvistaCapital Partners (Offshore), L.P., ACP-Lantern Co-Invest, LLC and certain employee shareholders named therein (incorporated byreference to Exhibit 10.5 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission onOctober 6, 2010 (file number 333-169785)). 160Table of ContentsExhibit Description 10.4† Sales Agreement, dated as of April 1, 2009, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes (Pty) Ltd. (incorporated byreference to Exhibit 10.9 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission onDecember 23, 2010 (file number 333-169785)). 10.5† Amendment No. 1 to Sales Agreement, dated as of January 1, 2010, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.10 to Lantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed withthe Commission on December 1, 2010 (file number 333-169785)). 10.6† Amendment No. 2 to Sales Agreement, dated as of January 1, 2010, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2011 (file number 333-169785)). 10.7† Purchase and Supply Agreement, dated as of April 1, 2010, between Lantheus Medical Imaging, Inc. and Nordion (Canada) Inc. (formerlyknown as MDS Nordion, a division of MDS (Canada) Inc.) (incorporated by reference to Exhibit 10.12 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). 10.8† Amendment No. 1 to the Purchase and Supply Agreement, dated as of December 1, 2010, between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (incorporated by reference to Exhibit 10.13 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K forthe fiscal year ended December 31, 2010 (file number 333-169785)). 10.9† Amendment No. 1 to the Amended and Restated Supply Agreement (Thallium and Generators), dated as of December 29, 2009 betweenLantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.26 to Lantheus MedicalImaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.10† Amended and Restated Supply Agreement (Thallium and Generators), dated October 1, 2004, by and between Lantheus MedicalImaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.14 to Lantheus Medical Imaging, Inc.’s RegistrationStatement on Form S-4 filed with the Commission on December 23, 2010 (file number 333-169785)). 10.11† Distribution Agreement, dated as of October 31, 2001, by and between Bristol-Myers Squibb Pharma Company (now known as LantheusMedical Imaging, Inc.) and Medi-Physics Inc., doing business as Amersham Health (incorporated by reference to Exhibit 10.16 toLantheus Medical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on December 29, 2010 (filenumber 333-169785)). 10.12† First Amendment to Distribution Agreement, dated as of January 1, 2005, by and between Bristol-Myers Squibb Medical Imaging, Inc.(formerly known as Bristol-Myers Squibb Pharma Company and now known 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 Statementon Form S-4 filed with the Commission on December 1, 2010 (file number 333-169785)). 10.13 Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.18 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.14 Amendment No. 1 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.19 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 161Table of ContentsExhibit Description 10.15 Amendment No. 2 to Lantheus MI Holdings, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit 10.20 to LantheusMedical Imaging, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.16 Form of Option Grant Award Agreement (incorporated by reference to Exhibit 10.21 to Lantheus Medical Imaging, Inc.’s RegistrationStatement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.17 Lantheus Medical Imaging, Inc. Severance Plan Policy (incorporated by reference to Exhibit 10.24 to Lantheus Medical Imaging, Inc.’sRegistration Statement on Form S-4 filed with the Commission on October 6, 2010 (file number 333-169785)). 10.18† Second Amendment, effective as of January 1, 2012, to the Distribution Agreement, dated as of October 31, 2001, by and betweenLantheus Medical Imaging, Inc., formerly known as Bristol-Myers Squibb Medical Imaging, Inc., and Medi-Physics, Inc., doing businessas G.E. Healthcare Inc. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q forthe quarterly period ended March 31, 2012 (file number 333-169785)). 10.19† Manufacturing and Supply Agreement, dated as of February 1, 2012, for the manufacture of DEFINITY® by and between LantheusMedical Imaging, Inc. and Jubilant HollisterStier LLC (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.’sQuarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 (file number 333-169785)). 10.20† First Amendment to Manufacturing and Supply Agreement, dated as of May 3, 2012, for the manufacture of DEFINITY® by and betweenLantheus Medical Imaging, Inc. and Jubilant HollisterStier LLC (incorporated by reference to Exhibit 10.1 to Lantheus MedicalImaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (file number 333-169785)). 10.21† Amendment No. 2, dated as of October 15, 2012, to the Purchase and Supply Agreement between Lantheus Medical Imaging, Inc. andNordion (Canada) Inc. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for theyear ended December 31, 2012 (file number 333-169785)). 10.22† Amendment No. 3, effective as of October 1, 2012, to Sales Agreement between Lantheus Medical Imaging, Inc. and NTP Radioisotopes(Pty) Ltd. (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2012 (file number 333-169785)). 10.23† Amendment No. 2, effective as of December 27, 2012, to the Amended and Restated Supply Agreement (Thallium and Generators)between Lantheus Medical Imaging, Inc. and Cardinal Health 414, LLC (incorporated by reference to Exhibit 10.1 to Lantheus MedicalImaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 (file number 333-169785)). 10.24 Separation Agreement, dated February 19, 2013, by and between Lantheus Medical Imaging, Inc. and Don Kiepert (incorporated byreference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 (filenumber 333-169785)). 10.25 Fission Mo-99 Supply Agreement, effective January 1, 2013, by and between Lantheus Medical Imaging, Inc. and the Institut National desRadioelements (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for thequarterly period ended March 31, 2013 (file number 333-169785)). 10.26 Lantheus MI Holdings, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’sCurrent Report on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)). 162Table of ContentsExhibit Description 10.27 Form of Employee Option Grant Award Agreement (incorporated by reference to Exhibit 10.2 to Lantheus Medical Imaging, Inc.’s CurrentReport on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)). 10.28 Form of Non-Employee Director Option Grant Award Agreement (incorporated by reference to Exhibit 10.3 to Lantheus MedicalImaging, Inc.’s Current Report on Form 8-K filed with the Commission on May 6, 2013 (file number 333-169785)). 10.29 Employment Agreement, dated May 8, 2013, by and between Lantheus Medical Imaging, Inc. and Jeffrey Bailey (incorporated byreference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,2013 (file number 333-169785). 10.30 Amended and Restated Credit Agreement date as of July 3, 2013, by and among Lantheus Medical Imaging Inc., Lantheus MIIntermediate Inc., Lantheus MI Real Estate, LLC, the lenders from time to time party thereto, and Well Fargo Bank, National Associationcollateral agent and administrative agent and as sole lead arranger, book runner and syndication agent (incorporated by reference toExhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (filenumber 333-169785)). 10.32 Employment Agreement, effective August 12, 2013, by and between Lantheus Medical Imaging, Inc. and Mary Anne Heino (incorporatedby reference to Exhibit 10.47 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013(file number 333-169785)). 10.33 Employment Agreement, effective August 12, 2013, by and between Lantheus Medical Imaging, Inc. and Cesare Orlandi (incorporated byreference to Exhibit 10.48 to Lantheus Medical Imaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013 (filenumber 333-169785)). 10.34 Amendment to Amended and Restated Credit Agreement, dated June 24, 2014, by and among Lantheus Medical Imaging Inc., LantheusMI Intermediate Inc., Lantheus MI Real Estate, LLC, the lenders from time to time party thereto, and Wells Fargo Bank, NationalAssociation collateral agent and administrative agent and as sole lead arranger, book runner and syndication agent (incorporated byreference to Exhibit 10.1 to Lantheus Medical Imaging, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,2014 (file number 333-169785)). 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 to Exhibit 14.1 to Lantheus MedicalImaging, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 (file number 333-169785)). 14.2 Lantheus Medical Imaging, Inc. Compliance Code. (incorporated by reference to Exhibit 14.2 to Lantheus Medical Imaging, Inc.’s AnnualReport on Form 10-K for the year ended December 31, 2010 (file number 333-169785)). 21.1 Subsidiaries of Lantheus MI Intermediate, Inc. and Lantheus Medical Imaging, Inc. (incorporated by reference to Exhibit 21.1 to LantheusMedical Imaging, Inc.’s Annual Report on Form 10-K for the year ended 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 tosection 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 tosection 302 of the Sarbanes-Oxley Act of 2002. 163Table of ContentsExhibit Description 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 theSarbanes-Oxley Act of 2002.101.INS* XBRL Instance101.SCH* XBRL Taxonomy Extension Schema101.CAL* XBRL Taxonomy Extension Calculation101.DEF* XBRL Taxonomy Extension Definition101.LAB* XBRL Taxonomy Extension Labels101.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 and Exchange Commission. 164Exhibit 12.1STATEMENTS RE: COMPUTATION OF RATIO OFEARNINGS TO FIXED CHARGES Year-Ended December 31, (in thousands) 2014 2013 2012 2011 2010 Earnings Income (loss) from continuing operations $26 $(60,664) $(42,556) $(52,371) $7,435 Fixed charges 42,384 43,607 42,111 37,753 22,767 Total earnings$42,410 $(17,057) $(445) $(14,618) $30,202 Fixed ChargesInterest Expense$42,288 $42,915 $42,014 $37,658 $20,395 Estimated interest portion within rental expense 96 94 97 95 94 Write-off of deferred financing costs — 598 — — 2,278 Total fixed charges$42,384 $43,607 $42,111 $37,753 $22,767 Ratio of earnings to fixed charges(1) 1.0x — — — 1.3x (1)Earnings were insufficient to cover fixed charges by $60.7 million, $42.6 million and $52.4 million, for the years ended December 31, 2013, 2012 and2011, respectively.Exhibit 31.1CERTIFICATION 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 2002I, Jeffrey Bailey, certify that: 1.I have reviewed this annual 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.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 d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, 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, to theregistrant’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 are reasonablylikely 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 internal controlover financial reporting. Dated: March 4, 2015/S/ JEFFREY BAILEYName:Jeffrey BaileyTitle:President and Chief Executive OfficerExhibit 31.2CERTIFICATION 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 2002I, John Bakewell, certify that: 1.I have reviewed this annual 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.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 d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, 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, to theregistrant’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 are reasonablylikely 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 internal controlover financial reporting. Dated: March 4, 2015/S/ JOHN BAKEWELLName:John BakewellTitle:Chief Financial OfficerExhibit 32.1CERTIFICATION 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 2002Each of the undersigned hereby certifies that to his knowledge the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 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 all materialrespects, the financial condition and results of operations of the Company. Dated: March 4, 2015/S/ JEFFREY BAILEYName:Jeffrey BaileyTitle:President and Chief Executive Officer Dated: March 4, 2015/S/ JOHN BAKEWELLName:John BakewellTitle:Chief Financial OfficerA 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.

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