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Lannett Company Inc (LCI) filed Quarterly Report for the period ended 2011-12-31.
Lannett Co. Inc. has a market cap of $147.6 million; its shares were traded at around $5.2 with a P/E ratio of 130.1 and P/S ratio of 1.4.
This is the annual revenues and earnings per share of LCI over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of LCI.
Highlight of Business Operations:
The Company had sales of approximately $307,000 and $298,000 during the three months ended December 31, 2011 and 2010, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”). Sales to Auburn for the six months ended December 31, 2011 and 2010 were approximately $488,000 and $474,000, respectively. Jeffrey Farber (the “related party”), who is a current board member and the son of William Farber, the Chairman Emeritus of the Board of Directors and principal shareholder of the Company, is the owner of Auburn. Accounts receivable includes amounts due from the related party of approximately $263,000 and $259,000 at December 31, 2011 and June 30, 2011, respectively. In the Company’s opinion, the terms of these transactions were not more favorable to the related party than would have been to a non-related party.Net sales of drugs used for the treatment of thyroid deficiency decreased by approximately $1,019,000 primarily as a result of a Medicare Part D coverage gap rebate totaling approximately $945,000 for the three months ended December 31, 2011. Sales of drugs used for the treatment of migraine headaches decreased by approximately $963,000 for the three months ended December 31, 2011 compared to December 31, 2010 primarily as a result of decreased volumes to both chain drug stores and wholesale distributors. Net sales of our prescription vitamins also decreased by approximately $952,000 due to the settlement agreement reached with KV on December 15, 2010 which required the Company to cease selling products covered by the licensed patents. Sales of drugs for cardiovascular treatment decreased by approximately $578,000 for the three months ended December 31, 2011 compared to December 31, 2010 mainly due to a competitive price reduction during the second quarter of FY 2011 in order to retain one of our major customers. Sales of drugs used for pain management decreased approximately $245,000 for the three months ended December 31, 2011 compared to December 31, 2010. The decrease in sales of pain management drugs was due mainly to a decrease in volume of Oxycodone shipped partially offset by a price increase for C-Topical Solution and an increase in Morphine Sulfate Oral Solution sales. The Company commenced shipments of Morphine Sulfate Oral Solution in the first quarter of fiscal year 2012 based on its June 2011 FDA approval. The overall decrease in sales was partially offset by an increase in sales of drugs for anti-psychosis treatment by approximately $522,000 for the three months ended December 31, 2011 compared to December 31, 2010 mainly due to the Loxapine product launch. Additional sales can also be attributed to drugs used for the treatment of glaucoma and gallstone prevention which increased $390,000 and $349,000, respectively.
2011 FDA approval which contributed to the overall increase in pain management sales. Partially offsetting these increases was a decrease in volume of Oxycodone shipped. Sales of drugs used in the treatment of thyroid deficiency increased by approximately $1,678,000 for the six months ended December 31, 2011 compared to December 31, 2010 primarily as a result of increased sales volume to one of our major retail customers, partially offset by a decrease in price related to a Medicare Part D coverage gap rebate totaling approximately $1,198,000. Sales of drugs for anti-psychosis treatment increased by approximately $609,000 for the six months ended December 31, 2011 compared to December 31, 2010 mainly due to the Loxapine product launch. Additional sales can also be attributed to drugs used for the treatment of glaucoma and gallstone prevention which increased $784,000 and $274,000, respectively. The overall increase in sales was partially offset by a decrease in sales of drugs for cardiovascular treatment by approximately $1,343,000 for the six months ended December 31, 2011 compared to December 31, 2010 mainly due to a competitive price reduction during the second quarter of FY 2011 in order to retain one of our major customers. Net sales of our prescription vitamins also decreased by approximately $1,821,000 due to the settlement agreement reached with KV on December 15, 2010 which required the Company to cease selling products covered by the licensed patents. Sales of drugs used for the treatment of migraine headaches decreased by approximately $1,877,000 for the six months ended December 31, 2011 compared to December 31, 2010 primarily as a result of decreased volumes to both chain drug stores and wholesale distributors.
Cost of sales for the first six months decreased 1% to $40,569,000 in Fiscal 2012 from $41,175,000 in Fiscal 2011. The decrease reflected a change in the mix of products sold as well as overall improvements in manufacturing processes. Cost of sales for the second quarter of Fiscal 2011 included additional inventory reserves totaling approximately $1,497,000 related to Morphine Sulfate Oral Solution and the reversal of royalty expense totaling approximately $618,000 as a result of the settlement agreement reached with KV in December 2010.
In April 1999, the Company entered into a loan agreement with the Philadelphia Authority for Industrial Development (the “Authority” or “PAID”), to finance future construction and growth projects of the Company. The Authority issued $3,700,000 in tax-exempt variable rate demand and fixed rate revenue bonds to provide the funds to finance such growth projects pursuant to a trust indenture (“the Trust Indenture”). A portion of the Company’s proceeds from the bonds was used to pay for bond issuance costs of approximately $170,000. The Trust Indenture requires that the Company repay the Authority loan through installment payments beginning in May 2003 and continuing through May 2014, the year the bonds mature. The bonds bear interest at the floating variable rate determined by the organization responsible for selling the bonds (the “remarketing agent”). The interest rate fluctuates on a weekly basis. The effective interest rate at December 31, 2011 and June 30, 2011 was 0.29% and 0.40%, respectively. At December 31, 2011, the Company has $425,000 outstanding on the Authority loan, of which $135,000 is classified as currently due. The remainder is classified as a long-term liability. In April 1999, an irrevocable letter of credit of $3,770,000 was issued by Wells Fargo. This letter of credit is renewed annually to secure payment of the outstanding Authority loan balance and a portion of the related accrued interest. At December 31, 2011, no portion of the letter of credit has been utilized.
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