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Lannett Company Inc Reports Operating Results (10-K)

September 24, 2010 | About:

Lannett Company Inc (NYSE:LCI) filed Annual Report for the period ended 2010-06-30.

Lannett Company Inc has a market cap of $105.1 million; its shares were traded at around $4.17 with a P/E ratio of 13.9 and P/S ratio of 0.9. LCI is in the portfolios of Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Over the past five years, we have experienced a 95% growth in our revenues from approximately $64 million in fiscal year 2006 to over $125 million in fiscal year 2010. This rapid growth has been achieved primarily through strategic partnerships and opportunities resulting from certain difficulties that a number of our competitors have experienced with regulatory compliance issues.

Our products containing Levo are produced and marketed with 12 varying potencies. In addition to generic Levo tablets, we also market and distribute Unithroid tablets, a branded version of Levo, which is produced and marketed with 11 varying potencies. Both generic Levo tablets and Unithroid tablets are manufactured by JSP. We began buying generic Levo from JSP and selling it to our customers in April 2003. In September 2003, we began buying the branded Unithroid tablets from JSP and selling them to our customers. Levo tablets are used to treat hypothyroidism and other thyroid disorders. Levo remains one of the most prescribed drugs in the U.S. and is used by over 13 million patients of various ages and demographic backgrounds. Side effects from Levo are rare, but may include allergic reactions, such as rash or hives. We signed a distribution agreement with JSP in March 2004 that granted us exclusive distribution rights to Levo tablets through March 2014 (the JSP Distribution Agreement). In June 2004, JSP received a letter from the FDA approving its supplemental application for generic bioequivalence to Levoxyl®. In December 2004, JSP received a letter from the FDA approving its supplemental application for generic bioequivalence to Synthroid®. Net sales of this product have grown rapidly in recent years from approximately $35 million in 2007 to almost $51 million in 2010. In our distribution of these products, we compete with two branded Levo productsAbbott Laboratories Synthroid® and Monarch Pharmaceuticals Levoxyl® as well as generic products from Mylan and Sandoz.

Digoxin tablets are produced and marketed with two different potencies (0.125 and 0.25 milligrams (mg) per tablet). This product is manufactured by JSP and we distribute it under the JSP Distribution Agreement. We began buying this product from JSP and selling it to our customers in September 2002. Digoxin tablets are used to treat congestive heart failure in patients of various ages and demographic backgrounds. The beneficial effects of Digoxin result from direct actions on the cardiac muscle, as well as indirect actions on the cardiovascular system mediated by effects on the autonomic nervous system. Side effects of Digoxin may include apathy, blurred vision, changes in heartbeat, confusion, dizziness, headaches, loss of appetite, nausea, vomiting and weakness. Net sales of this product have increased from approximately $4.7 million in 2007 to $21.0 million in 2010.

Our manufacturing facility consists of 31,000 square feet on an approximately 3.5-acre parcel of land that we own. In addition, we own a 63,000 square foot building on approximately 3.0 acres located within one mile of our manufacturing facility that houses packaging, research and development and possibly additional manufacturing space in the future. In June 2006, we leased a third building located several miles from our manufacturing facility, consisting of 66,000 square feet on approximately 7.3 acres. We purchased this building in October 2009 for approximately $3.8 million, plus the cost of fit out of approximately $2.0 million. A significant portion of the purchase price and fit out costs are expected to be financed through a series of loans with a bank and a Pennsylvania state run development agency. Construction was substantially complete by June 30, 2010. The financing will be competed shortly. This new facility is being used for certain administrative functions, warehouse space, shipping and possibly additional manufacturing space in the future.

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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 2.3/5 (4 votes)


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