Lantheus Holdings Inc (LNTH) 2021 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Lantheus Fourth Quarter and Full Year 2021 Financial Results Conference Call. This is your operator for today's call. (Operator Instructions) This call is being recorded for replay purposes. A replay of the webcast will be available in the Investors section of the company's website approximately 2 hours after the completion of the call and will be archived for 30 days.

I'll now turn the call over to your host for today, Mark Kinarney, Senior Director of Investor Relations. Mark?

Thank you, and good morning. Welcome to Lantheus' Fourth Quarter and Full Year 2021 Financial Results Conference Call. With me on today's call are Mary Anne Heino, our President and CEO; Bob Marshall, our Chief Financial Officer; and Paul Blanchfield, our Chief Commercial Officer. Mary Anne will begin the call with introductory remarks and then turn the call over to Paul to provide a commercial update. Bob will cover our financial results and provide 2022 financial guidance and Maryann will provide closing remarks and then we will open the call for Q&A. This morning we issued a press release, which was furnished to the Securities and Exchange Commission under Form 8-K, reporting our fourth quarter and full year 2021 results. You can find the release in the Investors section of our website at lantheus.com. For those of you not on the webcast, you can find the slide presentation on the Investors section of our website under the Presentations tab.

Before we get started, I would like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainties. In particular, the hospital staffing levels and the impacts of COVID-19 on our business results and outlook continues to be a best estimate based on currently available information. Please note that we assume no obligation to update these forward-looking statements except as required by applicable law even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. Also discussions during this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is also included on the Investors section of our website.

With that, it is my pleasure to now turn the call over to Mary Anne.

Thank you, Mark, and good morning to everyone joining us on today's call. I hope all of you are safe and healthy. 2021 was an incredibly exciting and productive year for Lantheus. As you can see from our fourth quarter and full year results, we significantly progressed our strategy to accelerate growth, diversify our portfolio and position Lantheus as a category leader in the markets in which we compete. 2021 was a year of significant achievement across our portfolio and I'll take a few minutes now to summarize our accomplishments. In our prostate cancer franchise, we launched 2 products in 2021. First PYLARIFY, which received priority review designation in December 2020 and was approved by the FDA in May as the first commercially available PSMA targeted PET imaging agent for prostate cancer.

As a reminder, PYLARIFY is an F-18 labeled PET imaging agent that enables visualization of lymph nodes, bone and soft tissue metastases to determine the presence or absence of recurrent and/or metastatic PSMA avid prostate cancer. We've been thrilled with the progress of PYLARIFY's launch and I'm excited to announce that fourth quarter sales exceeded $35 million. During the quarter, we made outstanding progress across all our major business drivers: supply, contracting, market access and customer adoption. We have significant momentum going into 2022 with market access and customer demand continuing to be key drivers. Paul will give you further details on the launch to date in a few minutes. Along with our efforts to launch PYLARIFY, we have also partnered with several companies including Bayer, Regeneron and POINT Biopharma to embed Piflufolastat F-18 imaging, which I will refer to as PyL, into their prostate cancer therapeutic trials to assess PSMA expression.

Similarly, we have incorporated PyL into our own PSMA-targeted therapeutic ARROW Phase II trial of 1095 to test for PSMA avidity. During 2021, we also announced a development and commercialization collaboration with Reflexion utilizing PyL. The collaboration is evaluating the use of PyL to enable real-time therapeutic guidance of biology guided radiotherapy with the goal of improving treatment options for prostate cancer patients. Our second product in our PSMA targeted portfolio is PYLARIFY AI, which was cleared by the FDA just 2 months after PYLARIFY's approval. PYLARIFY AI is the first and only FDA cleared artificial intelligence enabled PSMA digital application that demonstrates increased efficiency and reproducibility of clinicians PSMA PET-CT image assessments, which we believe provides a distinct advantage for our prostate cancer franchise. With FDA clearance, we are working to advance utility of AI enabled imaging diagnostics in prostate cancer.

Just last month, we announced a collaboration with the Prostate Cancer Clinical Trial Consortium, or PCCTC, a premier multicenter clinical research organization that specializes in cutting edge prostate cancer research. The intent of this strategic collaboration is to integrate Lantheus' AI platform into early phase PCCTC studies to advance the discovery, development and validation of novel AI enabled biomarkers. For our microbubble business in 2021, DEFINITY sales continued to grow despite a year challenged by hospital staffing and other COVID related issues, all during which we maintained our market leadership position. In October 2021, we submitted a supplemental new drug application or sNDA for our on-campus manufacturing facility for DEFINITY, which we call Genesis, and I'm pleased to announce that we received FDA approval earlier this week.

This facility provides us with supply chain redundancy and the opportunity for margin expansion as we progressively include inventory from this manufacturing line into our supply chain. In 2021, we successfully manufactured batches of DEFINITY at our Genesis facility so that the product will be ready for commercial sale upon FDA approval. I'm pleased to announce that we've already begun shipping DEFINITY from our Genesis manufacturing site to our customers. Additionally, earlier this month, we entered into a new manufacturing and supply agreement with our long-standing DEFINITY manufacturer, JHS, Between our Genesis facility and our partner JHS, we believe we will have sufficient supply of DEFINITY to meet our expected demand well into the future. In 2021, we entered into another strategic collaboration for our microbubble franchise. This collaboration is with Allegheny Health Network or AHN.

AHN is investigating our microbubble technology in combination with their ultrasound assisted gene therapy for the development of a treatment for xerostomia, a chronic and debilitating condition with limited treatment options currently available for patients.

Turning to TechneLite. Sales remained stable during 2021 as compared to the prior year. We successfully navigated the negative impact of both the Delta and Omicron infection rate spikes on supply chain logistics and continuously delivered our just-in-time generators to our customers throughout the year. AZEDRA, as a hospital based product, was impacted by staffing and other COVID related challenges over the course of 2021 and this did negatively impact demand. As such, in 2021 we focused on building out our commercial and medical based field market model for AZEDRA and introduced new marketing initiatives to increase awareness of pheochromocytoma and paraganglioma or PPGL for referring physicians and AZEDRA as a treatment option for their patients.

We were pleased to see additional centers of excellence during the network of those centers offering AZEDRA treatment. We believe when hospital conditions permit, our team is well positioned to drive usage of AZEDRA in PPGL patients. Finally, during 2021, we advanced our pipeline with prudent investment. In March, we announced that we acquired exclusive worldwide rights to develop, manufacture and commercialize a novel imaging biomarker targeting fibroblast activation protein or FAP. We believe FAP is a promising target for cancer imaging and has broad potential to inform diagnosis and staging to guide patient selection for therapy and to monitor response to treatment across multiple tumor types. We are pleased to partner with a very experienced team led by Dr. Alan Greene and Dr. John Babich, both proven experts in the development of radiopharmaceuticals, to move this agent into clinical trials.

We announced on our third quarter earnings call the completion of an interim analysis of our ongoing Phase II study of 1095, our PSMA targeted therapeutic. The Independent Data Monitoring Committee recommended the study continue without modification. As a reminder, the ARROW study is a multicenter, randomized, open-label, controlled Phase II clinical study evaluating the efficacy and safety of 1095 in combination with enzalutamide compared to enzalutamide alone in patients with metastatic castration-resistant prostate cancer who are PSMA avid, chemotherapy naive and have progressed on abiraterone. As you can see, over the course of 2021, we've made significant progress on our strategy to accelerate growth, diversify our portfolio and position Lantheus as a category leader in the markets in which we compete. In 2022, we are committed to continuing this same level of progress.

Now I'll turn the call over to Paul for a commercial update on our key products.

Thank you, Mary Anne, and good morning, everyone. During the fourth quarter, our commercial teams were productive in establishing PYLARIFY as the PSMA PET imaging agent of choice for the U.S. prostate cancer community and growing DEFINITY while maintaining our market leading position. Starting with the PYLARIFY launch. As Mary Anne mentioned, during our second full quarter since approval, we made significant progress across our major business drivers: supply, contracting, market access and customer adoption. This momentum has translated into fourth quarter sales of $36 million and full year sales of $44 million. We expanded our PET manufacturing facility or PMF network from 18 to 21 activated sites, which in turn increased geographic coverage for the share of the U.S. population we can reach through this network from 2/3 to now approximately 80%.

We also invested in our capacity at existing PMF sites by adding additional synthesis boxes and securing additional time on cyclotrons while still selectively flying doses into certain markets, including Florida, Colorado and Utah in advance of PMS activation in these remaining regions. This facilitates patients' access to PYLARIFY and it allows institutions to embed PYLARIFY into their prostate cancer workflow. Our broad manufacturing network and increased capacity along with F-18's longer half-life enables us to deliver doses to adjacent geographies, allowing us to efficiently and continually meet the needs of our customers and we think will prove a competitive advantage when competition becomes available. In 2022, we will continue our efforts to increase PYLARIFY supply through ongoing geographic expansion as well as increased capacity at existing sites.

Regarding market access, specifically coverage, coding and payment. Our pass-through application to the centers for Medicare and Medicaid Services or CMS was granted in November and went into effect January 1, 2022. Transitional pass-through payment status enables traditional Medicare to provide an incremental payment for PET-CT image done with PYLARIFY in the hospital outpatient setting. As we mentioned last quarter, we received notification that our HCPCS code, which enables streamlined billing, also went into effect as of January 1. We believe the activation of pass-through payment status and our HCPCS for PYLARIFY further facilitates patient access to our game-changing PSMA targeted imaging agent for prostate cancer. We are also making progress in coverage of both indications with Medicare administrative contractors or MACs as well as with radiology benefit managers or RBMs and traditional commercial payers.

As I shared last quarter, the majority of MACs have either paid claims, published guidance or have indicated they will cover PYLARIFY usage in our approved indications. In addition, 2 major RBMs and a number of commercial payers have recently enacted policies to cover PYLARIFY in both recurrent and metastatic indications and we expect additional commercial payer policy reviews to take place in the coming months. During the fourth quarter, we remained heavily focused on contracting and by year-end, we had contracts in place with almost 90% of our targeted academic institutions in the U.S. who treat prostate cancer as well as many community hospitals, government facilities and freestanding imaging centers. From a demand perspective, we are very pleased with the underlying trends and the range of ordering across our customer base with hospitals comprising 63% of orders even prior to pass-through initiation and independent imaging centers and government facilities 27% and 10%, respectively.

We are also encouraged by the rate of repeat demand increasing quarter-over-quarter with over 90% of customers having ordered multiple doses. We are also excited to announce that we have partnered with Palette Life Sciences, a global medical device company in the prostate cancer space, to have their dedicated U.S. urology and radiation oncology sales team support the promotion of PYLARIFY. This partnership will fortify our existing promotional efforts as well as that of our PMF partners and enable us to build on our success in educating even more referring physicians on the availability and unique benefits of PYLARIFY. We expect this partnership to be operational in April 2022. As Mary Anne mentioned, we received FDA clearance for PYLARIFY AI this past summer and launched the product at the annual meeting of the Radiological Society of North America or RSNA at the end of November. We believe PYLARIFY AI provides a distinct advantage for PYLARIFY.

PYLARIFY AI is designed to provide enhanced consistency in quantitative analysis and precise anatomical context and can enable quantitative reporting. Collectively, these benefits potentially contribute to increased reader efficiency and reproducibility of PSMA PET-CT image assessments. Both our internal AI team and our partner [Sintomed] have been working to introduce the software at key centers and began demonstrations with current PYLARIFY customers in December. Finally, I want to provide you with an update on the total addressable market for PSMA PET imaging agents. We currently believe the market potential could be up to 220,000 annual scans, an increase from the 170,000 scans we previously estimated. These 220,000 scans consist of approximately 90,000 scans for men who have intermediate unfavorable or high or very high risk of suspected metastasis of prostate cancer and approximately 130,000 stands for men with suspected recurrence.

We revised our prior estimates based on PYLARIFY's broad label and NCCN and SNMMI guidelines as well as our refined understanding of how PYLARIFY is being used in clinical practice. This translates into a total addressable market for PSMA PET imaging agents of more than $900 million. The market could be further expanded by additional scans coming from further use of PSMA PET imaging agents if and when PSMA targeted therapeutic agents are approved. Needless to say, we are excited about the launch and reception of PYLARIFY to date and believe there is significant potential for us to grow the business and ensure PYLARIFY remains the PSMA imaging agent of choice in the U.S. prostate cancer community. Switching now to DEFINITY. The fourth quarter saw continued growth in year-over-year sales even amidst hospital staffing and COVID related challenges. DEFINITY has been impacted by hospital nursing and sonographer shortages and we expect these headwinds to affect the first quarter of the year.

We also saw an increase in the portion of our promotional efforts done remotely. Despite this, we still maintain greater than 80% market share of the ultrasound enhancing agent market and grew our business 19% for the year and 6% in the fourth quarter. As Mary Anne mentioned, we are committed to sustainable growth in existing and new markets for DEFINITY. During the fourth quarter, we shipped our first vials of DEFINITY RT as well as our enhanced VIALMIX RFID, which is used to activate DEFINITY doses. With DEFINITY RT, customers now have the added choice of a room temperature formulation in addition to our market leading refrigerated DEFINITY. This enables those customers who prefer a non-refrigerated product to be able to benefit from our DEFINITY microbubble products. As you can see, we made significant progress in the launch of PYLARIFY and have continued to grow DEFINITY and maintain our market leadership position.

I will now turn the call over to Bob for a financial update.

Thank you, Paul, and good morning, everyone. I will provide highlights of the fourth quarter and full year financials focusing on adjusted results unless otherwise noted. Turning now to the results. Revenue for the fourth quarter was $129.6 million, an increase of 37.6% over the prior year quarter, a comparison that includes our now divested Puerto Rico operation. On a year-to-date basis, revenue for the full year was $425.2 million, an increase of 25.3% on a similar comparison. Beginning with precision diagnostics, revenue of $87 million was 0.8% higher to the prior year quarter. Sales of DEFINITY net of rebates and allowances were $59.3 million or 6.1% higher as compared to the prior year quarter. DEFINITY closed out 2021 with $232.8 million of net sales, an increase of 18.8% over the prior year.

TechneLite net revenue was $22 million, down 1.5% from the prior year quarter due to an exited radiopharmacy contract, which occurred at the start of Q3 2021 offset in part by opportunistic generator sales to a key partner of $2.2 million. During 2021, opportunistic generator sales contributed a total of $6.1 million of TechneLite's total $91.3 million, which was up 7.5% year-over-year. Within other precision diagnostics, Xenon's performance has continued at similar levels seen throughout 2021 and since the start of the pandemic. Radiopharmaceutical oncology contributed $35.7 million of sales in the quarter, up 1,300% from the prior year quarter attributable to accelerating PYLARIFY sales as noted by Paul earlier. As was the case in Q3, AZEDRA was down sequentially as usage remains more susceptible to hospital access for both patients and sales representatives during the heightened measures to control COVID-19 surges.

Lastly, strategic partnerships and other revenue was $6.8 million, up 29% from the prior year quarter, driven primarily by the RELISTOR royalty stream. Gross profit margin for the fourth quarter was 56.5%, an increase of 676 basis points over the fourth quarter of 2020 on a similar basis. Gross profit margin is slightly higher than forecasted for the quarter based on product mix with PYLARIFY volumes driving higher contribution offset by slightly lower than expected contribution from DEFINITY and AZEDRA. Operating expenses were 153 basis points favorable to the prior year at 34.8% of net revenue and within previously guided spending levels. As I noted in the prior quarter, we intend to continue driving PYLARIFY sales with increasing effort around product awareness, market access and contracting activities at activated PMS as well as supporting DEFINITY with a mix of in-person and virtual sales and marketing activities.

R&D was higher on a dollar basis, but in line with prior year spending levels as a percentage of revenue reflecting costs associated with ongoing pipeline advancement. G&A improved 270 basis points as a percentage of revenue in the quarter and was a key driver of overall leverage from operating expenses. Operating profit for the quarter was $28.2 million or an increase of 122.3% over the same period prior year. Total adjustments in the quarter totaled $63.5 million of expense before taxes. Of this amount, 4.2 and $8.4 million of expenses associated with noncash stock and incentive plans and acquired intangible amortization, respectively. Also in the quarter, we recorded a $43.9 million net expense adjustment to contingent assets and liabilities, including the PYLARIFY CVR contingent liability.

Additionally, the company recorded an expense of $5.4 million related to an acceleration of our asset retirement obligation due to a change in estimated useful life assumptions for certain of our manufacturing assets. The remainder is related to acquisition integrated and other nonrecurring expenses. Our effective tax rate or ETR was 23.5% in the quarter. During the quarter, we released yet another portion of our uncertain tax position or UTP provisions dating back to our 2008 sales from VMS for which we are fully indemnified based on newly acquired information. The release flows through other income as an expense and through the tax provision as a benefit. The net result does not have an effect on net income, but does distort the underlying ETR for the period. The full year ETR was 19.8%.

The resulting reported net income for the fourth quarter was a loss of $40.2 million and a profit of $17.2 million on an adjusted basis, an increase of 276%. GAAP fully diluted earnings per share were a loss of $0.59 and a profit of $0.25 on an adjusted basis, an increase from the prior year of 263.5%. On a full year basis, GAAP fully diluted earnings per share were a loss of $1.06 and a profit of $0.49 on an adjusted basis, an increase of 4% over the prior year. Now turning to cash flow. Fourth quarter operating cash flow totaled $13.9 million as compared to $0.6 million in Q4 2020. Capital expenditures totaled $4.5 million, up $0.8 million from the prior year quarter. Free cash flow, which we define as operating cash flow less capital expenditures, was $9.3 million, an increase of $12.6 million from the prior year period. The main driver of the year-over-year variance is attributable to increased profitability, unfavorable product mix and volume as well as increasing overall P&L leverage.

Cash and cash equivalents net of restricted cash now stands at $98.5 million. We continue to have access to our $200 million undrawn bank revolver and are comfortable with our strong liquidity position. Late in January we entered into a global settlement agreement with Novartis and its affiliates to settle certain intellectual property disputes. The settlement agreement includes, among other things, the dismissal of litigation in Germany related to PSMA-617, a PSMA targeted radiopharmaceutical compound under development by Novartis for the treatment of prostate cancer, and the resolution of other certain proceedings. Under the agreement, we will cross-license certain patent rights to one another and Novartis will make a $24 million lump sum payment to us. This item is outlined in our 10-K filed this morning. Additionally, this benefit has not been considered in either our full year or first quarter 2022 guidance, which I will now turn to.

We expect growth to be driven by PYLARIFY supplemented by a resilient growth profile from DEFINITY. Within precision diagnostics, we expect high single to low double-digit growth from DEFINITY for full year 2022 while TechneLite will look much the same as 2021 after adjusting for the exited customer contract. As a reminder, that decision had a $10 million full year impact, which started in Q3 of last year. Additionally, we don't typically forecast for opportunistic sales of TechneLite, which had amounted to $6.1 million in 2021 base as I have already noted. Radiopharmaceutical oncology will be driven by PYLARIFY and modestly by AZEDRA. Our AZEDRA forecast does assume, however, that COVID-19 variant impacts on hospitals lessen and sustain throughout 2022. We forecast PYLARIFY to be in a range of $300 million to $325 million for the full year.

Taken together with other revenue contributors, we estimate full year revenue to be in an approximate range of $685 million to $710 million, an increase of approximately 60% and 65% over 2021. For modeling purposes, both gross profit margin and operating expenses as a percentage of revenue should be several percentage points improved over Q4 2021 metrics with favorable product mix and volume along with ongoing spend to capture and retain market share while investing in technology to drive efficiencies longer term. Therefore, for the full year, we expect fully diluted adjusted earnings per share to be in a range of $1.95 to $2.05. For the first quarter, net revenue should be in a range of $160 million to $170 million. As I have noted, our guidance considers the tangential impacts of COVID-19 notably on DEFINITY, AZEDRA and Xenon offset by ramping PYLARIFY sales.

To assist with models, DEFINITY will likely flat to Q1 2021 due to the aforementioned early quarter COVID impacts while PYLARIFY should be in the $70 million to $80 million range based on January trends. Fully diluted adjusted earnings per share should be in a range of $0.45 to $0.50. Lastly, for modeling purposes, depreciation and amortization for the full year 2022 should be approximately 12 and $37 million, respectively, generally spread evenly throughout the year.

With that, let me turn the call back over to Mary Anne.

Thank you, Bob. In closing, 2021 was marked by the successful launch of PYLARIFY and another solid year of revenue and market leadership for DEFINITY. We diversified our revenue stream and ended the year with nearly $100 million in cash. In 2021, we executed on our strategy to accelerate growth, diversify our portfolio and position Lantheus as a category leader in the markets we serve. In 2022, we look to further establish PYLARIFY as the PSMA PET imaging agent of choice in the U.S. prostate cancer community, maintain market leadership with our microbubble franchise, execute strategic transactions in line with our portfolio objectives and deliver on our financial objectives, which we believe will allow us to continue to deliver strong shareholder value. In closing, I would like to thank all Lantheus employees for their dedication and commitment to our patients and their unfailing passion to our purpose to find, fight and follow disease. It is their commitment that continues to make what we achieve possible.

With that, Bob, Paul and I are now ready to take your questions. Operator, please go ahead.

(Operator Instructions) And our first question comes from Danielle Antalffy from SVB Leerink.

So just curious, I appreciate you're increasing the TAM. Number one, just what did go-to-market -- if adding intermediate risk patients into the TAM changes the go-to-market strategy, sort of what's the confidence that you can capture those patients? And also curious how you're thinking about penetration based on your guidance for PYLARIFY and where that can ultimately go and how quickly? And then I have one follow-up.

And I am going to turn you over to Paul for that question and answer.

So as I mentioned, we've obviously been looking at the total addressable market and we've upped our view of that market to 220,000 scans on an annual basis. We upped that based on, as I mentioned, the label that we have for the risk of metastases prior to definitive therapy as well as guidelines for SNMMI and the NCCN, which have combined with medical practice expanding how physicians and payers are looking at the use of PYLARIFY for the risk of metastases to not just very high, but to high as well as intermediate. And so from a go-to-market model, we have always been viewed as looking at both the nuclear market as well as the referring physician market meaning those that are actually doing the treating and the referring physicians that are writing the prescription. And so it doesn't necessarily change our go-to-market model.

But we will see the continued investment as in, I highlighted, an expanded partnership with Palette Life Sciences who will focus on in addition to our efforts as well as that of our PMF partners to promote PYLARIFY in the referring physician space. And so it doesn't change our view of the market other than we believe it to be larger, but our go-to-market model remains consistent and we remain incredibly focused on promoting PYLARIFY to both the nuclear imaging physicians as well as referring physicians and ensuring that our first and only commercially available PSMA PET imaging agent remains the product of choice. I said with regard to total addressable market, we obviously mentioned that it's north of $900 million. With the guidance that Bob preferred view, we can do the math on what penetration that would be today, but we continue to see growth into this market going forward.

Got it. So just a follow-up question on that and that's related to competition and what you're seeing there. I mean it seems a little silly to ask the question based on your guidance. But just any early indications on how the competition is impacting your PYLARIFY adoption?

Absolutely. Well, today we do remain the only commercially available PSMA PET imaging agent in the marketplace. We have contemplated competition. We are very well aware of competition. That has been factored into our guidance. But currently, we remain focused on maximizing the potential of PYLARIFY both today and in the future through our promotional efforts through the launch of now our AI as we talked about in the fall. And so that's been factored into our progress to date into our guidance going forward. But we remain focused on ensuring that PYLARIFY remains the best-in-class and preferred PSMA agent of choice.

And our next question comes from Zach Weiner from Jefferies.

Congrats on a blow-away quarter here. I just have a few. First on the PMF site cadence through the quarter and then expectations through 2022. Where do you expect to get as the year progresses? And then one, just if you could give some color on margin benefits from PYLARIFY and then also from bringing the DEFINITY manufacturing in-house, the spread between the 2?

Thanks for your questions. I think on your question around PMF, we've kind of talked from the start of the launch that this is a continual build-out that we will continue to focus on. Paul referenced what progress we made through year-end and as he also referenced, we will continue to build out our PMS network to satisfy our needs in the marketplace and that happens 2 ways. We look to continually add PMFs and then at the PMFs that we're already using, we add additional capacity by building in additional what we call synthesis boxes, which are literally the manufacturing boxes in which PYLARIFY is made. So it's a great way to add additional capacity where you already are in addition to adding additional PMFs into our sites. As Paul mentioned in his comments, we are already covering approximately 90% of the U.S. and he mentioned the couple of different geographic regions where we are still flying doses into that we will additionally cover -- I'm sorry, 80%. I over spoke there a little bit. They're correcting me in real time here. And as we look out across the rest of 2022, we'll continually to take that number higher to those areas that we can cover. So it's a continual build-out and we'll keep you updated across the year. I don't know, Paul, if you want to add any comments on to that?

No, Mary Anne. I think it's a build-out, it's rolling out additional PMFs, but it's also expanding capacity of those as we highlighted. So we're comfortable with our supply position, but continue to build that capacity as the first and only commercially available.

I apologize. I think it was the contracting figure that was the 90% target that we had reached.

So Zach, with regard to gross margin contribution, it is clearly being driven by PYLARIFY. Just to sort of recap a handful of the numbers that we had in the quarter. Gross margin was 56.5% and we were at 52.7% for the full year. So you can see that as PYLARIFY is ramping that clearly it is one of the single largest drivers in the quarter of that ramp, which is also what informs our 2022 gross margin model. Now with regard to what drives it or continues to drive it, I've always sort of mentioned it would come from a handful of things. It would come from continued DEFINITY growth. It would come from ramping PYLARIFY, which clearly you can see we have good confidence as we look forward. With regard to our on-campus manufacturing facility in terms of Genesis, early days in terms of rolling out product. It will be a contributor as we go further into the future. This is about dual supply so we will be working inventory in and amongst the product that we are also getting from our partner in JHS. So that contribution will be a slower contributor, but still will be there as we look to leverage that investment.

Got it. And then one more just on DEFINITY room temperature. Going forward I guess in 2022, where do you expect the mix to be between the legacy product and the RT version and is there any margin benefit to RT or ASP increase to the RT versus the legacy product?

We've never spoken to an intentional mix of the 2 products or trying to create an intentional mix out in the marketplace. Our strategy with having the 2 formulations has always been one of customer choice and offering customer choice because as the market leader, we feel that's important. There isn't a competitive product out there that has a room temperature formulation and so we brought RT to market to make sure that we could cover choice in the market. We also felt it was important because again from a customer perspective, in our partnerships and in the partnerships that we have, in those cases the product is typically part of a complex product kit and we felt it was important to have a room temperature formulation available as part of a complex product kit. But we have never as a strategy had it as part of our strategy to force product into the market in any percentage. So you'll never hear us speaking to that. And we don't also speak to any margin benefit or pricing difference between the 2 products. So that is not a strategy of ours either.

And our next question comes from Larry Solow from CJS Securities.

Congratulations on a really strong start for PYLARIFY, good start. Just a couple of follow-ups. On DEFINITY, it sounds like sluggishness seems pretty temporary I suppose related to staffing, which I think the staffing issues and COVID kind of really got a little crazy early in the quarter, but it seems to have calmed down. So hopefully, I think we could get a rebound in DEFINITY. It doesn't sound like anything has changed to your longer-term outlook, still think it's a low double-digit kind of grower and is that a fair statement?

Larry, this is Bob. Yes, our guidance does contemplate the DEFINITY opportunity as being what we've always expected it to be. This is why I say that it's -- trying to give you a range that incorporates the early quarter Q1 kind of read so that spillover of what had been Delta and then Omicron and the related impacts in the early part of the quarter and then as we would then see it then kind of recapture its trajectory into the -- in Q2, Q3, Q4 as we look forward. So no, we still firmly believe in the opportunity of DEFINITY. We're a market leader and we intend to continue to invest to drive that market share and protect it.

Right. And on the Genesis on in-house product, I think all along that was going to be at least dual source in the beginning or for a while. It sounds like a slow ramp at first. But over time, do you expect this maybe not to be exclusive, but do you expect -- or maybe, I don't know, What's your sort of long-term plan? Do you eventually sort of bring most of it in-house? Is that the goal or can you speak to that?

No, we're not providing specific mix, if you will, of how -- because again this is also about protecting and dual sourcing a very important product to our portfolio. So yes, I mean sort of again early days with the product. We have manufactured inventory on the shelf that we can start to integrate into the flow and we will work with mission teams and get the expertise behind it and the capacity opportunity with that facility is significant so that we have the ability to provide for our own total volume and growth. But at the same time, I think it's also important from a business continuity perspective to be able to continue to leverage the longstanding partnership that we've had and would think that it will always be a mix.

Okay. Just a couple on PYLARIFY. Just real quick I know you've never given actual unit price. But just from a high level, is your pricing sort of in the range you thought it would be? And the second question is just a technicality. On the CVR, on the contingent value rights, I guess the payments are done after the year. Does that come off on the P&L? How is that sort of accounted for?

So I'll start with the CVR and then I don't know maybe Paul or Mary Anne, you can take the price question. But with regard to the CVR, the way they work just to remind people is that it's based on sales over $100 million in 2022 and over $150 million in 2023 and they are capped at 19.9% of total consideration in the Progenics deal. So as such, our obligation is to accrue based on the Monte Carlo simulation the potential liability that the company would have. And so that -- obviously if you do that as you bring your forecast into those Monte Carlo analysis, which are done by third parties and we recorded that through the P&L. So you saw that come through the P&L -- in the GAAP P&L and of course we evaluate those every single quarter and true them up from the perspective of will they pay out. And so you can see in the K this morning, the total accumulated value that's there. That will continue based on time value of money to move around a little bit. But the cash payment itself would then become -- it becomes a balance sheet item where the contingent liability then becomes cash in what would likely be the first part of 2023 and 2024, respectively, depending on how the CVRs actually accrue.

Larry, as you know, it has been our longstanding policy that we do not speak to pricing. I will tell you that as a matter of public record because we deal with PMF as an agency that the pricing of the product does get publicly reported through CMS on a trailing basis and so it does get publicly reported. So I will say that the pricing of the products are -- the cross competitive products are fairly similar.

And thank you. And I am showing no further questions. I would now like to go ahead and close the call. This concludes today's conference call. Thank you for participating. You may disconnect.