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Lannett Set to Lose Distribution Agreement With Key Supplier
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Lannett Company, Inc. announced that its major supplier, Jerome Stevens Pharmaceuticals (JS Pharma) will not renew their distribution agreement, which is set to expire on Mar 23, 2019.
Shares of the company plummeted 60.4% on Aug 20 following the news. Lannett’s shares have lost 76.9% so far this year compared with the industry’s decline of a mere 0.3%.
Per the distribution agreement, JS Pharma is liable to manufacture and supply three products – Butalbital, Aspirin, Caffeine with Codeine Phosphate Capsules USP; Digoxin Tablets USP; and Levothyroxine Sodium Tablets USP – to Lannett.
Lannett is a generic drug company with more than 100 marketed products, which address a wide range of therapeutic areas. Some of the company’s products are manufactured by others including its primary finished goods inventory supplier, JS Pharma, which accounted for more than 35% of total purchase of goods in the nine month period ending Mar 31, 2018.
Moreover, Levothyroxine Sodium Tablets USP is part of Lannett’s thyroid deficiency portfolio, which generated almost 36% of total sales in the nine month period ending Mar 31, 2018. Therefore, unavailability of the product due to non-renewal of the contract is expected to severely impact Lannett’s top line in next fiscal year.
The company has not provided any reason for non-renewal. However, we note that, Amneal Pharmaceuticals (AMRX - Free Report) signed a 10-year distribution and supply agreement with JS Pharma on Aug 20 for supply of several products including Levothyroxine Sodium Tablets.
Lannett is currently evaluating the impact of non-renewal on its goodwill, which can result in write-off of a significant amount in impairment charges from its assets next fiscal.
Moreover, Lannett provided its preliminary results for fourth quarter as well as fiscal 2018. The company expects net sales to be approximately $171 million and adjusted earnings per share to be in the range of 62 cents to 64 cents in the fourth quarter. However, both the numbers were below estimates, which further result in the steep drop in shares. The Zacks Consensus Estimates for earnings and revenues stand at 65 cents and $171.69 million, respectively. For the full year, the company expects net sales to be approximately $685 million and adjusted earnings per share to be in the range of $3.08 and $3.10. The Zacks Consensus Estimates stand at $685.47 million and $3.12 per share for revenues and earnings, respectively.
Meanwhile, the company stated in its press release that it has been preparing a contingency plan keeping the non-renewal outcome a possibility. The company has streamlined its operations since the beginning of 2018 and launched eight new products, which is expected to add $50 million in annual sales for fiscal 2019. Additionally, the company acquired 25 market-ready or near-market-ready product lines including an asset purchase agreement with Endo International plc in May.
Lannett also anticipates to launch several new products in fiscal 2019. There are four drugs under review in the United States and the company is looking to add more products to its portfolio. It has also implemented a restructuring plan at its manufacturing unit.
The launch of new products and restructuring initiatives are least likely to completely offset the unfavorable impact of the loss of distribution agreement. However, the actual effect of non-renewal as well as degree of offset of loss from new launches remains to be seen.
BioSpecifics’ earnings estimates increased from $20.9 to $2.28 for 2018 and from $2.13 to $2.38 for 2019 over the last 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 11.37%. The company’s shares have increased 19% so far this year.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Lannett Set to Lose Distribution Agreement With Key Supplier
Lannett Company, Inc. announced that its major supplier, Jerome Stevens Pharmaceuticals (JS Pharma) will not renew their distribution agreement, which is set to expire on Mar 23, 2019.
Shares of the company plummeted 60.4% on Aug 20 following the news. Lannett’s shares have lost 76.9% so far this year compared with the industry’s decline of a mere 0.3%.
Per the distribution agreement, JS Pharma is liable to manufacture and supply three products – Butalbital, Aspirin, Caffeine with Codeine Phosphate Capsules USP; Digoxin Tablets USP; and Levothyroxine Sodium Tablets USP – to Lannett.
Lannett is a generic drug company with more than 100 marketed products, which address a wide range of therapeutic areas. Some of the company’s products are manufactured by others including its primary finished goods inventory supplier, JS Pharma, which accounted for more than 35% of total purchase of goods in the nine month period ending Mar 31, 2018.
Moreover, Levothyroxine Sodium Tablets USP is part of Lannett’s thyroid deficiency portfolio, which generated almost 36% of total sales in the nine month period ending Mar 31, 2018. Therefore, unavailability of the product due to non-renewal of the contract is expected to severely impact Lannett’s top line in next fiscal year.
The company has not provided any reason for non-renewal. However, we note that, Amneal Pharmaceuticals (AMRX - Free Report) signed a 10-year distribution and supply agreement with JS Pharma on Aug 20 for supply of several products including Levothyroxine Sodium Tablets.
Lannett is currently evaluating the impact of non-renewal on its goodwill, which can result in write-off of a significant amount in impairment charges from its assets next fiscal.
Moreover, Lannett provided its preliminary results for fourth quarter as well as fiscal 2018. The company expects net sales to be approximately $171 million and adjusted earnings per share to be in the range of 62 cents to 64 cents in the fourth quarter. However, both the numbers were below estimates, which further result in the steep drop in shares. The Zacks Consensus Estimates for earnings and revenues stand at 65 cents and $171.69 million, respectively. For the full year, the company expects net sales to be approximately $685 million and adjusted earnings per share to be in the range of $3.08 and $3.10. The Zacks Consensus Estimates stand at $685.47 million and $3.12 per share for revenues and earnings, respectively.
Meanwhile, the company stated in its press release that it has been preparing a contingency plan keeping the non-renewal outcome a possibility. The company has streamlined its operations since the beginning of 2018 and launched eight new products, which is expected to add $50 million in annual sales for fiscal 2019. Additionally, the company acquired 25 market-ready or near-market-ready product lines including an asset purchase agreement with Endo International plc in May.
Lannett also anticipates to launch several new products in fiscal 2019. There are four drugs under review in the United States and the company is looking to add more products to its portfolio. It has also implemented a restructuring plan at its manufacturing unit.
The launch of new products and restructuring initiatives are least likely to completely offset the unfavorable impact of the loss of distribution agreement. However, the actual effect of non-renewal as well as degree of offset of loss from new launches remains to be seen.
Lannett Co Inc Price
Lannett Co Inc Price | Lannett Co Inc Quote
Zacks Rank & Stock to Consider
Lannett currently carries a Zacks Rank #4 (Sell).
BioSpecifics Technologies Corp is a better-ranked stock from the same space, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BioSpecifics’ earnings estimates increased from $20.9 to $2.28 for 2018 and from $2.13 to $2.38 for 2019 over the last 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 11.37%. The company’s shares have increased 19% so far this year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>