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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2011o

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(State of incorporation)

51-0396366(IRS Employer Identification No.)331 Treble Cove Road, North Billerica, MA(Address of principal executive offices)

01862(Zip Code)


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

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

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



Indicate
by check mark 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 o    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 May 10, 2011.



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TABLE OF CONTENTS



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements (Unaudited)

1Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010

1Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010

2Consolidated Statements of Stockholder's Equity as of March 31, 2011 and December 31, 2010

3Consolidated Statements of Cash Flow for the Three Months Ended March 31, 2011 and 2010

4Notes to Unaudited Consolidated Financial Statements

5Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38Item 4.

Controls and Procedures

39PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

40Item 1A.

Risk Factors

40Item 6.

Exhibits

41SignaturesExhibit Index


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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements



Lantheus MI Intermediate, Inc. and subsidiaries

Consolidated Statements of Income

(unaudited, in thousands)

Three Months Ended
March 31,2011

2010RevenuesNet product revenues

$
95,956

$
78,788License and other revenues


2,163


2,084Total revenues


98,119


80,872Cost of goods sold


52,051


42,831Gross profit


46,068


38,041Operating expensesGeneral and administrative expenses


8,132


7,491Sales and marketing expenses


9,395


11,308Research and development expenses


10,505


10,659Total operating expenses


28,032


29,458Operating income


18,036


8,583Interest expense


(7,007
)

(2,500
)Interest income


70


34Other income (expense), net


498


(561
)Income before income taxes


11,597


5,556Provision for income taxes


5,250


2,222Net income

$
6,347

$
3,334


See
notes to unaudited consolidated financial statements.

1

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Lantheus MI Intermediate, Inc. and subsidiaries

Consolidated Balance Sheets

(unaudited, in thousands except share data)

March 31,
2011

December 31,
2010AssetsCurrent assetsCash and cash equivalents

$
37,964

$
33,006Accounts receivable, net of allowance of $876 and $796


56,214


50,452Inventory


22,624


20,117Deferred tax assets


4,270


4,266Other current assets


3,593


3,158Total current assets


124,665


110,999Property, plant and equipment, net


118,810


120,684Capitalized software development costs


3,593


3,896Intangibles, net


119,171


124,689Goodwill


15,714


15,714Deferred tax assets


73,971


78,312Deferred financing costs


14,443


9,425Other long-term assets


40,263


32,162Total assets

$
510,630

$
495,881Liabilities and Stockholder's EquityCurrent liabilitiesAccounts payable

$
21,603

$
24,528Accrued expenses


31,079


18,605Income tax payable


468


128Deferred revenue


6,567


7,261Total current liabilities


59,717


50,522Asset retirement obligation


4,496


4,372Long-term debt, net


398,510


250,000Deferred tax liability


1,618


1,853Deferred revenue


2,001


2,668Other long-term liabilities


33,720


33,032Total liabilities


500,062


342,447Commitments and contingencies (see Note 13)





Stockholder's equityCommon stock ($0.001 par value, 10,000 shares authorized; 1 share issued and outstanding)





Additional paid-in capital


1,308


150,316Retained earnings


8,157


2,410Accumulated other comprehensive income


1,103


708Total stockholder's equity


10,568


153,434Total liabilities and stockholder's equity

$
510,630

$
495,881


See
notes to unaudited consolidated financial statements.

2

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Lantheus MI Intermediate, Inc. and subsidiaries

Consolidated Statements of Stockholder's Equity

(unaudited, in thousands except share data)

Common Stock





Accumulated
Other
Comprehensive
Income (Loss)Additional
Paid-In
Capital

Retained
Earnings

Total
Stockholder's
EquityShares

AmountBalance at January 1, 2010


1




$
247,883

$
63,138

$
(442
)
$
310,579Dividend paid to LMI Holdings (see Note 10)








(98,078
)

(65,698
)




(163,776
)Comprehensive incomeNet income











4,970




$
4,970Foreign currency translation














1,150


1,150Total comprehensive income
















$
6,120Stock-based compensation








511








511Balance at December 31, 2010


1





150,316


2,410


708


153,434Dividend paid to LMI Holdings (see Note 10)








(149,400
)

(600
)




(150,000
)Comprehensive incomeNet income











6,347




$
6,347Foreign currency translation














395


395Total comprehensive income
















$
6,742Stock-based compensation








392








392Balance at March 31, 2011


1

$


$
1,308

$
8,157

$
1,103

$
10,568


See
notes to unaudited consolidated financial statements.

3

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Table of Contents



Lantheus MI Intermediate, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(unaudited, in thousands)

Three Months ended
March 31,2011

2010Cash flow from operating activitiesNet income

$
6,347

$
3,334Adjustments to reconcile net income to cash flow from operating activitiesDepreciation


3,013


2,737Amortization


5,841


5,874Amortization of deferred financing charges


458


571Amortization of debt premium


(15
)

Amortization of consent fee


25


Provision for excess and obsolete inventory


162


1,396Stock-based compensation


(746
)

143Deferred income taxes


4,104


243Accretion of asset retirement obligation


124


102Loss on disposal of long-lived assets


30


Long-term income tax receivable


(381
)

167Long-term income tax payable


688


(94
)Increase (decrease) in cash from operating assets and liabilitiesAccounts receivable, net


(5,749
)

(5,701
)Prepaid expenses and other assets


(435
)

(2,754
)Inventory


(10,474
)

(7,035
)Deferred revenue


(1,333
)

2,858Accounts payable


(92
)

441Income tax payable


340


(276
)Accrued expenses and other liabilities


12,334


(1,897
)Cash provided by operating activities


14,241


109Cash flows from investing activitiesCapital expenditures


(4,019
)

(773
)Cash used in investing activities


(4,019
)

(773
)Cash flows from financing activitiesProceeds from issuance of debt


152,250


Consent solicitation fee


(3,750
)

Debt issuance costs


(4,211
)

Payment of dividend


(150,000
)

Cash (used in) provided by financing activities


(5,711
)

Effect of foreign exchange rate on cash


447


328Increase (decrease) in cash and cash equivalents


4,958


(336
)Cash and cash equivalents, beginning of period


33,006


31,480Cash and cash equivalents, end of period

$
37,964

$
31,144Supplemental disclosure of cash flow informationInterest paid

$


$
1,850Income taxes paid, net of refunds

$
212

$
2,767


See
notes to unaudited consolidated financial statements.

4

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Table of Contents



Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited 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.

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:



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 generally accepted accounting principles in the United States of America 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 consolidated balance sheet data
presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by

5

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

1. Business Overview (Continued)

U.S. GAAP.
The results of operations for the three months ended March 31, 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 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 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 million in license fees; $8 million of which was received upon execution of the Agreement and $2 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 in license fee revenue pursuant to the Agreement in each of the three month periods ended
March 31, 2011 and 2010, and had deferred revenue of $4.4 and $5.0 million as of March 31, 2011 and December 31, 2010, respectively, related to the Agreement. The
$4.4 million of deferred revenue as of March 31, 2011 will be recognized as revenue at a rate of $2.5 million per year in 2011 through 2012.

In
addition, the Company had other revenue of $1.5 million in each of the three month periods ended March 31, 2011 and 2010, respectively. Other revenue represents contract
manufacturing services

6

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

2. Revenue Recognition (Continued)

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 $2.5 million of revenue relating to Ablavar shipments,
associated with a distributor arrangement. The corresponding cost has been recorded in inventory as of March 31, 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 March 31, 2011 and December 31,
2010, and indicate the fair value hierarchy of the valuation techniques we 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
March 31,
2011

Quoted prices in
active markets
(Level 1)

Significant other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)Money Market

$
25,110

$
25,110

$


$
$
25,110

$
25,110

$


$





(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 March 31, 2011 and December 31, 2010, the Company had approximately $12.9 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 March 31, 2011 was $402.3 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.

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.

7

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

4. Income Taxes (Continued)

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 three months
ended March 31, 2011 the Company increased its valuation allowance by $0.8 million for deferred taxes relating to state research credits for which the Company does not believe it will
fully utilize. 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 expense was
$5.2 million and $2.2 million for the three months ended March 31, 2011 and March 31, 2010, respectively, on pre-tax income of $11.6 million and
$5.6 million for the respective periods.

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 non-current assets, consisted of the following:

(in thousands)

March 31,
2011

December 31,
2010Raw materials

$
7,112

$
7,116Work in process


6,370


5,605Finished goods


9,142


7,396Inventory

$
22,624

$
20,117Other long-term assets


20,500


12,781Total

$
43,124

$
32,898


Included
in other non-current assets is $16.1 million of raw materials, $1.4 million in work-in-process and
$3.0 million of finished goods at March 31, 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 March 31, 2011 have not been significant. At March 31, 2011 and December 31, 2010 the balances of inventory on
hand reflect approximately $22.0 million and $13.9 million, respectively, of finished products, work-in-process and raw materials related to Ablavar. At
March 31, 2011 and December 31, 2010, approximately $20.5 million and

8

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

5. Inventory (Continued)

$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 March 31, 2011, the total of this remaining minimum purchase commitment was
approximately $41.3 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.

Based
on the current sales forecast, coupled with the aggregate six-year shelf life of API and finished goods, the Company currently believes that it will be able to use the
committed supply. In the fourth quarter of 2010, the Company recorded a $10.9 million inventory write-down of its Ablavar inventory. 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 our purchase commitments.

6. Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

(in thousands)

March 31,
2011

December 31,
2010Land

$
22,450

$
22,450Buildings


62,846


62,014Machinery, equipment and fixtures


61,991


60,713Construction in progress


6,651


7,631Accumulated depreciation


(35,128
)

(32,124
)Property, plant and equipment, net

$
118,810

$
120,684


Depreciation
expense related to property, plant and equipment was $3.0 million and $2.7 million for the three months ended March 31, 2011 and 2010,
respectively.

Included
within property, plant and equipment are spare parts of approximately $3.9 million and $4.0 million as of March 31, 2011 and December 31, 2010,
respectively. Spare parts include replacement parts relating to plant and equipment and are either recognized as an expense when consumed or re-classified and capitalized as part of the
related plant and equipment and depreciated over a time period not exceeding the useful life of the related asset. In addition, the Company had
included $332,000 and $3.2 million in accounts payable related to its property, plant and equipment at March 31, 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.

9

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Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

7. Asset Retirement Obligations (Continued)

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 three months ended March 31, 2011:

(in thousands)Balance at January 1, 2011

$
4,372Capitalization


Accretion expense


124Balance at March 31, 2011

$
4,496


8. Intangibles, net

Intangibles, net consisted of the following:

March 31, 2011(in thousands)

Cost

Accumulated
amortization

Net

Weighted
Average
Useful Life

Amortization
MethodTrademarks

$
53,390

$
11,182

$
42,208


16 years


Straight-lineCustomer relationships


113,480


65,629


47,851


19 years


AcceleratedAblavar patent rights, know-how


29,710


5,539


24,171


11 years


Straight-lineOther patents


42,780


37,839


4,941


2 years


Straight-line$
239,360

$
120,189

$
119,171




December 31, 2010(in thousands)

Cost

Accumulated
amortization

Net

Weighted
Average
Useful Life

Amortization
MethodTrademarks

$
53,390

$
10,317

$
43,073


16 years


Straight-lineCustomer relationships


113,480


61,909


51,571


19 years


AcceleratedAblavar patent rights, know-how


29,710


4,842


24,868


11 years


Straight-lineOther patents


42,780


37,603


5,177


2 years


Straight-line$
239,360

$
114,671

$
124,689


The
Company determined that its write down of Ablavar inventory in the fourth quarter of 2010 (see Note 5) represented an event that warranted assessment of the
$24.6 million Ablavar patent portfolio for its recoverability. Based on the Company's estimate of future undiscounted cash flows associated with the Ablavar product, the Company concluded the
patent portfolio was recoverable by a narrow margin. The Company's estimate of undiscounted cash flows assumes it is granted its U.S. request for regulatory extension of its Ablavar patent portfolio
until 2020. Currently the Company's patent rights to Ablavar expire as late as 2017. In the event the Company does not meet its sales

10

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

8. Intangibles, net (Continued)

expectations
or its costs and expenses exceed the costs and expenses incorporated into its projection model, an impairment of the Ablavar patent portfolio may be required.

The
Company recorded amortization expense for its intangible assets of $5.5 million and $5.6 million for the three months ended March 31, 2011 and March 31,
2010, respectively.

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

Remainder of 2011

$
14,3412012


15,3582013


13,5782014


12,2972015


10,6252016 and thereafter


52,972$
119,171


9. Accrued Expenses

Accrued expenses are comprised of the following:

(in thousands)

March 31,
2011

December 31,
2010Compensation and benefits

$
7,003

$
5,839Accrued interest


14,634


3,137Accrued professional fees


2,715


2,342Research and development services


743


1,327Freight and distribution


3,151


3,368Marketing expense


1,188


989Accrued rebates, discounts and chargebacks


928


910Other


717


693$
31,079

$
18,605


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 pursuant to which the Issuer previously issued $250.0 million
in aggregate principal amount of 9.750% Senior Notes due 2017 ("Existing 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 governing the Existing Notes. Collectively, the New Notes and the
Existing Notes will be referred to as the "Notes." 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 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

11

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

mature
on May 15, 2017. The net proceeds of the New Notes were used to pay a dividend to the Company's parent, Lantheus MI Holdings, Inc. ("LMI Holdings"), which it used to fully redeem
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 will be 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 Company registered the New Notes on April 8, 2011 and the existing Notes on December 30, 2010 with the
Securities and Exchange Commission.

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:

Year

Percentage2014


104.875
%2015


102.438
%2016


100.000
%


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.

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.

12

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

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 revolving line of
credit ("Revolver") were modified as disclosed below. The other terms of the revolver 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 revolving credit facility will be at either LIBOR plus 3.75% or the Reference Rate (as defined in the Credit
Agreement) plus 2.75%. The Revolver expires on May 10, 2014, at which time all outstanding borrowings are due and payable.

At
March 31, 2011, there were no amounts outstanding under the Revolver 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 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.

13

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

10. Financing Arrangements (Continued)

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 March 31, 2011, this total included approximately $1.6 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 LMI Holdings 2008 Equity Incentive Plan (the "2008 Plan"). The 2008 Plan is administered by the LMI 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 March 31, 2011 is 5,010,100, which
decreased due to cancelled and retired vested options. Option awards are granted with an exercise price equal to the fair value of LMI Holdings' stock at the date of grant, as determined by the Board
of Directors of LMI
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 historical
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.

Three Months
Ended
March 31,2011

2010Expected volatility


33
%

39
%Expected dividends





Expected life (in years)


6.5


6.5Risk-free interest rate


2.9
%

3.0
%


14

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

11. Stock-Based Compensation (Continued)

A
summary of option activity for 2011 is presented below:

Time Based

Performance
Based

Total

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic ValueOutstanding at January 1, 2011


2,368,350


1,797,569


4,165,919

$
2.70


7.0

$
32,618,000Options granted


121,000


121,000


242,000


10.26Options cancelled


(76,250
)

(73,252
)

(149,502
)

2.20Options exercised











Options forfeited or expired


(13,000
)

(9,500
)

(22,500
)

5.76Outstanding at March 31, 2011


2,400,100


1,835,817


4,235,917


3.20


7.2

$
31,427,000Vested and expected to vest at March 31, 2011


2,381,347


1,818,102


4,199,449


3.18


7.2

$
31,209,000Exercisable at March 31, 2011


1,312,280


845,697


2,157,977


2.16


7.0

$
18,225,000


The
weighted average grant-date fair value of options granted during the three months ended March 31, 2011 and 2010 was $4.01 and $4.53, respectively. During the three
months ended March 31, 2011, 266,258 options vested, with an aggregate fair value of approximately $304,000. There were no options exercised during the three months ended March 31, 2011
and 2010. Stock-based compensation expense for both time based and performance based awards was recognized in the consolidated statements of income as follows:

Three Months
Ended
March 31,(in thousands)

2011

2010Cost of goods sold

$
16

$
20General and administrative


128


135Sales and marketing


(957
)

6Research and development


67


(18
)Total stock-based compensation expense

$
(746
)
$
143


As
stock-based compensation expense recognized in the consolidated statement of income for the three months ended March 31, 2011 and 2010 was based on awards ultimately expected
to vest, it was reduced for estimated pre-vesting forfeitures 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. As of March 31, 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 three month period ended March 31, 2011 related to liability awards which
expired during the period.

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 three months of 2011.

15

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

11. Stock-Based Compensation (Continued)

The Company did not recognize an income tax benefit for the three months ended March 31, 2011 or March 31, 2010. As of March 31, 2011, there was approximately
$2.8 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 2.1 years.

12. Other Income (expense), net

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

Three Months
Ended
March 31,(in thousands)

2011

2010Foreign currency gains (losses)

$
89

$
(512
)Tax indemnification income (loss)


380


(90
)Other income


29


41Total other income(expense), net

$
498

$
(561
)


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.

14. Segment Information

The Company reports two operating segments, the U.S. and International, based on geographic customer base rather than by legal entity as previously reported. 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,

16

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

14. Segment Information (Continued)

selling
and distribution of medical imaging products, focused primarily on cardiovascular diagnostic imaging. The U.S. segment comprises 76.3% and 72.5% of consolidated revenues for the three months
ended March 31, 2011 and 2010, respectively, and 89.4% and 89.7% of consolidated assets at March 31, 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):

Three Months
Ended March 31,2011

2010RevenuesU.S.

$
80,625

$
66,039International


23,243


22,250Total revenue, including inter-segment


103,868


88,289Less inter-segment revenue


(5,749
)

(7,417
)$
98,119

$
80,872Revenues from external customersU.S.

$
74,876

$
58,622International


23,243


22,250$
98,119

$
80,872Operating income/(loss)U.S.

$
13,055

$
5,254International


3,607


3,175Total operating income, including inter-segment


16,662


8,429Inter-segment operating income


1,374


154$
18,036

$
8,583




March 31,
2011

December 31,
2010AssetsU.S.

$
456,628

$
444,767International


54,002


51,114$
510,630

$
495,881




March 31,
2011

December 31,
2010Long-lived AssetsU.S.

$
238,048

$
244,784International


19,240


20,199$
257,288

$
264,983


17

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information

The 9.750% senior subordinated notes due 2017 (see Note 10) are guaranteed by the Company and
Lantheus MI Real Estate, LLC, one of the Company's consolidated subsidiaries (the "Guarantor Subsidiary"). The guarantees are full and unconditional and joint and several. The following
supplemental financial information sets forth, on a condensed consolidating basis, balance sheet information as of March 31, 2011 and December 31, 2010, and income and cash flow
information for the three months ended March 31, 2011 and 2010 for the Company, Lantheus Medical Imaging, Inc. (the "Issuer"), the Guarantor Subsidiary and the Company's other
subsidiaries, or the Non-Guarantor Subsidiaries. The supplemental financial information reflects the investments of the Company in the Issuer, and the Company's investment in the Guarantor
Subsidiary and Non-Guarantor Subsidiaries using the equity method of accounting.

18

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Consolidating Balance Sheet Information (Unaudited)        March 31, 2011

(in thousands)

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalAssetsCash and cash equivalents

$


$
20,835

$


$
17,129

$


$
37,964Accounts receivable, net





41,555





14,659





56,214Intercompany accounts receivable





3,894








(3,894
)

Inventory





17,123





5,501





22,624Deferred tax assets





4,187





83





4,270Other current assets





3,141





452





3,593Total current assets





90,735





37,824


(3,894
)

124,665Property, plant and equipment, net





85,826


23,335


9,649





118,810Capitalized software development costs





3,584





9





3,593Goodwill





15,714











15,714Intangibles, net





109,589





9,582





119,171Deferred tax assets





73,971











73,971Deferred financing costs





14,443











14,443Investment in subsidiaries


10,568


65,498








(76,066
)

Other long-term assets





40,066





197





40,263Total assets

$
10,568

$
499,426

$
23,335

$
57,261

$
(79,960
)
$
510,630Liabilities and equityAccounts payable

$


$
19,131

$


$
2,472

$


$
21,603Intercompany accounts payable











3,894


(3,894
)

Accrued expenses





27,716





3,363





31,079Income tax payable





(573
)




1,041





468Deferred revenue





5,201





1,366





6,567Total current liabilities





51,475





12,136


(3,894
)

59,717Asset retirement obligation





4,379





117





4,496Long-term debt, net of current portion





398,510











398,510Deferred tax liability











1,618





1,618Deferred revenue





2,001











2,001Other long-term liabilities





32,493





1,227





33,720Total liabilities





488,858





15,098


(3,894
)

500,062Equity


10,568


10,568


23,335


42,163


(76,066
)

10,568Total liabilities and equity

$
10,568

$
499,426

$
23,335

$
57,261

$
(79,960
)
$
510,630


19

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Consolidating Balance Sheet Information (Unaudited)        December 31, 2010

(in thousands)

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalAssetsCash and cash equivalents

$


$
19,079

$


$
13,927

$


$
33,006Accounts receivable, net





36,925





13,527





50,452Intercompany accounts receivable





4,462








(4,462
)

Inventory





12,611





7,506





20,117Deferred tax assets





4,187





79





4,266Other current assets





2,845





313





3,158Total current assets





80,109





35,352


(4,462
)

110,999Property, plant and equipment, net





87,258


23,355


10,071





120,684Capitalized software development costs





3,887





9





3,896Goodwill





15,714











15,714Intangibles, net





114,570





10,119





124,689Deferred tax assets





78,312











78,312Deferred financing costs





9,425











9,425Investment in subsidiaries


153,434


63,827








(217,261
)

Other long-term assets





31,966





196





32,162Total assets

$
153,434

$
485,068

$
23,355

$
55,747

$
(221,723
)
$
495,881Liabilities and equityAccounts payable

$


$
22,334

$


$
2,194

$


$
24,528Intercompany accounts payable











4,462


(4,462
)

Accrued expenses





15,879





2,726





18,605Income tax payable





(741
)




869





128Deferred revenue





5,383





1,878





7,261Total current liabilities





42,855





12,129


(4,462
)

50,522Asset retirement obligation





4,260





112





4,372Long-term debt, net of current portion





250,000











250,000Deferred tax liability











1,853





1,853Deferred revenue





2,668











2,668Other long-term liabilities





31,851





1,181





33,032Total liabilities





331,634





15,275


(4,462
)

342,447Equity


153,434


153,434


23,355


40,472


(217,261
)

153,434Total liabilities and equity

$
153,434

$
485,068

$
23,355

$
55,747

$
(221,723
)
$
495,881


20

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Consolidating Income Information (Unaudited)        Three Months Ended March 31, 2011

(in thousands)

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalNet product revenues

$


$
81,696

$


$
20,009

$
(5,749
)
$
95,956License and other revenues





2,163











2,163Total revenues





83,859





20,009


(5,749
)

98,119Cost of goods sold





41,066





16,734


(5,749
)

52,051Gross profit





42,793





3,275





46,068Operating expensesGeneral and administrative expenses





7,416


20


696





8,132Sales and marketing expenses





8,338





1,057





9,395Research and development expenses





10,393





112





10,505Operating income (loss)





16,646


(20
)

1,410





18,036Interest expense





(7,007
)










(7,007
)Interest income





1





69





70Other income, net





415





83





498Equity in earnings (losses) of affiliates


6,347


1,283








(7,630
)

Income (loss) before income taxes


6,347


11,338


(20
)

1,562


(7,630
)

11,597(Provision) benefit for income taxes





(4,991
)

7


(266
)




(5,250
)Net income (loss)

$
6,347

$
6,347

$
(13
)
$
1,296

$
(7,630
)
$
6,347


21

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Consolidating Income Information (Unaudited)        Three Months Ended March 31, 2010

(in thousands)

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalNet product revenues

$


$
66,938

$


$
19,267

$
(7,417
)
$
78,788License and other revenues





2,084











2,084Total revenues





69,022





19,267


(7,417
)

80,872Cost of goods sold





34,498





15,750


(7,417
)

42,831Gross profit





34,524











38,041Operating expensesGeneral and administrative expenses





6,807


20


664





7,491Sales and marketing expenses





10,129





1,179





11,308Research and development expenses





10,430





229





10,659Operating income (loss)





7,158


(20
)

1,445





8,583Interest expense





(2,500
)










(2,500
)Interest income





1





33





34Other income, net





(59
)




(502
)




(561
)Equity in earnings (losses) of affiliates


3,334


674








(4,008
)

Income (loss) before income taxes





5,274


(20
)

976


(4,008
)

5,556(Provision) benefit for income taxes





(1,940
)

7


(289
)




(2,222
)Net income (loss)

$
3,334

$
3,334

$
(13
)
$
687

$
(4,008
)
$
3,334


22

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Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Condensed Consolidating Cash Flow Information (Unaudited)        Three Months Ended March 31, 2011

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalCash provided by operating activities

$
600

$
11,454

$


$
2,787

$
(600
)
$
14,241Cash flows from investing activitiesCapital expenditures





(3,987
)




(32
)




(4,019
)Proceeds from dividend


149,400











(149,400
)

Cash provided by (used in) investing activities


149,400


(3,987
)




(32
)

(149,400
)

(4,019
)Cash flows from financing activitiesProceeds from issuance of debt, net





152,250











152,250Consent solicitation fee





(3,750
)










(3,750
)Payments on term loan

















Payments of deferred financing costs





(4,211
)










(4,211
)Payment of dividend


(150,000
)

(150,000
)







150,000


(150,000
)Cash used in financing activities


(150,000
)

(5,711
)







150,000


(5,711
)Effect of foreign exchange rate on cash











447





447Increase in cash and cash equivalents





1,756





3,202





4,958Cash and cash equivalents, beginning of period





19,079





13,927





33,006Cash and cash equivalents, end of period

$


$
20,835

$


$
17,129

$


$
37,964


23

---



Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

15. Guarantor Financial Information (Continued)

Condensed Consolidating Cash Flow Information (Unaudited)        Three Months Ended March 31, 2010

Company

Issuer

Guarantor
Subsidiary

Non-Guarantor
Subsidiaries

Eliminations

TotalCash provided by operating activities

$


$
313

$


$
(204
)
$


$
109Cash flows from investing activitiesCapital expenditures





(613
)




(160
)




(773
)Proceeds from dividend

















Asset acquisitions

















Cash provided by (used in) investing activities





(613
)




(160
)




(773
)Cash flows from financing activitiesProceeds from issuance of debt, net

















Payments on term loan

















Payments of deferred financing costs

















Payment of dividend

















Cash (used in) provided by financing activities

















Effect of foreign exchange rate on cash











328





328(Decrease)Increase in cash and cash equivalents





(300
)




(36
)




(336
)Cash and cash equivalents, beginning of period





21,505





9,975





31,480Cash and cash equivalents, end of period

$


$
21,205

$


$
9,939

$


$
31,144


24

---



Table of Contents

Lantheus MI Intermediate, Inc. and subsidiaries

Notes to Unaudited Consolidated Statements (Continued)

16. Subsequent Events

On April 29, 2011, we entered into an amendment, effective as of April 1, 2011, to the Sales Agreement, dated as of April 1, 2009 (the "NTP Agreement"), with NTP
Radioisotopes (Pty) Ltd ("NTP"). The NTP Agreement, as amended, provides for the supply of Molybdenum-99 ("Moly") from NTP. It expires on December 31, 2013, and the amendment
contains modified purchase terms relating to quantities and unit pricing. It allows for termination upon the occurrence of certain events, including failure by NTP to provide the required amount of
Moly, material breach of any provision by either party, bankruptcy by the either party and force majeure events. Additionally, we have the ability to terminate the NTP Agreement with six months
written notice prior to the expiration of the term of the NTP Agreement.

25

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Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

Some of the statements contained in this quarterly report are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, including, in particular, statements about our plans, strategies, prospects and industry
estimates. These statements identify prospective information and include words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "should," "predicts," "hopes" and
similar expressions. Examples of forward-looking statements include, but are not limited to, statements we make regarding: (i) our
liquidity, including our belief that our existing cash, cash equivalents and anticipated revenues are sufficient to fund our existing operating expenses, capital expenditures and liquidity
requirements for at least the next twelve months; (ii) our outlook and expectations including, without limitation, in connection with continued market expansion and penetration for our
commercial products, including Ablavar, DEFINITY and TechneLite; and (iii) expected new product launch dates and market exclusivity periods. The foregoing is not an exclusive list of all
forward-looking statements we make. 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 and changes 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 statements contained in this quarterly report may not in fact occur. We caution you therefore against relying on any of these forward-looking statements. Important factors that 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:



26

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Table of Contents



Factors
that could cause or contribute to such differences include, but are not limited to, those that are discussed in other documents we file with the Securities and Exchange
Commission, including our Annual Report on Form 10-K. Any forward-looking statement made by us in this quarterly report speaks only as of the date on which it is made. Factors or
events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and
the related notes included in Item 1 of this Quarterly Report on Form 10-Q.

Overview

We are a leading specialty pharmaceutical company that develops, manufactures, distributes and sells innovative diagnostic medical
imaging products on a global basis. Our current imaging agents primarily assist in the diagnosis of heart, vascular and other diseases using nuclear imaging, ultrasound and MRI technologies. We also
have a full clinical and preclinical development program of next-generation and first-in-class products that use PET and MRI technologies. We believe that our
products offer significant benefits to patients, healthcare providers and the overall healthcare system. As a result of more accurate diagnosis of disease, we believe our products allow healthcare
providers to make more informed patient care decisions, potentially improving outcomes, reducing patient risk and decreasing costs for payors and the entire healthcare system.

We
have operations in the United States, Puerto Rico, Canada and Australia and distribution relationships in Europe, Asia Pacific and Latin America. Our products are used by nuclear
physicians, cardiologists, radiologists, internal medicine physicians, technologists and sonographers working in a variety of clinical settings, and we sell our products to radiopharmacies, hospitals,
clinics, group practices, integrated delivery networks, group purchasing organizations and, in certain circumstances, wholesalers.

27

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Table of Contents

Our Products

Our principal products include DEFINITY, an ultrasound contrast agent, Cardiolite, a myocardial perfusion imaging agent, and
TechneLite, a generator used to provide the radioisotope to radiolabel Cardiolite and other radiopharmaceuticals. In the United States, DEFINITY, Cardiolite and TechneLite are marketed through an
internal sales force and sold either to radiopharmacies or directly to end-users. Radiopharmacies reconstitute certain of the products into patient specific unit-dose syringes
which are then sold directly to hospitals, clinics and group practices. Internationally, in some countries these products are marketed through an internal sales force and sold either through our
radiopharmacies or directly to end-users, and in other countries through distributors. DEFINITY, Cardiolite and TechneLite, in the aggregate, accounted for approximately 73%, 76% and 87%
of our global total revenues in 2010, 2009 and 2008, respectively.

The
following table sets forth our revenue derived from our principal products:

Three Months Ended
March 31,(dollars in millions)

2011

%

2010

%Cardiolite

$
22.7


23

$
21.0


26TechneLite


35.9


37


22.4


28DEFINITY


16.2


16


13.9


17Other


23.3


24


23.6


29Total revenues

$
98.1


100

$
80.9


100


Executive Overview

The following have impacted our results in the three months ended March 31, 2011:



We
expect the trends noted above to continue for the remainder of 2011. We also expect our research and development expenses to increase during 2011 as we begin our phase III
clinical trial for Flurpiridaz F-18. The trends noted above may be impacted by the return to service of each of the NRU reactor and the manufacturing facility at Ben Venue Laboratories.
See Part IIItem 1A. "Risk Factors" for further detail.

28

---



Table of Contents

Results of Operations

Revenues

Revenues are summarized as follows:

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)United StatesCardiolite

$
15.4

$
13.9

$
1.5


11
%TechneLite


31.2


19.8


11.4


58DEFINITY


15.9


13.5


2.4


18Other currently marketed products


10.2


9.3


0.9


10Total US product revenue


72.7


56.5


16.2


29License and other revenues


2.2


2.1


0.1


5Total US revenues

$
74.9

$
58.6

$
16.3


28
%InternationalCardiolite

$
7.3

$
7.1

$
0.2


3
%TechneLite


4.7


2.6


2.1


81DEFINITY


0.3


0.4


(0.1
)

(25
)Other currently marketed products


10.9


12.2


(1.3
)

(11
)Total International product revenue


23.2


22.3


0.9


4License and other revenues











Total International revenues

$
23.2

$
22.3

$
0.9


4
%Product revenue

$
95.9

$
78.8

$
17.1


22
%License and other revenue


2.2


2.1


0.1


5Total revenue

$
98.1

$
80.9

$
17.2


21
%


For
the three month period ended March 31, 2011 compared to the same period for 2010, product revenues in the United States and International increased $16.2 million and
$0.9 million, respectively. The return of global Moly availability following the outage of the NRU reactor in Chalk River, Ontario, from May 2009 until August 2010 due to a "heavy water" leak
in the reactor vessel was a primary contributor of increased TechneLite revenues in the United States. Revenues also increased in the United States for DEFINITY due to its continuing ramp up after a
relaunch in June 2008 and for Xenon due to an increase in price and an expanded customer base. We expect this trend to continue for the balance of the year, thus resulting in higher revenues in 2011
as compared to 2010.

In
International, the primary contributing factors for the increase were the impact of foreign exchange rates and higher TechneLite sales upon an increase in global Moly availability
following the NRU
reactor outage. This increase was partially offset by decreased Thallium sales due to customers switching back to technetium-based studies.

Rebates, Discounts and Allowances

Estimates for rebates, discounts and allowances represent our estimated obligations under contractual arrangements with third parties.
Rebate accruals and allowances are recorded in the same period the related revenue is recognized, resulting in a reduction to product revenue and the

29

---



Table of Contents

establishment
of a liability which is included in accrued expenses in the accompanying consolidated balance sheets. These rebates result from performance-based offers that are primarily based on
attaining contractually specified sales volumes and growth, administration fees of group purchasing organizations and certain distributor related commissions. The calculation of the accrual for these
rebates and allowances is based on an estimate of the third party's buying patterns and the resulting applicable contractual rebate or commission rate(s) to be earned over a contractual period.

Revenue
reserves are categorized as follows: rebates and allowances. An analysis of the amount of, and change in, reserves is summarized as follows:

(in thousands)

Rebates

Allowances

TotalBalance, as of January 1, 2010

$
427

$
41

$
468Current provisions relating to revenues in current year


3,072


555


3,627Adjustments relating to prior years estimate








Payments/credits relating to revenues in current year


(2,171
)

(454
)

(2,625
)Payments/credits relating to revenues in prior years


(418
)

(41
)

(459
)Balance, as of December 31, 2010


910


101


1,011Current provisions relating to revenues in current year


860


167


1,027Adjustments relating to prior years estimate


(116
)




(116
)Payments/credits relating to revenues in current year


(419
)

(72
)

(491
)Payments/credits relating to revenues in prior years


(307
)

(100
)

(407
)Balance, as of March 31, 2011

$
928

$
96

$
1,024


Sales
rebates and other accruals were approximately $928,000 and $910,000 at March 31, 2011 and December 31, 2010, respectively. The increase in the provision resulted
principally from the addition of contracts with rebate rights in 2010.

In
October 2010, we entered into a Medicaid Drug Rebate Agreement for certain of our products which did not have a material impact on our results of operations. If the demand for these
products through the Medicaid program increases in the future, our rebates associated with this program could increase and could have a material impact on future results of operations.

Costs of Goods Sold

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)United States

$
38.2

$
28.5

$
9.7


34
%International


13.9


14.3


(0.4
)

(3
)Total Cost of Goods Sold

$
52.1

$
42.8

$
9.3


22
%


For
the three months ended March 31, 2011 compared to the same period for 2010, cost of goods sold in the United States increased $9.7 million. The primary contributing
factor to the increase was an increase in TechneLite volume due to an increase in global Moly availability following the outage of the NRU reactor in Chalk River, Ontario. Increases in Thallium cost
for the United States also occurred as a result of lower International volume, the effect of which burdens the United States with a greater share of manufacturing expenses.

30

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Table of Contents

For the three months ended March 31, 2011 compared to the same period for 2010, cost of goods sold in our International segment decreased
$0.4 million largely due to a decrease in Thallium cost from lower volumes, partially offset by higher TechneLite volume, both due to the return of a normal Moly supply.

Commensurate
with anticipated higher revenue, we expect to see higher cost of goods sold in 2011, as compared to 2010.

Gross Profit

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in thousands)United States

$
36.8

$
30.1

$
6.7


22
%International


9.3


7.9


1.4


18Total Gross Profit

$
46.1

$
38.0

$
8.1


21
%


For
the three months ended March 31, 2011 compared to the same period for 2010, gross profit in the United States increased $6.7 million. The primary contributing factors
to the increase were an increase in TechneLite margin due to the return to normal Moly supply and higher margin contributed by DEFINITY, as demand continues to increase subsequent to the relaunch of
DEFINITY. We also experienced higher margins from Xenon due to increased volume and new customers. Offsetting part of the increase was a decrease in Thallium due to decreased revenues.

For
the three months ended March 31, 2011 compared to the same period for 2010, gross profit in our International segment increased $1.4 million largely due to an increase
in TechneLite margin following the return of a normal Moly supply.

Commensurate
with anticipated higher revenue, we expect to see higher gross profit in 2011 as compared to 2010.

Sales and Marketing

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in thousands)United States

$
8.2

$
10.1

$
(1.9
)

(19
)%International


1.2


1.2


0.0


0Total Sales and Marketing

$
9.4

$
11.3

$
(1.9
)

(17
)%


Sales
and marketing expenses consist primarily of salaries and other related costs for personnel in field sales, marketing, business development, and customer service functions. Other
costs in sales and marketing expense include the development and printing of advertising and promotional material for promoted products, professional services, market research, and sales meetings.

For
the three months ended March 31, 2011, we incurred $1.9 million less than the three months ended March 31, 2010. The decrease was primarily related to lower
salaries, benefits, and other employee related costs due to a non-recurring reduction of stock compensation from the expiration of a liability award; the conclusion on December 31,
2010 of using a contracted sales force supporting

31

---



Table of Contents

Ablavar,
which is now completely supported by our internal sales force; and a sales force reorganization during the fourth quarter of 2010.

We
expect to continue to incur sales and marketing costs for the remainder of 2011 associated with increasing revenue, supporting our marketing, business development and customer service
functions, and maintaining our sales force to support our commercial products.

General and Administrative

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)United States

$
7.4

$
6.8

$
0.6


9
%International


0.7


0.7


0.0


0Total General and Administrative

$
8.1

$
7.5

$
0.6


8
%


General
and administrative expenses consist of salaries and other related costs for personnel in executive, finance, legal, information technology and human resource functions. Other
costs included in general and administrative expenses are professional fees for information technology services, external legal fees, consulting and accounting services as well as bad debt expense,
certain facility and insurance costs, including director and officer liability insurance.

The
increase for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 of $0.6 million was primarily attributable to increased
United States salary, benefits and other personnel related costs. Other increases include legal costs related to a business interruption insurance claim.

We
expect our general and administrative expenses for the remainder of 2011 to be slightly higher than 2010 levels.

Research and Development

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)United States

$
10.4

$
10.5

$
(0.1
)

(1
)%International


0.1


0.2


(0.1
)

(50
)Total Research and Development

$
10.5

$
10.7


(0.2
)

(2
)%


For
the three months ended March 31, 2011 compared to the same period in 2010, the decrease of $0.2 million, or 2% in research and development expense was primarily due to
the timing of clinical activity related to our Flurpiridaz F-18 programs. During the first quarter of 2011, we had a reduction in clinical activities as we were in the planning and
preparation stage for the Flurpiridaz F-18 Phase III program in 2011, as compared to the same period in 2010, when we had multiple clinical trials, including the Flurpiridaz
F-18 Phase II clinical trial and a DEFINITY Phase IV clinical trial.

In
addition, our R&D spending also decreased due to reductions in purchases of drug products to support our clinical programs, lower travel costs for clinical site monitoring, and other,
lower employee related charges caused by the reduction of clinical activity during the first quarter of 2011 compared to

32

---



Table of Contents

2010,
which was offset by increased compensation costs, pharmacovigilance services for support with regulatory inspections, and independent medical education due to the timing of services.

During
the first quarter of 2011, we reached an agreement with the U.S. Food and Drug Administration on a Special Protocol Assessment (SPA) for the Flurpiridaz F-18
Phase III clinical trial and anticipate the program to start during the second quarter of 2011. We anticipate that our research and development expenses for 2011 will primarily relate to the
support of our Flurpiridaz F-18 program.

Other Income (Expense), Net

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)Interest Expense

$
(7.0
)
$
(2.5
)
$
(4.5
)

(180
)%Interest Income


0.1


0.1





Other Income, Net


0.5


(0.6
)

1.1


183Total Income (Expense), net

$
(6.4
)
$
(3.0
)
$
(3.4
)

(113
)%


Interest Expense

For the three months ended March 31, 2011 compared to the same period in 2010, interest expense increased by $4.5 million
as a result of the issuance of our Notes in May 2010 and March 2011, which carry higher interest rates and a larger debt balance than the obligation that was paid off in May 2010. See
Note 10, "Financing Arrangements" to our unaudited consolidated financial statements.

Interest Income

For the three months ended March 31, 2011, compared to the same period in 2010, interest income remained flat.

Other Income, net

For the three months ended March 31, 2011, compared to the same period in 2010, other income increased as a result of the tax
indemnification and favorable foreign currency exchange.

Provision for Income Taxes

Three Months
Ended
March 31,2011

2010

Change $

Change %(dollars in millions)Provision for income taxes

$
5.2

$
2.2

$
3.0


136
%


For
the three months ended March 31, 2011 compared to the same period in 2010, the provision for income taxes increased from $2.2 million to $5.2 million. The
increase was caused primarily by the tax effect of the increase in pre-tax income of $5.6 million in 2010 to $11.6 million in 2011 and the increase in our valuation allowance
of $0.8 million relating to state research credits.

33

---





Table of Contents

Liquidity and Capital Resources

Cash Flows

The following table provides information regarding our cash flows:

Three Months
Ended
March 31,2011

2010

$ Change(dollars in
thousands)Cash provided by (used in):Operating activities

$
14,241

$
109

$
14,131Investing activities


(4,019
)

(773
)

(3,246
)Financing activities


(5,711
)




(5,711
)


Net Cash Provided by Operating Activities

Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than
investing and financing activities. Cash provided by operating activities is primarily driven by our earnings and changes in working capital. The increase in cash provided by operating activities for
the three months ended March 31, 2011 as compared to 2010 was primarily driven by the increase in net income as well as increases in liabilities.

Net Cash Used in Investing Activities

Our primary uses of cash in investing activities are for the purchase of property and equipment. Net cash used in investing activities
in the three months ended March 31, 2011 and 2010 reflected the purchase of property and equipment.

Net Cash Provided by (Used in) Financing Activities

Historically, our primary source of cash flows from financing activities have been the proceeds from the issuance of our Notes. Going
forward, we expect our primary sources of cash flows from financing activities to be debt or equity issuances or other arrangements that we may enter into. 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 our parent. On March 21, 2011, we issued an additional $150.0 million of Notes.
The net proceeds of these Notes were used to pay a dividend to our indirect parent, LMI Holdings, which utilized the dividend to redeem 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.

Sources of Liquidity

On March 21, 2011, we issued $150.0 million of 9.750% Senior Notes due in 2017 (the "Restricted Notes"). The Restricted
Notes were issued at a price of 101.50% and were issued as additional debt securities under an indenture pursuant to which the we previously issued $250.0 million in aggregate principal amount
of 9.750% Senior Notes due 2017 ("Existing Notes"). The Restricted Notes were issued with the same terms and conditions as the Existing Notes except that the Restricted Notes are subject to a separate
registration rights agreement. The Restricted Notes and the Existing Notes vote as one class under the indenture governing the Existing Notes. As a result of the issuance of the Restricted Notes, we
have $400.0 million in aggregate principal amount of 9.750% Senior Notes due 2017 outstanding. On May 10, 2011, we consummated an exchange offer where we exchanged $150.0 million aggregate
principal amount of our Restricted Notes, for an equal principal amount of Exchange

34

---



Table of Contents

Notes
(the "Exchange Notes" and together with the Restricted Notes, the "New Notes"), with substantially identical terms in all respects. Collectively, the New Notes and the Existing Notes will be
referred to as the "Notes." 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 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 New Notes were used to pay a dividend to our indirect parent,
LMI Holdings, which it used to fully redeem 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, we 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. We anticipate our annual cash interest expense will increase to $39.0 million as a result of the issuance of the New Notes. We believe the impact of increased interest
payments related to the New Notes will be offset, in part, by an expected increase in our results of operations and cash flows from growth in DEFINITY, as well as TechneLite, now that the NRU reactor
is again operational.

The
Notes contain certain covenants of us and the guarantors that limit the payments of dividends, incurrence of additional indebtedness and guarantees, issuance of disqualified stock
and preferred stock, transactions with affiliates and a merger, consolidation or sale of all or substantially all of our assets. As of March 31, 2011, we were in compliance with all applicable
covenants. In addition, our revolving credit facility ("the Facility") requires us to comply with financial covenants, including a total leverage ratio and interest coverage ratio, beginning with the
quarter ended March 31, 2011, as well as limitations on the amount of capital expenditures. The financial ratios are determined by our EBITDA as defined in the Facility ("Facility EBITDA"). The
total leverage ratio is the financial covenant that is currently the most restrictive, which requires Lantheus Intermediate and its Subsidiaries (as defined in the Facility) 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 Lantheus Intermediate and its Subsidiaries (as defined in the Facility) 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. Although we believe that our anticipated Facility EBITDA amounts will be sufficient such that we will be in compliance with our financial covenants, if our
upcoming quarterly earnings are not sufficient, we could be in violation of the leverage ratio covenant.

We
may from time to time repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include open market
repurchases of any notes outstanding, prepayments of our term loans or other retirements or refinancing of outstanding debt. The amount of debt that may be repurchased or otherwise retired, if any,
would be decided upon at the sole discretion of our Board of Directors and will depend on market conditions, trading levels of our debt from time to time, our cash position and other considerations.

We
entered into an inventory supply agreement with Covidien in connection with the launch of Ablavar. This agreement has a future minimum quarterly purchase commitment ranging from
$6.3 million to $7.5 million through September 2012. At March 31, 2011, the total of this remaining minimum purchase commitment was approximately $41.3 million.
Accordingly, significant cash outflows will be required during the term of this purchase commitment and for costs incurred in connection with the product launch, with limited cash inflows from Ablavar
until market penetration increases further. We believe that we will be able meet this obligation as a result of our expected increase in results of

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operations
and cash flows, which we believe will result from continued increases in the sale of DEFINITY, which continues to experience market growth approaching sales levels prior to the boxed
warning, increase in the sales of TechneLite resulting from the now normalized and sustained Moly supply, increase in the sales of Ablavar as we continue our U.S. launch of the product and the
anticipated continued strong position of Cardiolite products. In the event that we do not meet our sales expectations for Ablavar or cannot sell the product we are committed to purchase prior to
expiration, we could incur additional inventory losses, potential impairment of the Ablavar patent portfolio and/or losses on our purchase commitments. In addition, while the loss of gross profit due
to the global Moly shortage did have a detrimental impact on our cash flows and results of operations, we continued to generate positive cash flows from operations during the period of the Moly
shortage and we did not make any significant changes to our strategic initiatives as a result of the shortage. We are continuing to review with Covidien our manufacturing arrangements and if we
negotiate a further amendment to the agreement or otherwise modify our relationship in order to further reduce or eliminate the remaining purchase minimums, or if we agree to a consensual termination
of the agreement, we could incur additional costs, the magnitude of which we cannot currently estimate.

Funding Requirements

Our future capital requirements will depend on many factors, including:



To
the extent that our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity offerings, debt
financings, corporate collaboration and licensing arrangements or other financing alternatives, to the extent such transactions are permissible under the covenants of our indenture and credit
agreement. If any of the transactions require a waiver under the covenants in our indenture and credit agreement, we will seek to obtain such a waiver to remain in compliance with the covenants of the
indenture and credit agreement.

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Our
only committed external source of funds is borrowing availability under the Facility. At March 31, 2011, we had $42.5 million of borrowing availability under the
Facility. Additional equity or debt financing, or corporate collaboration and licensing arrangements, may not be available on acceptable terms, if at all.

As
of March 31, 2011, we had $38.0 million of cash and cash equivalents. Based on our current operating plans, we believe that our existing cash and cash equivalents,
results of our operations and our borrowing capacity under the Facility will be sufficient to continue to fund our liquidity requirements for at least the next twelve months.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent
contractual liabilities for which we cannot reasonably predict future payment, including contingencies related to potential future development, financing, certain suppliers, contingent royalty
payments and/or scientific, regulatory, or commercial milestone payments under development agreements. The following table summarizes our contractual obligations as of March 31, 2011:

Payments Due by PeriodTotal

Less than
1 Year

1 - 3 Years

3 - 5 Years

More than
5 Years(dollars in thousands)Debt obligations (principal)

$
400,000

$


$


$


$
400,000Interest on debt obligations


253,500


39,000


78,000


78,000


58,500Operating leases(1)


4,695


922


1,698


1,066


1,009Purchase obligations(2)


195,672


84,999


110,673





Asset retirement obligation


4,496











4,496Other long-term liabilities(3)


33,720











33,720Total contractual obligations

$
892,083

$
124,921

$
190,371

$
79,066

$
497,725


(1)Operating
leases include minimum payments under leases for our facilities and certain equipment. See "Item 2Properties."(2)Purchase
obligations include fixed or minimum payments under manufacturing and service agreements with Covidien and other third-parties.(3)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 amount
and timing of payments, if any, which we will make related to this liability, are not known.


Critical Accounting Estimates

The discussion and analysis of our financial position and results of operations is based on our consolidated financial statements,
which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments
that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and
judgments, including those related to revenue recognition and related allowances, inventory, impairments of long-lived assets including intangible assets, impairments of goodwill, income
taxes including the valuation allowance for deferred tax assets, valuation of investments, research and development expenses, contingencies and litigation, and share-based payments. For the quarter
ended March 31, 2011, our critical estimates included estimates related to what we believe to be our portion

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of
the fee payable to the Federal Government by Pharmaceutical Manufacturers pursuant to ASU 2010-027. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates
under different assumptions or conditions.

Please
read Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the year ended December 31, 2010 for a discussion of our critical accounting estimates. There have been no material changes to our critical accounting policies in the three months ended
March 31, 2011.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet arrangements, including structured finance, special purpose
entities or variable interest entities.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in interest rates and foreign currency exchange rates. We do not hold or issue financial
instruments to reduce these risks or for trading purposes.

Interest Rate Risk

We are subject to interest rate risk in connection with the Facility, which is variable rate indebtedness. Interest rate changes could
increase the amount of our interest payments and thus negatively impact our future earnings and cash flows. As of March 31, 2011, there was no amount outstanding under the Facility. Any
increase in the interest rate under the Facility will have a negative impact on our future earnings, depending on the outstanding balance of the Facility during the respective period.

Foreign Currency Risk

We face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with
third parties that are denominated in currencies other than our, or its, functional currency. Intercompany transactions between entities that use different functional currencies also expose us to
foreign currency risk. During the three months ended March 31, 2011 and 2010, the net impact of foreign currency changes on transactions was a gain of $89,000 and a loss of $512,000,
respectively. Historically, we have not used derivative financial instruments or other financial instruments to hedge such economic exposures.

Gross
margins of products we manufacture at our U.S. plants and sell in currencies other than the U.S. Dollar are also affected by foreign currency exchange rate movements. Our gross
margin on total revenue for each of the three month periods ended March 31, 2011 and 2010 was 47.0%. If the U.S. Dollar had been stronger by 1%, 5% or 10%, compared to the actual rates
during the three months ended March 31, 2011, our gross margin on total net product sales would have been 47.0%, 47.2% and 47.5%, respectively. If the U.S. Dollar had been stronger by 1%, 5% or
10%, compared to the actual rates during the three months ended March 31, 2010, our gross margin on total net product sales would have been 47.1%, 47.3% and 47.6%, respectively.

In
addition, a portion of our earnings is generated by our foreign subsidiaries, whose functional currencies are other than the U.S. Dollar (in which we report our consolidated financial
results); our earnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the earnings of such subsidiaries into the U.S. Dollar.

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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 results of our foreign subsidiaries, our
net product sales and net income for the three months ended March 31, 2011 would have been impacted by approximately the following amounts:

Approximate
Decrease in
Net Revenue

Approximate
Decrease in
Net Income(dollars in thousands)1%

$
(166
)
$
(9
)5%


(832
)

(47
)10%


(1,663
)

(94
)


Item 4.    Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and procedures; as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange
Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period
covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes during the quarter ended March 31, 2011 in our internal control over financial reporting (as defined
in Rule 13a-15(f) promulgated under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, we are a party to various legal proceedings arising in the ordinary course of our business. In addition, we have in
the past been, and may in the future be, subject to investigations by regulatory authorities which expose us to greater risks associated with litigation, regulatory or other proceedings, as a result
of which we 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 us. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed against us, could materially and adversely affect
our financial condition or results of operations.

On
December 16, 2010, we filed suit against one of our insurance carriers seeking to recover business interruption losses associated with the NRU reactor shutdown and the ensuing
global Moly supply challenge (Lantheus Medical Imaging, Inc., Plaintiff v. Zurich American Insurance Company, Defendant, United States District
Court, Southern District of New York, Case No. 10 Civ 9371 (LTS)). 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. Historically, our largest supplier of Moly has been Nordion which has relied on the NRU reactor.
The business interruption claim is based on an estimate of losses of, in the aggregate, of more than $70 million, including increases in the cost of obtaining limited amounts of Moly from
alternate, more distant, suppliers, and substantial decreases in sales revenue as a result of significantly curtailed manufacturing of TechneLite generators and our decreased ability to sell other
Moly-based medical imaging products, including Cardiolite, in comparison to our forecasted results. The defendant answered our complaint on January 21, 2011, denying substantially
all of our 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. Because we cannot be certain what amount, if any, or
when, if ever, we will be able to recover business interruption losses related to this matter, we have not included any recovery amount related to this claim in our results of operations.

Except
as noted above, as of December 31, 2010, we had no material ongoing litigation, regulatory or other proceeding and had no knowledge of any investigations by governmental or
regulatory authorities in which we are a target that could have a material adverse effect on our current business.

Item 1A.    Risk Factors

Except as set forth below, there have been no changes in the risk factors set forth in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2010. For further information, refer to Part IItem IA. "Risk Factors," in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2010.

The
following risk factor replaces and supersedes, in its entirety, the risk factor regarding our third party suppliers in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2010:

Our dependence upon third parties for the manufacture and supply of a substantial portion of our products could prevent us from delivering our products to our customers in
the required quantities, within the required timeframe, or at all, which could result in order cancellations and decreased revenues.

We obtain a substantial portion of our products from third party suppliers. We rely on sole source manufacturing for DEFINITY,
Neurolite and certain of our TechneLite accessories at Ben Venue Laboratories, Inc. ("BVL") and Ablavar at Covidien. We also rely on BVL for a majority of our

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Cardiolite
supply. In addition, for reasons of quality assurance or cost effectiveness, we purchase certain components and raw materials from sole suppliers. Because we do not control the actual
production of many of the products we sell, we may be subject to delays caused by interruption in production based on conditions outside of our control. At our North Billerica, Massachusetts facility,
we manufacture TechneLite on a relatively new, highly automated production line, as well as Thallium and Gallium using our older cyclotron technology. If we or one of our manufacturing partners
experiences an event, including a labor dispute, natural disaster, fire, power outage, security or other issue, we may be unable to manufacture the relevant products at previous levels, if at all. Due
to the stringent regulations and requirements of the governing regulatory authorities regarding the manufacture of our products, we may not be able to quickly establish additional or replacement
sources for certain components or materials. In July 2010, BVL temporarily shut down the facility where they manufacture DEFINITY, Cardiolite and other products in order to upgrade the facility to
meet certain European Medicines Agency ("EMEA") requirements. BVL had previously planned for the shutdown to run through March 2011 and to resume production of our products in April 2011. In
anticipation of the shutdown, BVL manufactured additional inventory of these products to meet our expected needs during this period. BVL has now indicated that it is planning to resume production of
our products in the third quarter of 2011. There can be no assurance that BVL's facility will resume production of our products as currently contemplated. In the event the shutdown
persists for a significant period of time following the exhaustion of the inventory previously supplied, this would have a material adverse affect on sales of certain products and our results of
operations until production resumes.

In
addition to our existing manufacturing relationships, we are also pursuing new manufacturing relationships to establish and secure additional or alternative supplies of each of
DEFINITY and Ablavar. We cannot assure you, however, that these activities will be maintained, will be successful, or that before such second source manufacturers are fully functional that we will be
able to avoid or mitigate possible interim supply shortages. In addition, we cannot assure you that our existing suppliers or any new suppliers can adequately maintain either their financial health or
regulatory compliance to allow continued production and supply. A reduction or interruption in manufacturing, or an inability to secure alternative sources of raw materials or components, could have a
material adverse effect on our business, results of operations, financial condition and cash flows.

Item 6.    Exhibits

10.1

Amendment No. 2 to Sales Agreement dated as of April 1, 2011, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes (Pty) Ltd.10.2

Amendment No. 4 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing and Rebates, dated as of March 1, 2011 (incorporated by reference to Exhibit 10.22 to Lantheus Medical Imaging,
 Inc.'s Registration Statement on Form S-4 filed with the Commission on April 1, 2011 (file number 333-173260)).31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.


Confidential
treatment requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

LANTHEUS MEDICAL IMAGING, INC.By:

/s/ DONALD R. KIEPERTName:

Donald R. KiepertTitle:

President and Chief Executive OfficerDate:

May 13, 2011LANTHEUS MEDICAL IMAGING, INC.By:

/s/ ROBERT P. GAFFEYName:

Robert P. GaffeyTitle:

Chief Financial Officer and TreasurerDate:

May 13, 2011


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EXHIBIT INDEX

Exhibit
Number

Description10.1

Amendment No. 2 to Sales Agreement dated as of April 1, 2011, between Lantheus Medical Imaging, Inc. and NTP Radioisotopes (Pty) Ltd.10.2

Amendment No. 4 to the Agreement Concerning Cardiolite and TechneLite Generator Supply, Pricing and Rebates, dated as of March 1, 2011 (incorporated by reference to Exhibit 10.22 to Lantheus Medical
Imaging, Inc.'s Registration Statement on Form S-4 filed with the Commission on April 1, 2011 (file number 333-173260)).31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14 Securities Exchange Act Rules 13a-14(a) and 15d-14(a), pursuant to section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.


Confidential
treatment requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission.


---