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Lannett Updates on Digoxin Safety Issues, Expands Portfolio

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Lannett Company, Inc.’s (LCI - Free Report) shares, which had gained slightly after the company issued a press release on the utilization of digoxin, saw its shares falling 4.3% in the subsequent trading session. Overall, shares are down 3.6% since the company’s announcement.

Concerns regarding digoxin surfaced following the publication of an abstract in the Journal of the American College of Cardiology (JACC). According to the abstract, digoxin was associated with a potential increase in the risk of mortality in patients with newly diagnosed atrial fibrillation. Lannett said that it does not expect the findings to have a major impact on digoxin prescriptions until a more effective alternative medication becomes available in the market. Digoxin currently represents less than 10% of Lannett’s net revenues.

Meanwhile, the company is working on diversifying its portfolio by developing products internally, forming strategic alliances and acquiring products from other companies. The company intends to purchase the abbreviated new drug applications (ANDAs) for two products − estradiol tablets and selegiline hydrochloride capsules. Lannett has not disclosed the name of the seller and the financial terms of the deal.

Earlier this week, Lannett had announced preliminary fourth-quarter fiscal 2014 results − the company expects earnings per share in the range of 60 cents − 64 cents. Net sales are expected to be $81 million, projecting a 101.5% increase from the year-ago quarter. The Zacks Consensus Estimate for net sales is $75 million.  

For fiscal 2014, Lannett expects net sales of nearly $274 million (previous guidance: $261 million − $267 million) and earnings per share in the range of $1.94 − $1.98. Lannett will report fiscal 2014 results on Aug 27 after market close.

Our Take

Since digoxin is not one of the top five products at Lannett and accounts for less than 10% of the company’s revenues, any deterioration in its performance should not hurt the top-line to a large extent. However, we expect investor focus to remain on future updates from the company on digoxin.

Lannett carries a Zacks Rank #2 (Buy). Investors looking for well-positioned stocks in the health care sector may consider Endo International plc (ENDP - Free Report) , Mallinckrodt plc (MNK - Free Report) and AstraZeneca plc (AZN - Free Report) . While Endo and Mallinckrodt carry a Zacks Rank #1 (Strong Buy), AstraZeneca holds a Zacks Rank #2 (Buy).

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