Good afternoon, ladies and gentlemen. Welcome to the Lantheus Holdings second quarter 2018 earnings conference call. This is your operator for today's call. Please note that all lines have been placed on mute to prevent any background noise. This 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 two 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, Meara Murphy, Director of Investor Relations and Corporate Communications.
Good afternoon, everyone, thank you for joining us for Lantheus Holdings' second quarter earnings conference call. With me today are Mary Anne Heino, our President and Chief Executive Officer, and Andrea Sabens, our Vice President of Finance, who will be standing in for Jack Crowley, our Chief Financial Officer, due to a death in his family. Earlier this afternoon, we issued a press release, which was also filed with the Securities and Exchange Commission under Form 8-K, reporting our second quarter results. You can find the release, as well as a replay of this call, in the Investors section of our website at lantheus.com. Please note that the remarks we make today regarding future expectations, plans, and prospects for the company constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which we disclose in more detail in the Risk Factors section of our annual report, filed under Form 10-K with the SEC and available on our website. We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so except as otherwise required by applicable law. Also, please note that on today's call, we will reference certain non-GAAP financial measures with respect to our performance.
Reconciliations to GAAP metrics for EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, adjusted net income per diluted common share, and free cash flow are set forth in our earnings press release. Of particular note, these tables include the reconciliation of our GAAP net income to adjusted EBITDA, a metric we consider to be particularly relevant at this time due to the variability of our technology transfer activities and related costs. Mary Anne will begin her comments today with a high-level review of Q2, Andrea will follow with an overview of our financial performance, along with our Q3 and full-year guidance. Mary Anne will then provide updates regarding our corporate growth strategy and programs. After their prepared remarks, both Mary Anne and Andrea will take questions. With that, I will turn the call over to Mary Anne.
Thank you, Meara, and good afternoon, everyone. Q2 was another solid quarter for us. We met our guidance for revenue and exceeded our guidance for adjusted EBITDA. This year continues to be a period of strategic investment in our business with an eye towards longer-term growth objectives. Our three-pronged strategy is to, one, enhance the growth trajectory and profitability of our core microbubble franchise. Two, augment and invest in our pipeline with a special focus on emerging technologies. Three, pursue external opportunities that fit with our objective to deliver long-term sustainable growth and profitability. I'll discuss each area of our corporate growth strategy after Andrea reviews our Q2 numbers in detail. First, I want to provide an update regarding one of our nuclear isotope suppliers, NTP, in South Africa. As we previously disclosed, the NTP processing facility has been offline since early June.
This has temporarily impacted a portion of our supply of molybdenum-99, or Mo-99, the medical isotope used in our proven high specific activity TechneLite generators. NTP is working with South African regulators on its remediation efforts. In our latest discussions with our partners at NTP, they suggest they are targeting a mid-August restart of production. While NTP's outage did impact our Q2 revenue, we were able to source additional Mo-99 from our other suppliers, allowing us to mitigate the impact of this shortage and to reaffirm our full-year financial guidance. Looking ahead, I would like to note the efforts we are making to further strengthen our Mo-99 supply chain for our proven high specific activity TechneLite generators. Our supply partner, ANSTO, is nearing completion of a project that ANSTO anticipates will significantly increase its Mo-99 production capacity.
In addition, 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. Finally, another strategic partner of ours is SHINE Technologies, which is well underway with its project to bring domestic supply of Mo-99 to the U.S. marketplace. Pending approval, SHINE is expected to initiate commercial supply in 2021, at which time SHINE will fortify our Mo-99 supply chain. I will now turn the call over to Andrea, who is standing in for Jack on today's call to review the Q2 numbers. As mentioned, I'll be back to review our recent progress on our three-pronged corporate strategy. Andrea?
Thanks, Mary Anne, and good afternoon, everyone. Please note that the tables in today's press release include a reconciliation of our GAAP results to the as-adjusted non-GAAP performance I'll review in a moment. We exceeded our guidance for adjusted EBITDA and came within the range of our guidance for revenue. The relative outperformance of adjusted EBITDA reflects thoughtful cost management along with the timing impact of some R&D expenses. Digging into the numbers and starting from the top line.
The company delivered $85.6 million in worldwide revenue for the second quarter, compared with $88.8 million in the second quarter of 2017. DEFINITY continued to perform well, with worldwide revenues totaling $46.1 million for the quarter, up 15% from Q2 of last year. TechneLite revenue was $23.5 million compared to $26.7 million a year ago, which was primarily a result of the disruption in Mo-99 supply that Mary Anne discussed earlier. Xenon revenue for the quarter was $7.6 million, essentially flat when compared with $7.9 million in the second quarter of 2017. Revenue from our other product category was $8.4 million in the second quarter, compared with $14.1 million a year ago. As a reminder, last year's other revenue included the $5 million upfront payment received in the second quarter of 2017 from GE HealthCare under the flurpiridaz F 18 collaboration and license agreement.
Our second quarter gross profit margin, excluding technology transfer activities, was 51.9%, compared with 50.3% last year, excluding the impact of the GE payment. Operating expenses were $27.9 million for the second quarter, a slight decrease as compared to $28.1 million in the second quarter of last year. Operating income for the second quarter of 2018 was $15.9 million, an increase of approximately 22% over last year, excluding the GE payment. Adjusted operating income for the second quarter of 2018 was $16.5 million, an increase of approximately 4% over last year, excluding the GE payment. Second quarter interest expense totaled $4.3 million, which was unchanged from Q2 of last year. Net income for the second quarter was $9.7 million or $0.25 per diluted share, compared with $13.6 million or $0.35 per diluted share for the second quarter of 2017.
Adjusted net income for the second quarter of 2018 was $10.2 million or $0.26 per diluted share, compared with $15.7 million or $0.40 per diluted share in the second quarter of last year. The decrease primarily reflects the impact of the GE payment and an increase in the tax provision following the release of our income tax valuation allowance in the fourth quarter of 2017. Moving on to the balance sheet. As of June 30th, 2018, we had cash and cash equivalents totaling $86.5 million. Borrowing capacity under our revolving credit facility remained at $75 million, making our total liquidity, including cash on hand, $161.5 million. This provides substantial support for our operating and strategic investment needs and represents a 22% improvement compared with the same period one year ago. Second quarter 2018 operating cash flow totaled $20.3 million, compared with $20.6 million in Q2 of 2017.
Capital expenditures during the second quarter of 2018 were $5.6 million, compared to $3.4 million in the second quarter of 2017, reflecting increased investment in some of our strategic programs. Turning now to our guidance. For the third quarter of 2018, we anticipate total revenue in the range of $82 million-$86 million and adjusted EBITDA in the range of $18 million-$21 million. For the year, we are maintaining our guidance for revenue in the range of $337 million-$342 million and for adjusted EBITDA in the range of $85 million-$90 million. With that, I will now turn the call back over to Mary Anne.
Thank you, Andrea. I will now provide some updates on our business performance and strategic programs. On July 25th, CMS published its proposed rules for 2019 OPPS procedures. The proposed reimbursement rates for contrast enhanced echo, including procedures with DEFINITY for 2019, are consistent with the current 2018 rates. We are pleased these proposed rates recognize the incremental value that contrast offers in echo procedures when needed. The final CMS OPPS 2019 rules are expected to be published in November. Strategically, we have added to our patent estate for DEFINITY. In addition to the U.S. patents already granted through 2037 that cover certain facets of DEFINITY, we were recently granted a composition of matter patent in the U.S. for our alternative formulation of DEFINITY that will run through 2035.
We believe the addition of another formulation to our DEFINITY portfolio will offer customers additional flexibility in choosing the formulation that best meets their patients' needs. Next, we reached another key milestone in our DEFINITY China program with Double Crane. Recently, enrollment was completed for all needed studies, which includes cardiac, kidney, liver, and pharmacokinetic studies. Analysis of the resulting data is in progress, and we expect the application for approval to be submitted to the China FDA by the end of this year. As shared previously, we are pursuing a left ventricular ejection fraction or LVEF indication for DEFINITY. We continue to work with the FDA on a special protocol assessment or SPA for our LVEF trial design. While the SPA is not completed, we are at the stage of answering routine questions with the FDA.
We believe we remain on track to initiate the trial by the end of 2018 and in fact, have started trial activities, including contracting with both the CRO and core laboratory, identifying trial sites, and conducting site qualification visits. If an LVEF indication is approved, the addressable echo patient population in which DEFINITY could be used would approximately double, and we would have 3 years of marketing exclusivity for that new indication. Additionally, the build-out of our in-house microbubble manufacturing capabilities at our Billerica campus remains on schedule. Once online, the facility will help to ensure reliable supply as well as improve our cost of goods sold and gross margin. Regarding our PET product pipeline, earlier this week, we jointly announced with GE HealthCare the start of the second phase III clinical trial for flurpiridaz F 18, with the first patient enrolled in June.
This agent is the focus of our collaboration and license agreement with GE HealthCare. This prospective open-label international multi-center trial for PET MPI will enroll up to 650 participants, with the last patient follow-up projected to occur in August 2020. The future economics of this collaboration provide for regulatory and sales milestone payments, double-digit royalties on U.S. sales, and single-digit royalties on sales outside of the U.S., and the option to co-promote the agent in the U.S. market. Next up is our phase III LMI 1195 program. LMI 1195 is our fluorine-18-based PET agent that we believe represents a first-in-class and useful diagnostic tool for a population of patients at risk for sudden cardiac death. While we now anticipate we will initiate the trial in 2019, we have undertaken work with the FDA on an SPA for the planned single phase III clinical trial.
Addressing the third prong of our growth strategy, we are actively assessing external opportunities. Ideal opportunities will both complement our current capabilities and address current unmet patient or market needs. In addition, we would prioritize assets that are or would soon be accretive to revenue and profit margins while improving cash flow. In closing, we are pleased with our business results to date and our progress on strategic programs. We look forward to updating you in the coming quarters. With that, Andrea and I are now ready to take your questions. Operator?
Ladies and gentlemen, if you'd like to ask a question at this time, please press the star then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, you may do so by pressing the pound key. Again, if you'd like to ask a question at this time, that's star then one. Our first question comes from the line of Raj Denhoy with Jefferies. Your line is now open.
Raj?
Hi, this is Anthony for Raj. I apologize, Mary Anne, I was muted. Thanks for taking the question. Maybe just to start on TechneLite, just bit light versus our expectations. I'm just trying to get a sense of the price-volume dynamics in the quarter, how that played out. Then maybe a related question to that would be looking ahead to the Molly supply agreement with SHINE. I'm just wondering how that plays out as it relates to margins for the radiopharma business. Then I have one follow-up. Thanks.
Sure. Anthony, let me answer your first question on TechneLite, that really you asked what the price-volume dynamic is for revenue for the quarter. It really is a volume dynamic, not a price dynamic. We are essentially fully contracted for sales for TechneLite, so the pricing is set through those contracts. As we noted during the call, the volume deficit we had, which led to the revenue deficit, is related to NTP being offline since early June. We were able to mitigate a significant portion of that supply outage, but not fully. That's what's driving the, as you described, lighter than anticipated TechneLite revenue. Looking forward to SHINE, as I mentioned in the call, SHINE is a little bit in the future. We anticipate that they can begin commercial supply to us in 2021.
I won't comment now on pricing or margin since it is an event sitting out in our future. I think it's fair to say that we continue to seek ways to not only fortify our supply chain, but to do so in a way that makes it most price efficient for us.
That's helpful. The follow-up, again, on NTP, I'm assuming intra-quarter orders will sort of shift depending on availability. Do you see pent-up demand as NTP comes back on, or are those orders lost? Lastly, just on F 18 and the announcement with GE. The timing there, August 2020, is that specifically last patient in, and then you would get an analysis of the study thereafter? Or are you expecting a final readout sort of August 2020? Just a clarification on timing. Thanks again. I'll get back in queue.
Thank you. Let me address first your questions about NTP and pent-up demand. Anthony, in this case, there really is no pent-up demand because in the case of TechneLite, it's pretty much a moment in time or just-in-time type of manufacturing and order demand fulfillment, there is no way to catch up on orders lost. During this time, we are very focused on ensuring that our customers receive as much supply as we can offer them, and ultimately that patients are not in any way inconvenienced by not having appropriate supply enough to do the patient exam that that supply ultimately satisfies. That's been a major concern for us. The other question was on flurpiridaz and on the August 2020. That is a last patient out date.
Of course, after that, there will have to be analysis of the data that were generated by the trial, which will ultimately fuel and allow completion of the full file for submission to the FDA.
Thanks again.
You're welcome.
Our next question comes from Erin Wright with Credit Suisse. Your line is now open
Great. Thanks. A follow-up on TechneLite. Can you explain or speak to your thoughts on the competitive landscape for TechneLite and how you envision that evolving and your competitive positioning overall? Thanks.
Yes. First, let me say it's our hope, and we support all the efforts to bring additional sources of supply and competitors into the nuclear marketplace. We think it's very healthy for a market that will welcome additional sources of not only supply, but also of additional modalities to the testing that's done under that specialty. We are strong supporters of that, and we're a strong supporter of the medical societies that are involved in that. I think, Erin, what you're referring to with the emerging competitive landscape perhaps are the announcements that were made last quarter by BWXT about their intent to enter the marketplace with a competitive product that would be a competitor to our product, which is TechneLite self-contained, proven high specific activity, the generator that's currently in the marketplace.
We feel that we will continue to have the type of product quality and the type of competitive dynamics that will allow us to very successfully compete in that market, whether that market change is next year, the year after or several years from now.
Okay, great. Somewhat of a two-part question here, but can you give us an update on the manufacturing initiatives at your facility? Also, can you give us an update on the M&A pipeline? Could you be in a position to close a deal or two by year-end? Thanks.
Sure. Again, two very different questions. Our on-site manufacturing project is the installation of a line that will allow us to have an additional source of manufacturing for DEFINITY. That's our cold product, not one of our nuclear products. We're very much on schedule there. I may have described in a previous call, this is the refit of an existing structure on our campus, and so from a timeline perspective, it's accelerated by the ability to use the existing infrastructure of that building. It's still a project that is certainly year plus in length. As we near completion, we will undergo inspection by the FDA, and they will give us a kind of more finite time point to point to when we can bring first commercial product into our supply chain for the U.S. market. That's our on-site manufacturing project.
Your other question about M&A, as I mentioned in the call, I really will not be any more specific, but we are well advanced in our consideration of what types of assets and/or companies in their geographies or in the markets they compete in are the right fit for us. That really is kind of a multi-pronged approach to improve what our shot on goal will be once we move forward. I will not offer any more detail or will I commit unnecessarily to saying that I expect one of those deals to close next month or by the end of the year. Suffice to say, when it does, we'll announce it, then I'll be more than glad to talk about it.
Great. Look forward to it. Thanks.
Our next question comes from Larry Solow with CJS Securities. Your line is now open.
Hi. Great, thanks. Good afternoon. Mary, can you maybe just speak a little bit more to DEFINITY. I assume, though, that any update on any patent filed, obviously, you're doing a good job building around the estate there with alternative formulations at least, expanding to different potential uses. Just thoughts on sort of, it seems like some of the overhang on the stock is related to the patent situation and is it just a matter of waiting out a few more quarters as we get one more quarter on the book and no filing? Do you think eventually these sort of fears will wane? Or what are your thoughts on that?
Larry, I think your thoughts are a perfect example of what we're facing with the market. That is my belief is that many of the analysts who consider us are used to the pharmaceutical market, where in fact, we've seen historically very significant drops in revenue of exclusive products, post-genericization events with those products. I have offered in earlier calls the consideration that the pattern post-genericization for a diagnostic product does not mirror what you see for a pharmaceutical product, and there's several reasons for that. In fact, we have experienced ourselves because our product Cardiolite, which went generic in 2008, and at the time of going generic, was the most successful radiopharmaceutical ever commercialized in the U.S. market, was a product that certainly demonstrated what would be the pent-up demand to enter with a generic product.
Yet, if you compare the post-genericization pattern of revenue sales and loss for that product, it is strikingly different from what you see post the genericization events we've seen with products such as Prilosec or any of the other major brands that have been in the pharmaceutical market. I'll offer two reasons why the diagnostic market, and in particular the DEFINITY supply chain, is different. They both have to do with the channel and how the channel is used and accessed. In the case of DEFINITY, our product is sold directly from our campus right into echocardiography labs where it is stocked and it is used in fulfillment with a procedure and then billed out to Medicare or a third-party payer as part of a procedure. That differs in the following two very dramatic ways from a pharmaceutical product.
Pharmaceutical products are uniformly, I'm going to say universally, but it's not exclusively distributed from large wholesalers. Where there is a possibility for very large-scale switch on a very real-time basis, as these wholesalers sometimes deliver three times a day to the pharmacies that they serve. You have a very easy part of the channel where it's very easy to flip the supply going out to the customer. Similarly, at the retail encounter between a patient and a pharmacist, you have the opportunity in real-time for electronic switch of a prescription. A patient, and we're all patients ourselves, a patient who approaches a pharmacy counter to fill a prescription, in real time can be offered the opportunity to have that prescription instead filled with the generic form of the same product that their prescription notes, as long as it may be rated.
There's also, very frequently, an economic incentive for the patients to comply with that generic switch. Neither of those dynamics are applicable or relevant in the supply channel in which DEFINITY operates, in that it is not a product that is ordered by prescription, nor is it a product that's housed by wholesalers, nor is there a point of electronic transaction where that decision can be changed. We feel those factors, plus our work in protecting what we see as the patented facets of DEFINITY, will impact what will be the behavior of the market post mid-2019, when our first composition of matter patent expires.
We also, just as a reminder, have an additional Orange Book patent which goes out to 2037, and based on that being included in the Orange Book, it would require any potential generic filer of a potential DEFINITY generic product to use a Paragraph IV filing process with the FDA, which would automatically include notification to Lantheus, to myself, that there was the intent to attempt to bring a generic product to market. I hope that answers part of your question. Happy to take any.
Absolutely. Yeah, how does the VIALMIX, obviously that seems like a big advantage. How does the patent situation on that come into play? In other words, if somehow generic was able to get in on the composition of matter patent expiration, does the VIALMIX now has a separate patent? Does that run out for a much further time? That seems to be an advantage of your product, so they wouldn't, I guess, have access to a similar type thing, right?
Well, it's true in the following way. The VIALMIX is also a patented device. It is not an Orange Book-listed patent, but it is a USPTO-listed patent.
Right
We would defend those patented aspects of our VIALMIX. Any potential generic filer wishing to enter the market would have to do so with their own dedicated apparatus that would have to be also approved as a device through a regulatory process.
Okay. Just a couple other follow-ups. You mentioned a little bit on the pipeline. On the DEFINITY trials, the by year-end start date, I think it looks like it's a little bit delayed on the SPA. Is there any particular reason why it's delayed other than just FDA back and forth? Would that necessarily push out some of your R&D expense from 2018 into future years?
The answer is yes and yes, Larry. It is just routine back and forth with the FDA. We had assumed earlier in the year that we'd be completed by mid-year. We're not. We do still anticipate we'll initiate the trial by year-end. Can that cause some expenses to float into 2019 from 2018? It's possible. We have not noted yet that we see any predictable movement of expenses, but I'll have a much better line of sight on that as we come closer to year-end.
Okay. There was no real bend. The spending to date obviously is pretty much in line, because it wouldn't have really accelerated, I guess, until you sort of got closer to the trial start date, right?
True. I'll just note, and for everyone's awareness, we are seeking an SPA, which is a special protocol assessment. That is not required for us to start our trial. We have chosen to have that conversation with the FDA because we feel that aligns more clearly what the expectations are for the outcomes of the trial that then lean towards the FDA saying the basis of this trial is also the basis of approval for the indication.
Right. I guess it sort of sets the goalposts before the game starts, if you will.
It is.
Just one other question. On TechneLite, it sounds like you said that you were able to secure supply for this quarter. If NTP is not back up by August or if that runs into the end of August, whatever that might be, is there a potential for some more impact on your sales going forward? I guess that's still somewhat of an uncertainty.
I just want to clarify, Larry. I hope I did not misspeak. I did not mean to communicate that we had secured another supply.
No, I know. You said enough. I said enough. You were able to Yeah, I'm sorry.
We mitigated the absence of NTP as one of our suppliers. We were able to mitigate
Right
that amount of volume by sourcing more from our other suppliers. Right now, based on our discussions with NTP, they're targeting a mid-August restart. Given that that already puts us into the quarter, yes, I would anticipate that versus what is the normal run rate you've seen in other quarters, there will still be a slight revenue hit for TechneLite in this quarter. As you heard Andrea say, and as you heard then me reaffirm at the end of my comments, we are reaffirming full-year guidance. We also offered our guidance for third quarter. I think that we're trying to send a message with that as well, that at the larger company level, with all the puts and takes of our portfolio of products, we feel we can manage what we see as any remaining issue with TechneLite revenue related to supply outage.
Okay. Then just lastly, any color on the recent departure of your head of commercial sales, Timothy Healey? I think he left last week, or that was in 8-K. Is there any particular reason for that? Was that just agree to disagree, he moved on to greener pastures or anything there?
Tim did separate from the company. I will, of course, not comment on employee matters.
Okay. Sure.
As Tim was a named executive officer, we did publish an 8-K announcing the day of his separation from the company. Just for everyone's awareness, my prior role in the company, my initial role in the company was chief commercial officer, before becoming chief operating officer. In the interim, while we do complete our search for a new commercial head, the commercial team will be reporting in to me. Not saying they're going to like it, but.
They will have their old boss back.
Got you. Okay, great. Thanks very much.
You're welcome.
Our next question comes from Lei Huang with Wells Fargo. Your line is now open.
Thanks. Hi, it's Lei calling in for Larry. Just to be clear on NTP and your guidance, your Q3 guidance and your 2018 full year guidance that you maintained, that assumes NTP is back online in mid-August. Is that right?
No, Lei, I did not say that.
Oh, okay.
I apologize if that's the inference I gave. What I would like to say is that we have considered what the impact of any outage could be, but I'm not trying to suggest that we have locked that down to saying that it only includes a considered outage up to the middle of August.
Got it. Okay. All right. It's possible your guidance assumes it comes back online sooner or later than August. You're just saying, "Here's what you've been told, mid-August restart," but your guidance may assume something different.
There's many scenarios that underlie how we come to final guidance, and it includes, as I mentioned before, puts and takes across different parts of the product line, and included in that are considerations for different restart times, full restart times of NTPs.
Got it. Okay. Just a couple questions on your guidance. In first half of the year, it looks like your total revenue grew in the low single digit. It looks like you're guiding to second half top-line growth that's closer to mid or mid to high single digit. One, I want to make sure I'm looking at those numbers correctly. If that is correct, can you just remind us what drives the faster growth in the second half?
A couple of things there. I'm going to turn it over to Andrea. She can be more numeric with you. I would remind everyone that this quarter that we're currently in, if you look at the pace of our quarters historically, this is a lower quarter for us, and we attribute that to essentially what we call vacationality. For scheduled procedures, which typically DEFINITY is, and for the routine scheduled procedures that nuclear studies typically are, and I'm excluding those that are done on an emergency or crisis basis, those tend to lag in the full summer months because people postpone having those studies done until everyone's back from vacations and staff is fully back up. You do normally see that.
Having said that then, as you mentioned, Lei, we do normally see kind of a stronger growth behavior in the latter half of the year. It's really then, as you can imagine, driven by Q4, where we typically see a resurgence of echo studies, including those done with DEFINITY and the recurrent of normally scheduled studies in our nuclear program.
Got it. Okay. I guess I was referring to a year-over-year growth. It looks like year-over-year, first half revenue growth was sort of in the low single digit, whereas in the back half of the year, if we compare to the prior year period, it looks like it is at least the guidance looks like it is implying something closer to mid to mid-high single digit. I was looking at year-over-year comparison, 2018 versus 2017.
That's fair. I would say, Lei, I think what is driving the math there is the fact that we also had the TechneLite outage in the first quarter of this year, and from a revenue planning perspective, we do not anticipate it continuing for the balance of the year. That would have first half 2018 versus first half 2017 look weaker than second half 2018 versus second half 2017.
Got it. Okay. Are there any other factors other than the TechneLite supply issue? Are there any other factors we should consider in the second half that could help growth?
No, the only thing I would remind you is that when you are comparing first half 2018 over first half 2017, you should pull the $5 million one-time payment from GE out of 2017 because it was a one-time non-recurring milestone payment.
Yep. Got it. Yep. Thanks. Along the same lines, just looking at your adjusted EBITDA margin, it looks like it was in the first half of the year, it looks like it was around 28%. If I look at your full year guidance, kind of back into the second half, it looks like it would be slightly lower, call it 25%-26% or so. One, I want to make sure my math is in the ballpark. Two, what's causing that little dip in margin first half 2018 versus second half 2018?
That's a very good question, very insightful, Lei. I think what's driving that, the most causative contributor to that are the R&D programs. As we had released earlier in the year, we had seen some timing delay on some of those expenses, and they have moved into the second half of the year. There was already R&D expense planned for that period, and in addition, that period is now picking up some of the expense that had been planned to occur earlier in the year.
Got it. Okay. Very helpful. If I can just squeeze in a couple of questions on DEFINITY. First, just to be clear, and I know you talked about the patent quite a bit, but just to be clear, are you aware of any generic DEFINITY filing at this time?
No, I have not been notified about any generic filings for DEFINITY to this date.
Okay, perfect. The new composition matter patent you mentioned for the alternative formulation. Is there anything else you can share on that at this point, in terms of the new formulation or the timeline? I guess we're typically thinking a composition of matter patent having to do with a drug substance. When you marry that with the term alternative formulation, it's not quite clear what it means.
We're not trying to be unclear about that. I think the information I offered this time, which should indicate what we're working on, is that we are offering an alternative formulation so that physicians can choose at their discretion which best meets their needs in the clinic and for their patients. That from a substance perspective, that doesn't indicate a different substance. It really does speak more to the composition or the packaging that the substance comes in. That's all I'll share at this point.
Got it. Nothing new you can share at this point in terms of timeline?
No, I don't have anything to update on timeline. I will note, though, just to be clear, that it's an Orange Book awarded patent, but it won't be Orange Book awarded until the product is actually approved. The patent has been awarded, but it will not be Orange Book listed until the product itself, the alternative formulation, is approved by the FDA, and then it will run out through 2035.
Got it. Okay, the patent has been issued by the U.S. Patent Office?
Patent has been issued. It will not be listed in the Orange Book because the Orange Book is a listing of patents that pertain to approved FDA products, therefore, you won't get the Orange Book listing until the product is approved by the FDA.
Got it. Perfect. Thanks very much, Mary Anne.
You're welcome, Lei.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time, please press the star, then the number one key. I'm showing no further questions in queue at this time. I'd like to turn the call back to Ms. Murphy for closing remarks.
Thank you for joining us today. Please note we will be presenting at the Wells Fargo Securities 2018 Healthcare Conference on September fifth in Boston. With that, we will end today's call.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating.