Earnings Call: Q4 2018

Feb 20, 2019

Good morning, ladies and gentlemen. Welcome to the Lantheus Holdings 4th Quarter Full Year 2018 Earnings Conference Call. This is your operator for today's call. Please note that all lines have been placed on you to prevent any background noise. The call is being recorded for replay purposes. A replay of the audio webcast will be available in the Investors section of the company's website approximately 2 hours after completion of the call and will be archived for 30 days. I would now like to turn the call over to your host for today, Mark Kinarney, Director of Investor Relations. Mark? Thank you, and good morning. Welcome to Lantheus Holdings' 4th quarter and full year 2018 earnings conference call. Joining me today is President and CEO, Mary Anne Aino and our CFO, Bob Marshall. Yesterday evening, we issued a press release, which was also filed with the Securities and Exchange Commission under Form 8 ks reporting our Q4 and full year 2018 results. You can find the release in the Investors section of our website atlantheus.com. Before we get started, I'd like to remind you that our comments during this call will include forward looking statements. Actual results may differ materially from those indicated by forward looking statements due to a variety of risks and uncertainties. Please note that we assume no obligation to update these forward looking statements even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. Also, the discussions during this call will include certain non GAAP financial measures. Reconciliation of certain of these measures to the most directly comparable GAAP financial measures is included within the earnings release found on our website. With that, I'll now turn over the call to Mary Anne. Mary Anne? Thank you, Mark, and good morning, everyone. Today, I'll give an overview of our results and some of the opportunities we are looking at in the year ahead. Bob will review our 2018 results and provide our guidance for 2019. We delivered strong 4th quarter results with revenues and profitability above our expectations, marking a great finish to a strong year for Lantheus. We have been pleased with our growth trajectory and in 2018, the team executed on a number of opportunities to help sustain our momentum while continuing to deliver on our financial commitments. 2018 was also an important year for investments into the business. We expanded our patent estate with Affinity in addition to making progress on several pipeline and infrastructure projects to support our growth initiatives. The majority of these investments will occur in 2019, strengthening our commercial foundation with the intent to increase our presence in near adjacencies for business development activities and expand our participation in what we see as an exciting and dynamic healthcare environment. As we enter 2019, the markets we serve continue to evolve and grow. Significant opportunity remains to drive sustainable growth in suboptimal echocardiography. The opportunity further broadens with possible expanded indications. With the leading microbubble use worldwide, we believe our franchise is well positioned for emerging applications of microbubbles. The nuclear medicine space is enjoying a renaissance of interest. While certain nuclear imaging modalities are mature, the broader application of isotopes in diagnostic, interventional and therapeutic procedures represents an emerging opportunity. Lantheus has been a trusted pioneer in nuclear medical imaging for over 50 years. As such, we are one of a small group of companies worldwide with critical expertise in medical nuclear isotopes. Having closed out on a strong year for the company, we are excited about our prospects and opportunities in 2019 and beyond. We will continue to invest for sustainable long term growth while driving operating efficiencies across the organization and serving as disciplined stewards of our shareholders' capital. With that, I'll turn things over to Bob. Thank you, Mary Anne, and good morning, everyone. I will provide highlights of the Q4 and then provide additional details of 2019 revenue and earnings guidance that can be found in our earnings press release. Revenue for the 4th quarter totaled $86,300,000 an increase of 6 0.2% over the prior year. For the full year, net revenues totaled $343,400,000 an increase of 3.6 percent over 2017. Returning now to the quarter. Sales of DEFINITY continued to post solid growth at $48,600,000 or 16.5 percent higher as compared to the prior year quarter. TechneLite revenue was $23,400,000 down 5.6 percent from the prior year quarter. Moly-ninety nine supply from NTP resumed in the latter part of Q4 and at levels sufficient to meet our ongoing needs. Additionally, sales of generators manufactured for ANSTO amounted to $2,700,000 in the quarter and in line with expectations. This was the primary driver of the increase in international TechneLite sales over the prior year quarter. Our other category decreased 3.1% with net revenue of $14,300,000 Within this performance, all other nuclear revenues, excluding TechneLite but including Xenon, grew 3.9 percent to $17,500,000 and was offset by rebates and allowances of $3,200,000 Gross profit margin for the 4th quarter was 50.8% and 53.1% of net revenues when excluding new manufacturing costs, an increase of 560 basis points over the Q4 2017 on a similar basis. The current quarter's reported results reflect certain expenses for the successful lot production of product qualification batches associated with our modified formulation of DEFINITY or DEFINITY RT, as we call it. These planned expenses were more than offset by higher than expected favorable contribution from product mix. Operating expenses were 4 10 basis points favorable to the prior year at 31.2% of net revenue, driven primarily by lower relative G and A expenditures. The prior year quarter's results included contract termination and refinancing expenses that did not repeat in 2018. Additionally, leverage sales and marketing expenses were offset by relatively higher research and development costs in support of our life cycle management and development programs. Operating profit for the quarter was $16,900,000 or an increase of 84% over the same period prior year. Moving down the P and L, net interest expense and other amounted to $4,200,000 Underlying net interest expense was slightly higher over the prior year, while other income expense decreased 6 point $3,000,000 due to a prior year benefit realized to account for a reduction in our tax indemnification accrual as a result of the 2017 U. S. Tax reform legislation. The tax benefit in both 2018 2017 4th quarters included the releases of deferred tax valuation allowances in each year. In 2017, we realized a net tax benefit of $85,900,000 due primarily to the release of our U. S. Tax valuation allowance, offset in part by the impact from the change in the U. S. Corporate income tax rate enacted at the end of 2017. Similarly, in 2018, we released $4,000,000 from our Canadian tax valuation position. These actions are reflective of our belief in sustainable profitability in these jurisdictions. The underlying effective tax rate in the quarter was 26.8%, which was favorable to our prior estimates. The resulting net income in the 4th quarter was $13,300,000 or a decrease of 86.3 percent due to the significant difference in the net tax benefits recognized year over year as just described. For the quarter, fully diluted earnings per share were $0.34 a decrease of 86.2 percent from the same quarter last year. In 2018, fully diluted earnings per share were $1.03 or a decrease of 67.5%. Additionally, EBITDA and adjusted EBITDA were $20,000,000 25,200,000 dollars respectively, or an increase of 55.6% 21% over the same quarter prior year. On a full year basis, adjusted EBITDA was $98,100,000 or an increase of 4.3%. As we stated in our press release, this is the last quarter we will be calling out EBITDA and adjusted EBITDA as non GAAP financial performance metrics. We believe that given that the company has delevered and matured as a public entity, the more appropriate performance metrics going forward are adjusted diluted earnings per share and free cash flow. We will discuss both and guide to the former. Lastly, 4th quarter operating cash flow totaled $17,300,000 as compared to $13,100,000 in the Q4 of 2017. Capital expenditures totaled $7,400,000 which increased from the prior year due mainly to continued investment in our own strategic manufacturing capabilities on our Billerica campus. Free cash flow, which we define as operating cash flow less capital expenditures, was $9,900,000 an increase of 39.4 percent over the prior year period. For the year, we generated $41,100,000 of free cash flow, an increase of 10.3 percent over 2017. This strong cash flow performance has brought our cash and cash equivalent balance to $113,400,000 Turning now to our guidance for the full year 2019 and for the Q1. Revenue growth is expected to be in a range of 4.25 percent to 5.75 percent or $1 range of $358,000,000 to 363,000,000 dollars This guidance includes an assumption of adequate Moly supply to meet our TechneLite commitments throughout the year. Additionally, sales of generators to Enso, which totaled approximately $10,600,000 in 2018, are not expected to repeat at a meaningful level during 2019. Gross margins are expected to be essentially flat with reported 2018 levels at approximately 51%, driven by positive contribution from an increased DEFINITY sales, which will be offset by unfavorable nuclear product mix as well as an incremental increase in the investment in our manufacturing capabilities. These incrementally higher new manufacturing costs are expected to be approximately 3,500,000 dollars with approximately half of this expense spread evenly throughout the 1st 3 quarters and the remaining occurring in the 4th quarter. Operating expenses will reflect ongoing investments in the business to support sustainable DEFINITY growth, strategic headcount additions as well as driving our pipeline of innovative products. It is important to note that we anticipate increased expenses in 2019 directly attributable to our ongoing clinical studies for our LVEF program as enrollment completes. Interest expense is expected to be slightly higher in 2018 due to a higher interest rate environment, which is anticipated for the full year in 20 19. Our effective tax rate is expected to be approximately 28% and similar to 2018 when excluding the impact of the valuation allowance benefit and including similar amounts of discrete items during the year, while we explore opportunities to drive the underlying rates lower. And for modeling purposes, total forecasted depreciation and amortization expense is expected to be approximately $14,000,000 for the full year. Lastly, fully diluted average shares outstanding for the year are expected to increase between 1% 2% over 2018. Taken altogether, full year adjusted fully diluted earnings per share are expected to be in a range of $1.14 to 1 $0.17 As I have noted, this range fully incorporates the noted temporal investments to drive longer term growth. It is important to note that we define adjusted earnings per share as reported earnings per share, excluding noncash stock incentive compensation, amortization of acquired intangible assets, certain acquisition related charges, restructuring expenses, legal settlements, charges and gains associated with business discontinuances or other significant onetime nonrecurring items. And for reference, the equivalent adjusted earnings per share for full year 2018 would have been $1.13 and that reconciliation is available in the Investor Relations section of our website. Turning now to our Q1. We expect total revenue to grow in a range of 3% to 6% or a dollar range of $85,000,000 to 80 $7,500,000 It is important to note that while we have one less shipping day in the first quarter than we had in the prior year same quarter, shipping days for the full year are equivalent. Diluted earnings per share are expected to be in a range of $0.25 as compared to $0.26 last year. As a reminder, the reason for the year over year quarterly decrease is due entirely to heavier expected expenses with our LDEF clinical studies currently underway and our new manufacturing capabilities project previously described. Lastly, this guidance does not include the impact from any unanticipated charges or gains associated with any material legal or business development activity. With that, let me turn the call back over to Mary Anne. Thank you, Bob. The Q4 marked a great finish to a strong year for Lantheus. My goal for Lantheus is to drive strategic change within the company that results in products and services that improve the precision and ability of diagnoses in today's healthcare delivery model. We enter 2019 confident that Lantheus is well positioned to drive sustainable growth in the dynamic health care environment facing the world today. I will now provide some updates on our business performance and strategic programs. While DEFINITY posted yet another year of strong growth in the United States, the contrast market offers significant additional opportunities, and we anticipate DEFINITY will be the key revenue driver in 2019. Looking forward, the use of microbubbles in therapeutic and diagnostic applications is gaining more interest in the worldwide market, and our goal is to have the Lantheus microbubble franchise become a leader in that evolution. To that end, our microbubble franchise strategy encompasses several investment initiatives. We continue to invest in the largest ultrasound contrast sales force in the U. S, which supports our marketing and education initiatives, emphasizing the benefits of the appropriate use of DEFINITY in suboptimal echos. We believe these investments, complemented by the growth in the underlying echocardiography market, will continue to drive revenue growth of DEFINITY in 2019 and beyond. Our current investment initiatives also address potential growth opportunities. These investments include a new indication, our modified formulation DEFINITY RT, as well as new applications outside of echocardiography and new geographies. We believe these investments can be an engine for the continued future growth of DEFINITY and the use of microbubbles. I will now discuss our progress with each of these investment initiatives. 1st is our DEFINITY left ventricular ejection fraction or LVEF clinical program. During the Q4, we began enrolling patients in 2 parallel Phase III studies called BENEFIT 1 and 2, designed to demonstrate improved accuracy and reproducibility of LVEF measurement with DEFINITY enhanced echocardiography versus unenhanced echocardiography. 20 U. S. Sites and approximately 300 subjects will participate in these studies. We expect to complete enrollment in 2019. With the data from these completed studies, we plan to file a supplemental NDA and if approved, we expect commercialization as early as 2020. We believe an LVEF indication expands the addressable market for contrast enhanced echocardiography and we'll continue to refine the targeting and messaging to optimize this opportunity as we approach commercialization. Another investment initiative is DEFINITY RT, our modified formulation that supports ambient storage. Ambient storage allows for greater portability, thereby adding options to better meet clinician and patient needs across the care settings where echoes are conducted. In the Q4, we reached an important milestone in the development of DEFINITY RT as our partner, Samsung Biologics, successfully manufactured the qualification batches, a critical step in completing an sNDA. We anticipate DEFINITY RT may be commercially available in 2020, assuming a positive FDA review and approval. Entering new geographies continues to represent an opportunity for DEFINITY. As we enter 2019, we are excited to report that we have signed additional partner agreements that further expand the footprint of DEFINITY, known as Luminity in Europe, into Italy, Portugal and Spain. We expect first shipments to these markets to occur mid year. With regard to China, we now anticipate our partner, DoubleCrane, will submit the import drug license application in the latter part of 2019. And because I have continually apprised you regarding the status of a potential generic filer, I would like to report to date we have not received notice of an ANDA application. We remain confident in DEFINITY's future and we'll continue to invest in our microbubble franchise. Finally, I am pleased to update you on our investment to build additional manufacturing capabilities. 2019 is a pivotal year for this project, as Bob noted in his comments, as we expect to complete final delivery of equipment and substantial completion of construction in the first half of twenty nineteen. These steps will allow us to complete facility and product qualification in 2020, and we anticipate producing commercial product by early 2021. I'd now like to turn to updates of our nuclear medicine business. I am pleased to report we have signed a contract with Cardinal Health and as a result, have contracts in place with the 4 key U. S. Radiopharmacy groups through 2019 and in some cases beyond that. These contracts specify volume commitments of our nuclear products. As such, it gives us clear line of sight into our manufacturing needs, allowing us to run our manufacturing campus efficiently. As many of you know, during 2018, we faced molybdenum 99 or Moly supply issues due to outages at the NTP processing facility in South Africa. While we are now receiving adequate supply to meet our customer commitments, we continue to monitor initiatives our Moly suppliers have underway that support expanded supply as well as full conversion to LEU, an important milestone for us as well as the broader U. S. Nuclear medicine market. ANSTO is currently in the final stages of seeking regulatory approval for its new moly processing facility that will significantly increase their production capacity when completed. Amso has indicated that it is currently planning to start commercial production in the new facility in the first half of twenty nineteen. Additionally, our supplier IRE is targeting to complete its conversion to full LEU supply in 2019, which will also bring additional flexibility to our supply chain. In the mid to longer term, to further augment and diversify our current supply, we are also pursuing additional sources of Moly from potential new producers, including the SHINE project for domestic supply of Moly. Lastly, with respect to our 1195 program, we remain in negotiations with the FDA for a special protocol assessment or SPA. The completion of these negotiations will define our path forward with respect to clinical trials. In the Q4, we also initiated discussions with CMS regarding reimbursement to ensure we are best prepared to gain reimbursement of our product in the future market we will join. In closing, our achievements in 2018 have continued to strengthen the foundation of our business. We posted strong results while making focused investments for growth and delivering on our financial commitments. We also made solid progress on our commercial pipeline projects for 2019 and beyond. As we look to the opportunities in the year ahead, we will continue to drive operational excellence to set the stage for future success and enhance long term shareholder value. With that, Bob and I are now ready to take your questions. Operator, please go ahead. Our first question comes from the line of Raj Denhoy with Jefferies. Your line is open. Hi, good morning. Maybe I could ask a couple on each of the lines and maybe one on the model. But so you mentioned in terms of DEFINITY, DoubleCrane expects to file by year end of 2019. I'm curious what the path forward there is? And when you think about perhaps getting on the Chinese market in 2020, what sort of revenue we should anticipate or how quickly that can ramp for you as you enter that big market? So Raj, this is Marion, and good morning and thank you for joining the call. We are working with DoubleCrane on the submission of the IVL or import drug license, and we do anticipate now that it will occur in the latter half of twenty nineteen. I really am hesitant to make any projections about the Chinese market for two reasons. First, I don't control it. It will be DoubleCrane's commercial footprint that will enter that market. I will say that it is a naive market in that the use of contrast is not well established there. So I would expect we would see a slow uptake of potential sales in that market. And I will remind you, our financial relationship with DoubleCrane is a transfer price relationship. So we will receive a set amount per vial for all vials that we sell to DoubleCrane for them to sell into that market. Okay, that's helpful. And then you also mentioned the RT formulation with Samsung, also it sounds like 2020. Should we be thinking about that as a driving additional use, perhaps a price uplift? Or really, is it more about maintaining the IP around the technology and really more kind of defensive and offensive on your part? I think it's offensive in that having an ambient storage POS product allows us to go into physical sites that we're not currently in. As echos become more portable, DEFINITY track along and go with those echos. From an IP perspective, there is additional IP with the formulation, so we will enjoy that. And our goal really is to give broader choice into all the customer segments that we go into. And as you heard me speaking, well, we intend to have that expand beyond echocardiography. Right, right. No, that's clear. And then on the Moly side of the business, you mentioned ANSTO is going to be expanding capacity. Is there any impact that will have on your cost for moly or any real impact on that business? Or is it really just that it may be just alleviate some of the disruptions we've seen in that business historically? Our costs are all laid out in our contracted relationships. So the addition of the extra capacity doesn't have a cost impact on us. But it does allow us in the flexibility of bringing in Moly over the course of the week as we manufacture, we may be able to become more efficient in having the Moly arrive sooner and closer to manufacturing date, which is always a cost saving because we pay for the degradation of the moly the whole time until we deliver it to our customers. Okay, great. And then maybe just 2 for Bob, maybe Mary Anne as well. But so the model, right? So when we I was looking back at how 2018 progressed from where it was originally sort of offered at the beginning of the year. I think you guys had originally talked about sort of very heavy spending here in 2018 as you were investing in the business. And I realize this preceded Bob, but the expenses came in quite a bit lower. But now as we look out in 2019, you're again talking about investing and spending into the business. Should we think about that as maybe some of the costs got pushed into 'nineteen? Or I guess I'm just trying to reconcile whether what you're offering here initially is, again, a very conservative view on the spending levels and how we should be modeling it. Yes. Raj, I think that as the team did articulate earlier last year in 2018 that there would be investment in that did occur, particularly as you think through the work that has been done on the DEFINITY front as well as sort of keeping some of the other development product projects keeping them going. Some of those did bleed over into the latter part of 2018 and now into 2019, that being more precisely the LVEF clinical studies. I think it would be anticipated to be a little earlier in 2018 than when they did kick off in more earnest in the 4th quarter. We do now see that spend being incremental in terms of the investment to the R and D spend from prior year. There were some cost savings too in R and D that sort of came through as well and had more to do with the closing down of some of the facilities as part of campus consolidation projects for to drive efficiencies in the business. As far as the manufacturing capabilities project, that actually has remained on time, on budget. And those costs are incremental, but they're sort of important costs that help us get that project to completion and are going to be sort of heavier here. So I do think that the company had outlined a 2 year investment period and with some incremental spillover into 2019, but a lot of it had been anticipated. That's helpful. And just one last one for you as well, Bob. Just in terms of I know one of the things you've been tasked with is M and A and potentially looking for new assets for the company. And I'm curious if there's anything you can offer in terms of how that process is proceeding. I know you won't give us a lot of detail, but just in terms of perhaps urgency and timing and might we see something this year? Well, I mean, of course, we can't comment on timing of those kinds of issues, Raj. I mean, the team is busy screening opportunities. The new business development groups that Mary Anne had put together in the fall have done a great job of focusing on what opportunities exist. And as we go through 2019 into the future, those teams will continue to do their good work, and we will be prudent as we think through how to deploy capital. Our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open. Good morning, Mary Anne and Bob, and congratulations on another nice quarter. A few questions from me. Let me start with DEFINITY. Mary Anne, another very strong quarter here, actually an acceleration on a difficult comparison. So Mary Anne, could you talk a little give us a little bit more color what drove that particularly in the United States price, market share, echo growth and how you're thinking about that for 2019? And just a related question, Bob, could you talk about the guidance assumptions for the top line for the 3 buckets you report? Are you expecting similar growth for each in 2019 versus 2018? Any additional color for 2019? I had one follow-up. Good morning, Larry. So I'll speak first to DEFINITY your question about what is driving growth. In order, I will tell you that the growth drivers for DEFINITY remain, 1st, contrast penetration rate. So this is our increasing ability to identify and have DEFINITY or contrast agent used in suboptimal echos. The second for us is market share. The third for us is the echocardiography market, the underlying growth of use of echos as a diagnostic procedure and the last would be price. So that is the order in which they So So Larry, so when you think about the drivers, clearly, we do believe that DEFINITY in Mary Anne's prepared comments, she did say that it would be one of our big drivers for revenue this coming year. So we do expect, 1, you have to take into consideration larger base. As you come into the year, we still expect to see low to mid teen growth with DEFINITY throughout 2019. With regard to TechneLite, we would expect to see a recovery just given the particularly from a U. S. Perspective, given the comps on a year over year basis as we look to meet the commitments of that particular product line, so you would expect to see obviously better growth rates than you saw in overall, keeping in mind that you don't have the $10,600,000 of revenue coming from ANSTO. We do believe that, that can be sort of recaptured, if you will, from a U. S. Perspective moving forward. With regard to the other big bucket, other nuclear, now at this point, as you will see going forward, that Xenon will be part of that group. We did see some marginal pressure in Xenon in the Q4, much like we saw in the Q3. As Maryann pointed out, our guidance now contemplates the totality of the contracts that we have with our radiopharmacy customers. So those numbers are embedded. So you would probably see and we've always talked about that part of the business as being stable and we would continue to expect that to be the case going forward. Perfect. And then just a follow-up. Let me just throw 2 out there. 1, Mary Anne, you talked about nuclear medicine having a renaissance, and this is an emerging opportunity and you want to leverage your expertise in medical isotopes. So my question is, Mary Anne, could you give us a little bit more color on how you plan to leverage that expertise and when we might have visibility on that? And just lastly, Bob, could you have you given any thought or more thought to providing kind of a more long term financial goals, long term outlook for the company and what's the status of that? Thanks for taking the questions. You're welcome, Larry. I'll speak to nuclear medicine and the renaissance that I referred to. As we look out into the larger life science market, we see emerging and growing use of isotopes in applications that quite frankly we haven't seen before. One and an important one for us given our expertise is the growing use of isotopes during clinical development programs used as either markers or tracers to kind of demonstrate efficacy of product as they are trying to move themselves from, say, Phase 2 into Phase 3 and ultimately towards approval in the market. So that as a almost a service industry, as I mentioned, we are one of the few companies worldwide that has ongoing expertise and I'd say ready expertise and capacity in producing isotopes, and we'd like to see ourselves as the natural partner for the larger life sciences companies who are endeavoring to use radioisotopes during their clinical development programs. The other and the one that's much closer to where we already are is the use of radioisotopes now as companion diagnostics to therapy. So that the use of the isotope is not only included in diagnosing the issue, but the same isotope issues with a different molecule to actually deliver targeted treatment to patients. And that's something that's very exciting to us because it for us, it's having always been in the diagnostic end of the treatment spectrum. It actually brings us closer to the patient if we can become part of that companion diagnostic or part of then the combined therapeutic agent. So those are the 2 major areas I was referring to. In addition, of course, we see the overall pet market or the pet driven market is growing at about 10% worldwide, and this is the growing part of the total nuclear medical imaging market that it offsets what is fairly stable and I would say flat growth in the spec based nuclear market. And Larry, so this is Bob. With regard to your question about long term financial goals, as a part of the natural evolution of how a company sort of goes through the year, we are deeply engaged in working through a strategic view of the company, working through 5 year financials and trying to work through those goals and objectives. So that would be the basis for us to be able to provide some sort of outlook when the time is right. And it would be part of our overall objectives as we get into this year to think further about how to provide and what metrics are the most relevant that would give you an idea of where we're going with the company, which we do believe there's a very exciting future, and we'll look forward to providing those when it's appropriate. Thanks for taking the questions, guys. Thanks, Larry. Your next question comes from the line of Larry Solow with CJS Securities. Your line is open. Great. Thanks, guys. Most of my questions have been answered. I just got a couple. I fully appreciate the sort of maneuver to EPS as a performance measure, I think much better. And also adding back to stock comp, also a lot of your peers do that. Can you just give us sort of an idea in 2019 stock comp and the amortization is going to come down a little bit that's in your schedule. But the stock comp particularly, should we assume about similar levels? So on an apples to apples basis, this is sort of adding close to $0.20 Is that about right? Barry, I think yes. I mean you're barking up the right tree in that sense. That's why we've provided on the website a full look at 2017 2018 by quarter to give you a run rate sense to be able to sort of carry that forward into 20 19 as well. Right. And just but just to say the stock comp is similar. I know it had a nice little it's run up the last couple of years, I think from like 5, 6 to over 9 last year. Is that trend to continue? Or should we expect sort of a similar level of stock comp in 2019, at least incorporated to your guidance? Yes. I think you would expect it to be slightly higher just given some of the growth that we've seen in that line. I think it's natural to expect that with the stock price also increasing that you're going to have a slightly higher impact on the from that perspective. So that is something that is right around what you're talking about. It does make up the majority of the one time items that are being adjusted here. Got you. And then on the R and D line, I know Raj already asked that question a little bit, but I think to start the year, we were sort of looking at more like a run rate of $5,000,000 $6,000,000 a quarter. Obviously, it didn't get stayed pretty well below that number. I don't know if you want I know you don't guide specifically to the line item, but is that number a bad place to start for 2019? Or is that maybe even a little too high? No. I mean, I think the way I would think about it is in terms of percent of total revenues. I think you would be sort of in that 5% to 5.5% of net revenues type range is sort of where you would be the right place to model. Okay. And then just a couple for Mary and maybe on the DEFINITY and on the new product first or the potential new room temperature product. You mentioned certainly there's room for that product and it sounds like some niche year situations. But in the long run, could there be benefits to a room temperature product that maybe gets even wider acceptance so that it helps your PAC position more? Larry, good morning. Yes, I think there is a longer term benefit that I didn't refer to specifically today, but I have spoken to in the past. And that is having a room temperature storage product opens up the ability to have it included in other product kits that are part of a larger treatment paradigm. So with the product requiring cold storage, it does limit how and where that product can be included in complex product kits. But once you have an ambient storage, you become an easy fit into those types of larger product kits. And that's one of our goals worldwide is wherever that is ongoing, we'd like to see one of the Lantheus microbubble franchise assets included in those kits. Our next question comes from the line of Erin Wright with Credit Suisse. Your line is open. Great, thanks. Can you speak to the underlying demand trends that you're seeing in echos or echocardiograms and what is sort of assumed in your guidance in terms of demand trends for 2019? And how should we be thinking about kind of the overall reimbursement environment as well? Sure. From the larger perspective of the echocardiography market, it is not something that we try to influence. We absolutely point all of our medical education at educating on identifying suboptimal echos, but we don't target trying to increase the total number of echoes done. So it is really for us an underlying rate. What we see that as on a year over year basis and there are some slight variations year to year, but essentially it's a 2% to 3% growth, natural growth rate in that market. And over the years, you've heard me speak to a market that was 30,000,000 echoes and more recently, a 33,000,000 echo market. And that math really is the addition of compounding of 2% to 3% on an annual basis. And your second question was? Reinforcement. Reinforcement environment. So this is an annual cycle for us. And what we see on an annual cycle is that in July, CMS post their draft proposed rules for reimbursement for the upcoming year, which then opens into a comment period, where comments are accepted from manufacturers and other interested parties, resulting in a final rule established somewhere around early November. What we've seen year on year is that there is, and I would say honest temp by CMS to get it right as far as what should be the average reimbursement rate, but we do find the need annually to intervene and offer our view into what fair reimbursement looks like, especially if the proposed rules come out with a very small difference in reimbursement for unenhanced echocardiography versus echocardiography with contrast. And I think we've been successful. We and all of our industry partners who work with us on this, I think we've been successful over the last several years in demonstrating the value of echocardiography with contrast enhanced contrast and then having that reflect in appropriate reimbursement rates. But it truly is a year by year effort that we in line with all the medical societies and our partners in contrast ultrasound work with CMS. Okay, great. And one other quick one, the LVEF indication for DEFINITY, I guess, how would you quantify sort of the opportunity? And will this be material in 2020? Or should this be a longer term type of contribution? Thanks. There is an incremental addressable market in echocardiography for patients who the echocardiography is specifically targeted to produce an LVEF result so that the patient can then be assessed as to whether they are amenable to certain types of treatment regimens that may not be ideal for the patient if they if their LVEF or their ejection fraction is too low. I won't speak yet to the kind of the actual size of the market. As I mentioned in the call, as we get close to commercialization, there are several key steps that are always done, approaching commercialization, which will really inform us much better and much more tactically as to how we'll go after that market and I'll reserve commenting on it until we are closer to commercialization. Okay, great. Thank you. And we have another question from Larry Biegelsen with Wells Fargo. Just two for me. Mary Anne, flu period as 'eighteen, I a little surprised you didn't mention that when you went through the pipeline. So any update there on timing? And then just second on the Cardinal contract, congratulations on re signing that. Are there any in the past, there have been changes with a new contract that have impacted your business. Anything you would call out here that we should be aware of with the new contract? Thanks for taking the questions. No worries, Larry. First, I'll speak to F-eighteen. I didn't mention it on the call because it's progressing somewhat with as on schedule with GE. They're very much involved in site activation and patient enrollment for the trials, and that is proceeding as our partner shares with us, proceeding well. In the global study, it will be a global study and so there will be enrollment in U. S, Canada and Europe. And GE's comment to us is that they still expect the U. S. NDA will be filed in 2021 and assuming FDA approval that will bring the commercial market into the commercial launch in 2022. And the second your second question was on? Just the Cardinal contract. In the past, Mary Anne, there have been important changes in the contract. So is there anything we should be aware of with this new contract? So I'll speak more broadly to our nuclear strategy and our nuclear portfolio. The Cardinal contract, like our other contracts, specifies volume and price across our entire product line. And our goal really as a company with our nuclear portfolio is to drive stable revenue prediction for the entire nuclear portfolio year on year. And I will say the Cardinal contract coming into 2019 in combination with all of our other contracts, we are confident that we can project out a stable view on the revenue derived from our nuclear portfolio. Thank you for taking the questions. You're welcome. There are no following further questions. I'll turn it back over to you. Thank you, everyone, for joining today, and I guess this will conclude our conference call. Thank you for participating.