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TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to

Commission File Number 333-169785

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LANTHEUS MEDICAL IMAGING, INC.
(Exact name of registrant as specified in its charter)

Delaware (State of incorporation)		51-0396366 (IRS Employer Identification No.)
331 Treble Cove Road, North Billerica, MA (Address of principal executive offices)		01862 (Zip Code)

(978) 671-8001
(Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

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        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 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required 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 shorter period that the registrant was required to submit and post such files). Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes o    No ý

        The registrant had 1,000 shares of common stock, $0.01 par value per share, issued and outstanding as of August 11, 2011.

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Table of Contents

TABLE OF CONTENTS

					Page
			PART I. FINANCIAL INFORMATION
	Item 1.		Financial Statements (Unaudited)			1
			Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010			1
			Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			2
			Condensed Consolidated Statements of Stockholder's (Deficit) Equity as of June 30, 2011 and December 31, 2010			3
			Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010			4
			Notes to Unaudited Condensed Consolidated Financial Statements			5
	Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations			30
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk			44
	Item 4.		Controls and Procedures			45
			PART II. OTHER INFORMATION
	Item 1.		Legal Proceedings			46
	Item 1A.		Risk Factors			46
	Item 6.		Exhibits			50
	Signatures
	Exhibit Index

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

        

Lantheus MI Intermediate, Inc. and subsidiaries

Condensed Consolidated Statements of Operations

(unaudited, in thousands)

					For the Three Months Ended June 30,						For the Six Months Ended June 30,
					2011			2010			2011			2010
Revenues
	Net product revenues				$	88,278		$	79,675		$	184,234		$	158,463
	License and other revenues					2,141			2,020			4,304			4,104
		Total revenues				90,419			81,695			188,538			162,567
Cost of goods sold						87,445			42,863			139,496			85,694
Loss on firm purchase commitment						1,879			—			1,879			—
		Total cost of goods sold				89,324			42,863			141,375			85,694
			Gross profit			1,095			38,832			47,163			76,873
Operating expenses
	General and administrative expenses					7,122			7,135			15,254			14,626
	Sales and marketing expenses					10,702			11,764			20,097			23,072
	Research and development expenses					10,342			12,463			20,847			23,122
		Total operating expenses				28,166			31,362			56,198			60,820
		Operating (loss) income				(27,071	)		7,470			(9,035	)		16,053
Interest expense						(10,511	)		(4,636	)		(17,518	)		(7,136	)
Loss on early extinguishment of debt						—			(3,057	)		—			(3,057	)
Interest income						78			48			148			82
Other income (expense), net						445			451			943			(110	)
		(Loss) income before income taxes				(37,059	)		276			(25,462	)		5,832
Benefit (provision) for income taxes						14,746			(190	)		9,496			(2,412	)
		Net (loss) income			$	(22,313	)	$	86		$	(15,966	)	$	3,420

See notes to unaudited condensed consolidated financial statements.

1

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Lantheus MI Intermediate, Inc. and subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in thousands except share data)

					June 30, 2011			December 31, 2010
Assets
	Current assets
		Cash and cash equivalents			$	27,788		$	33,006
		Accounts receivable, net of allowance of $459 and $796				52,125			50,452
		Inventory				18,171			20,117
		Deferred tax assets				4,308			4,266
		Income tax receivable				212			—
		Other current assets				3,964			3,158
			Total current assets			106,568			110,999
	Property, plant and equipment, net					116,385			120,684
	Capitalized software development costs					3,840			3,896
	Intangibles, net					90,180			124,689
	Goodwill					15,714			15,714
	Deferred tax assets					89,161			78,312
	Deferred financing costs					13,801			9,425
	Other long-term assets					34,981			32,162
			Total assets		$	470,630		$	495,881
Liabilities and Stockholder's (Deficit) Equity
	Current liabilities
		Accounts payable			$	13,260		$	24,528
		Accrued expenses				23,548			18,605
		Income tax payable				—			128
		Deferred revenue				5,719			7,261
			Total current liabilities			42,527			50,522
	Asset retirement obligation					4,620			4,372
	Long-term debt, net					398,571			250,000
	Deferred tax liability					1,066			1,853
	Deferred revenue					1,335			2,668
	Other long-term liabilities					34,551			33,032
			Total liabilities			482,670			342,447
Commitments and contingencies (see Note 13)						—			—
Stockholder's (deficit) equity
	Common stock ($0.001 par value, 10,000 shares authorized; 1 share issued and outstanding)					—			—
	Additional paid-in capital					781			150,316
	Retained (deficit) earnings					(14,156	)		2,410
	Accumulated other comprehensive income					1,335			708
			Total stockholder's (deficit) equity			(12,040	)		153,434
			Total liabilities and stockholder's (deficit) equity		$	470,630		$	495,881

See notes to unaudited condensed consolidated financial statements.

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Lantheus MI Intermediate, Inc. and subsidiaries

Condensed Consolidated Statements of Stockholder's (Deficit) Equity

(unaudited, in thousands except share data)

				Common Stock												Accumulated Other Comprehensive Income (Loss)
										Additional Paid-In Capital			Retained (Deficit) Earnings						Total Stockholder's (Deficit) Equity
				Shares			Amount
Balance at January 1, 2010					1		$	—		$	247,883		$	63,138		$	(442	)	$	310,579
Dividend paid to Holdings (see Note 10)					—			—			(98,078	)		(65,698	)		—			(163,776	)
Comprehensive income
	Net income				—			—			—			4,970			—		$	4,970
	Foreign currency translation				—			—			—			—			1,150			1,150
		Total comprehensive income																	$	6,120
Stock-based compensation					—			—			511			—			—			511
Balance at December 31, 2010					1			—			150,316			2,410			708			153,434
Dividend paid to Holdings (see Note 10)					—			—			(149,400	)		(600	)		—			(150,000	)
Comprehensive income
	Net loss				—			—			—			(15,966	)		—		$	(15,966	)
	Foreign currency translation				—			—			—			—			627			627
		Total comprehensive income																	$	(15,339	)
Stock-based compensation					—			—			(135	)					—			(135	)
Balance at June 30, 2011					1		$	—		$	781		$	(14,156	)	$	1,335		$	(12,040	)

See notes to unaudited condensed consolidated financial statements.

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Lantheus MI Intermediate, Inc. and subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

				For the Six Months Ended June 30,
				2011			2010
Cash flow from operating activities
Net (loss) income				$	(15,966	)	$	3,420
Adjustments to reconcile net (loss) income to cash flow from operating activities
	Depreciation				5,992			5,562
	Amortization				11,696			11,853
	Impairment of intangible asset				23,474			—
	Amortization of deferred financing charges				1,072			947
	Write-off of deferred financing charges				—			2,278
	Amortization of debt premium				(106	)		—
	Amortization of consent fee				177			—
	Provision for excess and obsolete inventory				14,660			2,199
	Stock-based compensation				(1,272	)		576
	Deferred income taxes				(11,692	)		977
	Accretion of asset retirement obligation				248			213
	Loss on disposal of long-lived assets				30			—
	Long-term income tax receivable				(771	)		4,186
	Long-term income tax payable				1,518			(3,850	)
Increase (decrease) in cash from operating assets and liabilities
	Accounts receivable, net				(1,677	)		(2,767	)
	Prepaid expenses and other assets				(804	)		(967	)
	Inventory				(14,838	)		(11,231	)
	Deferred revenue				(2,911	)		1,525
	Accounts payable				(8,400	)		5,040
	Income tax payable				(340	)		(4,336	)
	Accrued expenses and other liabilities				5,985			(2,983	)
		Cash provided by operating activities			6,075			12,642
Cash flows from investing activities
Asset Acquisition, net of cash acquired					—			(215	)
Capital expenditures					(5,206	)		(4,171	)
		Cash used in investing activities			(5,206	)		(4,386	)
Cash flows from financing activities
	Proceeds from issuance of debt				152,250			243,658
	Consent solicitation fee				(3,750	)		—
	Payment of term loan				—			(93,649	)
	Debt issuance costs				(5,368	)		(2,370	)
	Payment of dividend to parent				(150,000	)		(163,776	)
		Cash used in financing activities			(6,868	)		(16,137	)
Effect of foreign exchange rate on cash					781			46
Decrease in cash and cash equivalents					(5,218	)		(7,835	)
Cash and cash equivalents, beginning of period					33,006			31,480
Cash and cash equivalents, end of period				$	27,788		$	23,645
Supplemental disclosure of cash flow information
	Interest paid			$	19,500		$	2,720
	Income taxes paid, net of refunds			$	1,132		$	4,768

See notes to unaudited condensed consolidated financial statements.

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements

        Unless the context requires otherwise, references to the "Company," "Lantheus," "our company," "we," "us" and "our" refer to Lantheus MI Intermediate, Inc. and its direct and indirect subsidiaries, references to "Lantheus Intermediate" refer to only Lantheus MI Intermediate, Inc., the parent of Lantheus Medical Imaging, Inc., and references to "Holdings" refer to Lantheus MI Holdings, Inc., the parent of Lantheus Intermediate. Solely for convenience, we refer 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 will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks, service marks and trade names.

1. Business Overview

Overview

        The Company manufactures, markets, sells and distributes medical imaging products globally with operations in the United States (U.S.), Puerto Rico, Canada and Australia and distribution relationships in Europe, Asia Pacific and Latin America. The Company provides medical imaging products, primarily focused on cardiovascular diagnostic imaging, to nuclear physicians, cardiologists, radiologists, internal medicine physicians, independent delivery networks, group purchasing organizations and technologists/sonographers working in a variety of clinical settings.

        The Company's principal products include:

•

Cardiolite—a myocardial perfusion imaging agent;



•

DEFINITY—an ultrasound contrast agent;



•

TechneLite—a generator that provides the radioisotope used to radiolabel Cardiolite and other radiopharmaceuticals.

        In the U.S., the Company's products are marketed through an internal sales force and sold through distributors to radiopharmacies and end-users. Radiopharmacies reconstitute certain of the products into patient specific unit dose syringes, which are then sold directly to hospitals and clinics. Internationally, the Company's products are marketed through an internal sales force and sold through Company-owned radiopharmacies in certain countries and elsewhere through distributors.

Basis of Presentation

        The financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

        In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial statements for interim periods in accordance with U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K). Our accounting policies are described in the "Notes to Consolidated Financial Statements" in our 2010 Form 10-K and updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements (Continued)

1. Business Overview (Continued)

sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Use of Estimates

        The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The more significant estimates reflected in the Company's consolidated financial statements include certain judgments regarding revenue recognition, goodwill and intangible asset valuation, inventory valuation, asset retirement obligations, income tax liabilities, deferred tax assets and liabilities, accrued expenses and stock-based compensation. Actual results could materially differ from those estimates or assumptions.

2. Revenue Recognition

Revenue Recognition

        The Company recognizes revenue when evidence of an arrangement exists, title has passed, substantially all the risks and rewards of ownership have transferred to the customer, the selling price is fixed or determinable, and collectability is reasonably assured. For transactions for which revenue recognition criteria have not yet 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 is recognized net of reserves, which consist of allowances for returns and allowances for rebates.

        Revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. Supply or service transactions may involve the charge of a nonrefundable initial fee with subsequent periodic payments for future products or services. The up-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 the arrangement.

        On January 1, 2009, the Company executed an amendment to a license and supply agreement (the "Agreement") with one of its customers, granting non-exclusive U.S. license and supply rights to the customer for the period from January 1, 2009 through December 31, 2012. Under the terms of the Agreement, the customer paid the Company $10.0 million in license fees; $8.0 million of which was received upon execution of the Agreement and $2.0 million of which was received in June 2009 upon delivery of a special license as defined in the Agreement. The Company's product sales under the Agreement are recognized in the same manner as its normal product sales. The Company is recognizing the license fees as revenue on a straight line basis over the term of the four-year Agreement. The Company recognized $625,000 and $1.2 million, respectively, in license fee revenue pursuant to the Agreement in each of the three and six month periods ended June 30, 2011 and 2010, and had deferred revenue of $3.8 million and $5.0 million as of June 30, 2011 and December 31, 2010, respectively, related to the Agreement. The $3.8 million of deferred revenue as of June 30, 2011 will be recognized as revenue at a rate of $1.3 million for the remainder of 2011 and $2.5 million in 2012.

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements (Continued)

2. Revenue Recognition (Continued)

        In addition, the Company had other revenue of $1.5 million and $3.1 million, respectively, in the three and six month periods ended June 30, 2011 as compared to $1.4 million and $2.9 million for the prior year comparative periods. Other revenue represents contract manufacturing services related to one of the Company's products for one customer. The related costs are included in cost of goods sold.

        In January 2010, the Company launched a new medical imaging product, Ablavar, which was acquired by the Company in April 2009. Because the Company was not assured that the price was fixed and determinable and due to the inability to reasonably estimate product returns, the Company has deferred recognition of $2.1 million of revenue at June 30, 2011 relating to Ablavar shipments, associated with a distributor arrangement. The corresponding cost has been recorded in inventory as of June 30, 2011 and December 31, 2010. The Company is recognizing revenue associated with this arrangement on the sell-through method.

3. Fair Value of Financial Instruments

        The tables below present information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points from active markets that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability.

(in thousands)		Total fair value at June 30, 2011			Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Money market		$	17,240		$	17,240		$	—		$	—
		$	17,240		$	17,240		$	—		$	—

 

(in thousands)		Total fair value at December 31, 2010			Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Money market		$	22,883		$	22,883		$	—		$	—
		$	22,883		$	22,883		$	—		$	—

        In addition, at June 30, 2011 and December 31, 2010, the Company had approximately $10.5 million and $10.1 million, respectively, of cash on-hand.

        The estimated fair values of the Company's financial instruments, including its cash and cash equivalents, receivables, accounts payable and accrued expenses approximate the carrying values of these instruments due to their short term nature. The estimated fair value of the debt, based on borrowing rates available to the Company at June 30, 2011 was $403.1 million compared to the face value of $400.0 million and at December 31, 2010 for similar debt, was $257.9 million compared to the face value of $250.0 million.

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements (Continued)

4. Income Taxes

        The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate for the full fiscal year in addition to discrete events which impact the interim period. The Company's effective tax rate varies from the US statutory rate principally due to the rate impact of uncertain tax positions, valuation allowance changes and state taxes. For the six months ended June 30, 2011 the Company increased its valuation allowance by $0.8 million for deferred taxes relating to state research credits the Company does not believe it will fully utilize prior to expiration. Cumulative adjustments to the tax provision are recorded in the interim period in which a change in the estimated annual effective rate is determined. The Company's tax benefit was $14.7 million and $9.5 million, respectively, for the three and six months ended June 30, 2011 on pre-tax loss of $37.1 million and $25.5 million for the respective periods compared to tax provisions of $0.2 million and $2.4 million, respectively, for the three and six months ended June 30, 2010 on pre-tax income of $0.3 million and $5.8 million for the respective periods. In the quarter ending June 30, 2011, the Company recorded a benefit for income taxes due primarily to the impairment of the Ablavar patent portfolio intangible asset and write-down of Ablavar inventory (see Notes 5 and 8). Due to the Company's recent history of U.S. taxable income, the Company has concluded that a valuation allowance is not necessary against these deferred tax assets.

        The Company has a tax indemnification agreement with Bristol-Myers Squibb ("BMS") related to certain tax obligations arising prior to the acquisition of the Company, for which the Company has the primary legal obligation. The tax indemnification receivable is recognized within other long-term assets. The changes in the tax indemnification asset are recognized within other income, net in the statement of income. 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 within the tax provision. Accordingly, as these reserves change, adjustments are included in the tax provision while the offsetting adjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there is no net effect on earnings related to these liabilities and no net cash outflows.

5. Inventory

        The Company includes within current assets the amount of inventory that is estimated to be utilized within twelve months. Inventory that will be utilized 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)			June 30, 2011			December 31, 2010
Raw materials			$	7,519		$	7,116
Work in process				3,893			5,605
Finished goods				6,759			7,396
	Inventory		$	18,171		$	20,117
Other long-term assets				14,829			12,781
	Total		$	33,000		$	32,898

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements (Continued)

5. Inventory (Continued)

        Included in other long-term assets are $12.5 million of raw materials, $0.4 million in work-in-process and $1.9 million of finished goods at June 30, 2011. At December 31, 2010 other non-current assets consisted of $7.8 million of raw materials, $1.4 million in work-in-process and $3.6 million of finished goods.

        The Company's Ablavar product was commercially launched in January 2010 and the Company is currently in the process of educating radiologists on optimizing the use of the product within their patient populations. The revenues for this product through June 30, 2011 have not been significant. At June 30, 2011 and December 31, 2010 the balances of inventory on-hand reflect approximately $16.1 million and $13.9 million, respectively, of finished products, work-in-process and raw materials related to Ablavar. At June 30, 2011 and December 31, 2010, approximately $14.8 million and $12.8 million, respectively of Ablavar inventory was included in other non-current assets. The Company entered into an agreement with a supplier to provide Active Pharmaceutical Ingredient ("API") and finished products for Ablavar under which the Company is required to purchase future quarterly minimum quantities ranging from $6.3 million to $7.5 million of API inventory through September 2012. The supply agreement was entered into to ensure supply of the product. At June 30, 2011, the total remaining minimum purchase commitment was approximately $33.8 million. In addition to the minimum commitment, the Company, at its discretion, can manufacture API into finished product for an additional charge per vial. The Company records the inventory when it takes delivery, at which time the Company assumes title and risk of loss.

        The Company performed an analysis of its expected future sales of its Ablavar product at June 30, 2011 and recorded an inventory write-down to cost of goods sold of $13.5 million of Ablavar inventory, which represents the cost of Ablavar finished good product and API that the Company does not currently believe it will be able to sell prior to its expiration. In the fourth quarter of 2010, the Company recorded to cost of goods sold a $10.9 million inventory write-down of its Ablavar inventory.

        The Company also evaluated an updated sales forecast for Ablavar in consideration of its supply agreement for API. Based on the updated sales forecast, coupled with the aggregate six-year shelf life of API and finished goods, the Company currently does not believe that it will be able to sell all of the committed supply. As a result, the Company recorded in cost of goods sold a reserve of $1.9 million for the loss associated with the portion of the committed purchases of Ablavar product that the Company does not believe it will be able to sell prior to its expiration. In addition, the Company determined that it's write-down of Ablavar inventory represented an event that warranted assessment of the intellectual property associated with Ablavar for its recoverability and concluded that the intellectual property was not recoverable and in June 2011, recorded in cost of goods sold an impairment of this intangible asset of $23.5 million (see Note 8). In the event that the Company does not meet its sales expectations for Ablavar or cannot sell the product it has committed to purchase prior to its expiration, the Company could incur additional inventory losses and/or losses on its purchase commitments.

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Condensed Consolidated Statements (Continued)

6. Property, Plant and Equipment, net

        Property, plant and equipment consisted of the following:

(in thousands)		June 30, 2011			December 31, 2010
Land		$	22,450		$	22,450
Buildings			63,175			62,014
Machinery, equipment and fixtures			63,529			60,713
Construction in progress			5,337			7,631
Accumulated depreciation			(38,106	)		(32,124	)
Property, plant and equipment, net		$	116,385		$	120,684

        For the three and six months ended June 30, 2011, depreciation expense related to property, plant and equipment was $3.0 million and $6.0 million, respectively, as compared to $2.8 million and $5.6 million for the prior year comparative periods.

        Included within property, plant and equipment are spare parts of approximately $4.0 million as of both June 30, 2011 and December 31, 2010. Spare parts include replacement parts relating to plant and equipment and are either recognized as an expense when consumed or re-classified and capitalized as part of the related plant and equipment and depreciated over a time period not exceeding the useful life of the related asset. In addition, the Company had included $0.3 million and $3.2 million in accounts payable related to its property, plant and equipment at June 30, 2011 and December 31, 2010, respectively.

7. Asset Retirement Obligations

        The Company considers the legal obligation to remediate its facilities upon a decommissioning of its radioactive related operations as an asset retirement obligation. The operations of the Company have radioactive production facilities at its North Billerica, Massachusetts and San Juan, Puerto Rico sites.

        The fair value of a liability for asset retirement obligations is recognized in the period in which the liability is incurred. The liability is measured at the present value of the obligation when incurred and is adjusted in subsequent periods as accretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying value of the related long-lived assets and depreciated over the asset's useful life.

        The following is a reconciliation of the Company's asset retirement obligations for the six months ended June 30, 2011:

(in thousands)
Balance at January 1, 2011			$	4,372
	Capitalization			—
	Accretion expense			248
Balance at June 30, 2011			$	4,620

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Notes to Unaudited Condensed Consolidated Statements (Continued)

8. Intangibles, net

        Intangibles, net consisted of the following:

        On April 6, 2009, the Company acquired the U.S., Canadian and Australian territory rights to a Gadolinium-based blood pool contrast agent, Ablavar (formerly known as Vasovist), from EPIX Pharmaceuticals for an aggregate purchase price of $32.6 million, including drug product and active pharmaceutical ingredient inventory. Ablavar was approved by the FDA in December 2008 and commercially launched by the Company in early January 2010 after final FDA approval of its product label. In June 2010, the Company acquired the remaining world rights to Ablavar.

        The Company determined that the write-down of Ablavar inventory in the fourth quarter of 2010 (see Note 5) represented an event that warranted assessment of the $24.9 million Ablavar patent portfolio for its recoverability. Based on the Company's estimate of future undiscounted cash flows associated with the Ablavar product as of December 31, 2010, the Company concluded the patent portfolio was recoverable by a narrow margin.

        During the interim periods subsequent to December 31, 2010, the Company monitored the recoverability of the Ablavar patent portfolio. The Company completed an update of its sales forecast based on second quarter actual sales results and its forecasted Ablavar sales activity. The Company, using its revised sales forecast, conducted an impairment analysis and concluded that the estimate of future undiscounted cash flows associated with the Ablavar product did not exceed 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 the Ablavar patent portfolio asset, the Company estimated the future discounted cash flows associated with the Ablavar product and as a result of this analysis, recorded an impairment charge of $23.5 million to adjust the carrying value to its fair value of zero. This expense was recorded within cost of goods sold in the accompanying statement of operations for the period ended June 30, 2011.

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Notes to Unaudited Condensed Consolidated Statements (Continued)

8. Intangibles, net (Continued)

        For the three and six months ended June 30, 2011, the Company recorded amortization expense for its intangible assets of $5.5 million and $11.0 million, respectively, as compared to $5.6 million and $11.2 million for the prior year comparative periods.

        Expected future amortization expense related to the intangible assets is as follows (in thousands):

9. Accrued Expenses

        Accrued expenses are comprised of the following:

        On June 30, 2011, the Company took action to reduce its work force in an effort to reduce costs and increase operating efficiency. The balance in accrued expenses at June 30, 2011 associated with this action is approximately $1.6 million.

10. Financing Arrangements

        On March 21, 2011, Lantheus Medical Imaging, Inc. (the "Issuer"), a wholly-owned subsidiary of the Company, issued $150.0 million of 9.750% Senior Notes due in 2017 (the "New Notes"). The New Notes were issued at a price of 101.50% and were issued as additional debt securities under an indenture (the "Indenture") pursuant to which the Issuer previously issued $250.0 million in aggregate principal amount of 9.750% Senior Notes due 2017 ("Existing Notes" and together with the New Notes, the "Notes"). The New Notes were issued with the same terms and conditions as the Existing Notes, except that the New Notes were subject to a separate registration rights agreement. The New Notes and the Existing Notes vote as one class under the Indenture. As a result of the issuance of the New Notes, the Company has $400.0 million in aggregate principal amount of 9.750% Senior Notes due 2017 outstanding. The Notes bear interest at a rate of 9.750% per year, payable on May 15 and

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Notes to Unaudited Condensed Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

November 15 of each year, beginning May 15, 2011 with respect to the New Notes. Interest on the New Notes accrues from November 15, 2010. The Notes mature on May 15, 2017. The net proceeds of the Existing Notes were used to repay $77.9 million due under the Company's then outstanding credit agreement and to pay a $163.8 million dividend to Holdings to repay a $75.0 million demand note it issued and for Holdings to repurchase $90.0 million of Holdings' Series A Preferred Stock at the accreted value. The net proceeds of the New Notes were used to pay a dividend to the Company's parent, Holdings, which it used to fully redeem the balance of its Series A Preferred Stock at the accreted value of $44.0 million and to pay a $106.0 million dividend to the holders of its common securities and stock options. In conjunction with the issuance of the New Notes, the Company made a cash payment (the "Consent Payment") of $3.75 million to the Holders of the Existing Notes in exchange for the Holders of the Existing Notes consent to amend the Indenture 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 to interest expense.

Registration Rights

        In connection with the issuance of the New Notes and Existing Notes, the Issuer and the guarantors, including the Company, entered into a registration rights agreement with the initial purchasers of the Notes. The Securities and Exchange Commission declared effective registration statements for the exchange offers of the New Notes and Existing Notes on December 30, 2010 and April 8, 2011, respectively, and these exchange offers were consummated on February 2, 2011 and May 10, 2011, respectively.

Redemption

        The Issuer can redeem the Notes at 100% of the principal amount on May 15, 2016 or thereafter. The Issuer may also redeem the Notes prior to May 15, 2016 depending on the timing of the redemption during the twelve month period beginning May 15 of each of the years indicated below:

        In addition, at any time prior to May 15, 2013, the Issuer may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued at 109.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date, subject to the right of holders of record on such date to receive any interest due, using proceeds of an equity offering, provided that at least 65% of the aggregate principal amount of the Notes remains outstanding immediately after such redemption and that such redemption occurs within 90 days of each equity offering (as defined in the Indenture).

        At any time prior to May 15, 2014, the Issuer may also redeem all or a part of the Notes, with notice, at a redemption price equal to 100% of the principal amount thereof of the Notes redeemed plus the applicable premium (as defined in the Indenture) as of, and accrued and unpaid interest and additional interest (as defined in the Indenture), if any, to, but not including, the redemption date, subject to the rights of holders of record on the relevant record date to receive interest due on the relevant interest payment date.

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Notes to Unaudited Condensed Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

        Upon a change of control (as defined in the Indenture), the Company will be required to make an offer to purchase each holder's Note at a price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

        If the Issuer or its subsidiaries engage in asset sales (as defined in the Indenture), they generally must either invest the net cash proceeds from such sales in such business within a specified period of time, prepay certain indebtedness or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds (as defined in the Indenture), subject to certain exceptions.

        The Notes are unsecured and are equal in right of payment to all of the existing and future senior debt, including borrowing under its secured credit facilities, subject to the security interest thereof. The Issuer's obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior basis by the Company and by certain of the Issuer's subsidiaries, and the obligations of such guarantors under their guarantees are equal in right of payment to all of their existing and future senior debt.

Revolving Line of Credit

        In connection with the issuance of the New Notes, certain covenants and interest rates under the Company's existing $42.5 million revolving facility ("Facility") were modified as disclosed below. The other terms of the Facility were unchanged, including the Company's ability to request the lenders to increase the Facility by an additional amount of up to $15.0 million at the discretion of the Lenders. Interest on the Facility will be at either LIBOR plus 3.75% or the Reference Rate (as defined in the Facility) plus 2.75%. The Facility expires on May 10, 2014, at which time all outstanding borrowings are due and payable.

        At June 30, 2011, there were no amounts outstanding under the Facility and our aggregate borrowing capacity was $42.5 million.

Covenants

        The Indenture and the credit agreement that governs the Revolver, contain affirmative and negative covenants, as well as restrictions on the ability of the Company, the Issuer and the Issuer's subsidiaries: to (i) incur additional indebtedness or issue preferred stock; (ii) repay subordinated indebtedness prior to its stated maturity; (iii) pay dividends on, repurchase or make distributions in respect of its capital stock or make other restricted payments; (iv) make certain investments; (v) sell certain assets; (vi) create liens; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and (viii) enter into certain transactions with our affiliates. The Company is required to comply with financial covenants, including total leverage ratio and interest coverage ratio, beginning with the quarter ended September 30, 2010, as well as limitations on the amount of capital expenditures. The financial ratios are driven by the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA"). The total leverage ratio is the financial covenant that is currently the most restrictive. The total leverage ratio requires the Company and its Subsidiaries (as defined in the Revolver) to maintain a leverage ratio of 5.50 to 1.00 for each of the first two fiscal quarters in 2011, 5.25 to 1.00 in the third fiscal quarter of 2011, 5.00 to 1.00 in the last fiscal quarter of 2011, 4.75 to 1.00 for the first fiscal quarter in 2012, 4.50 to 1.00 for the second and third fiscal quarter in 2012, 4.25 to 1.00 for the last fiscal quarter in 2012 and the first three fiscal quarters in 2013 and 3.75 to 1.00 thereafter. The interest coverage ratio requires the Company and its Subsidiaries (as

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Notes to Unaudited Condensed Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

defined in the Revolver) to have a coverage ratio of 1.75 to 1.00 for the first three fiscal quarters in 2011, 2.00 to 1.00 for the last fiscal quarter of 2011 and the first fiscal quarter in 2012, 2.15 to 1.00 for the second and third fiscal quarter of 2012 and 2.25 to 1.00 thereafter.

Financing Costs

        The Issuer incurred and capitalized approximately $16.0 million in direct financing fees including $5.5 million associated with the New Notes issued in March 2011, consisting primarily of underwriting fees and expenses, consent solicitation fee, legal fees, accounting fees and printing costs in connection with the issuance of the New Notes, the Existing Notes and the Revolver. At June 30, 2011, this total included approximately $0.4 million of accrued costs. Deferred financing costs are being amortized over the life of the Notes and the Revolver, as appropriate, using the effective-interest method.

11. Stock-Based Compensation

        The Company's employees are eligible to receive awards from the Holdings 2008 Equity Incentive Plan (the "2008 Plan"). The 2008 Plan is administered by the Holdings Board of Directors. The 2008 Plan permits the granting of nonqualified stock options, stock appreciation rights (or SARs), restricted stock and restricted stock units to its employees, officers, directors and consultants of the Company or any subsidiary of the Company. The maximum number of shares that may be issued pursuant to awards under the 2008 Plan at June 30, 2011 is 5,010,100. Option awards are granted with an exercise price equal to the fair value of Holdings' stock at the date of grant, as determined by the Board of Directors of Holdings. Time based option awards vest based on time, either four or five years, and performance based option awards vest based on the achievement of certain annual EBITDA targets over a five-year period. The Company recognizes compensation costs for its time based awards on a straight-line basis equal to the vesting period. The compensation cost for performance based awards is recognized on a graded vesting basis, based on the probability of achieving performance targets over the requisite service period for the entire award. The fair value of each option award is estimated on the date of grant using a Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historic volatility of a selected peer group. 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 the seven-year U.S. Treasury rate at the date of the grant which most closely resembles the expected life of the options.

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Notes to Unaudited Condensed Consolidated Statements (Continued)

11. Stock-Based Compensation (Continued)

        A summary of option activity for 2011 is presented below:

        The weighted average grant-date fair value of options granted during the three and six months ended June 30, 2011 was $4.01, as compared to $4.43 and $4.49 for the three and six months ended June 30, 2010, respectively. There were no options granted during the three months ended June 30, 2011. During the six months ended June 30, 2011, 431,320 options vested, with an aggregate fair value of approximately $514,000. There were no options exercised during the six months ended June 30, 2011 and 2010. Stock-based compensation expense for both time based and performance based awards was recognized in the consolidated statements of operations as follows:

        As stock-based compensation expense recognized in the consolidated statement of operations for the three and six months ended June 30, 2011 and 2010 was based on awards ultimately expected to vest, it was reduced for estimated pre-vesting forfeitures and probability of achieving certain performance features as required.

        As part of the 2008 Plan, the Company has the right to call options upon notice of exercise and to settle the exercise in cash in lieu of issuing shares. As a result of this right, upon termination of service, stock-based awards are reclassified to liability based awards until the period of probable exercise has lapsed. For the three and six months ended June 30, 2011 and 2010, the Company did not have any awards classified as liabilities. The Company recorded a benefit of approximately $1.0 million in the six month period ended June 30, 2011 related to liability awards which expired during the period.

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Notes to Unaudited Condensed Consolidated Statements (Continued)

11. Stock-Based Compensation (Continued)

        The total of all share-based liability awards paid out during 2010 was approximately $84,000. There were no share-based liability awards paid out in the first six months of 2011.

        The Company did not recognize an income tax benefit for the six months ended June 30, 2011 or June 30, 2010. As of June 30, 2011, there was approximately $3.3 million of total unrecognized compensation costs related to non-vested stock options granted under the 2008 Plan. These costs are expected to be recognized over a weighted-average remaining period of 1.9 years.

12. Other Income (expense), net

        Other income (expense), net consisted of the following:

13. Legal Proceedings and Contingencies

        From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. In addition, the Company has in the past been, and may in the future be, subject to investigations by regulatory authorities which expose it to greater risks associated with litigation, regulatory or other proceedings, as a result of which the Company could be required to pay significant fines or penalties. The outcome of litigation, regulatory or other proceedings cannot be predicted with certainty and some lawsuits, claims, actions or proceedings may be disposed of unfavorably to the Company. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against the Company, could materially and adversely affect its financial condition or results of operations.

        On December 16, 2010, the Company filed suit against one of its insurance carriers seeking to recover business interruption losses associated with the NRU reactor shutdown and the ensuing global Moly supply challenge. The claim is the result of the shut-down of the NRU reactor in Chalk River, Ontario. The NRU reactor was off-line from May 2009 until August 2010 due to a "heavy water" leak in the reactor vessel. The defendant answered the complaint on January 21, 2011, denying substantially all of the allegations, presenting certain defenses and requesting dismissal of the case with costs and disbursements. On April 4, 2011, the parties had their first pre-trial conference before Judge Laura Taylor Swain of the United States District Court for the Southern District of New York, and discovery has commenced. The Company cannot be certain what amount, if any, or when, if ever, it will be able to recover for business interruption losses related to this matter.

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Notes to Unaudited Condensed Consolidated Statements (Continued)

14. Segment Information

        The Company reports two operating segments, the U.S. and International, based on geographic customer base. The results of these operating segments are regularly reviewed by the chief operating decision maker, the President and Chief Executive Officer. The Company's segments derive revenues through the manufacturing, marketing, selling and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging. The U.S. segment comprises 74.9% and 75.6% of consolidated revenues for the three and six months ended June 30, 2011 as compared to 74.4% and 73.5% for the prior year comparative periods and 89.1% and 89.7% of consolidated assets at June 30, 2011 and December 31, 2010, respectively. All goodwill has been allocated to the U.S. operating segment.

        Selected information for each business segment are as follows (in thousands):