LCI Lannett CO

Lannett Company, Inc. (NYSE AMEX: LCI) today reported financial results for the fiscal 2010 fourth quarter and full year ended June 30, 2010.

For the 2010 full year, net sales increased to $125.2 million from $119.0 million for fiscal 2009. Gross profit was $41.3 million compared with $45.2 million for the same period in the prior year. Research and development (R&D) expenses increased to $11.3 million from $8.4 million in the prior year. Selling, general and administrative (SG&A) expenses decreased to $17.4 million from $26.1 million in fiscal 2009. SG&A expenses in fiscal 2009 included professional fees of $6.5 million related to the OB Natal One patent challenge that was settled in March 2009. Operating income grew to $13.0 million compared with $10.8 million in fiscal 2009. Net income was $7.8 million, or $0.31 per diluted share, compared with $6.5 million, or $0.27 per diluted share, for the prior year.

“Strong sales of our pain management drugs in the latter part of 2010 combined with increased sales of certain base business pharmaceutical products drove our topline growth in fiscal 2010,” said Arthur Bedrosian, president and chief executive officer of Lannett. “Looking ahead, competitive pricing for certain products combined with the FDA’s decision ordering Lannett, and others, to cease manufacturing Morphine Sulfate, will negatively impact our business for the balance of calendar year 2010. However, we are optimistic about receiving FDA approval in the near future of our New Drug Application for Morphine Sulfate and currently expect to re-launch the drug in early 2011. Moreover, we continue to make progress vertically integrating and increasing production of other active pharmaceutical pain management products and have a strong pipeline, including 21 product applications currently pending at the FDA.”

For the fourth quarter of fiscal 2010, net sales were $33.8 million compared with $35.4 million for the fourth quarter of fiscal 2009. Gross profit was $11.3 million compared with $13.6 million for the same period in the prior year. R&D expenses decreased to $2.1 million from $2.7 million in the 2009 fiscal fourth quarter. SG&A expenses decreased to $5.2 million from $6.9 million in the same quarter of the prior year. SG&A expenses in the fourth quarter of fiscal 2009 included professional fees of $818,000 related to the OB Natal One patent challenge. Operating income rose to $4.3 million compared with $3.9 million in the fiscal 2009 fourth quarter. Net income was $2.8 million, or $0.11 per diluted share, compared with $2.4 million, or $0.10 per diluted share, for the prior year fourth quarter.

Conference Call Information and Forward-Looking Statements

On September 13, 2010, the company will host a conference call at 4:30 p.m. ET to review its results of operations for the 2010 fiscal year ended June 30, 2010. The conference call will be available to interested parties by dialing 800-447-0521 from the U.S. or Canada, or 847-413-3238 from international locations, passcode 27892211. The conference call will also be available through a live audio Internet broadcast at www.lannett.com. The call will be archived and accessible at this site for approximately two weeks.

Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company’s financial status and performance and regulatory and operational developments, and any comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

About Lannett Company, Inc.:

Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of indications. For more information, visit the company’s website at www.lannett.com.

This news release contains certain statements of a forward-looking nature relating to future events or future business performance. Any such statements, including, but not limited to, investing in R&D to add to the company’s growing product offering and further diversify its portfolio, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated due to a number of factors which include, but are not limited to, the difficulty in predicting the timing or outcome of FDA or other regulatory approvals or actions, the ability to successfully commercialize products upon approval, Lannett’s estimated or anticipated future financial results, future inventory levels, future competition or pricing, future levels of operating expenses, product development efforts or performance, and other risk factors discussed in the company’s Form 10-K and other documents filed with the Securities and Exchange Commission from time to time. These forward-looking statements represent the company's judgment as of the date of this news release. The company disclaims any intent or obligation to update these forward-looking statements.

  LANNETT COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS           Three months ended Fiscal Year ended June 30, June 30,   2010     2009     2010     2009   (Unaudited) (Unaudited)   Net sales $ 33,760,023 $ 35,448,874 $ 125,177,949 $ 119,002,215 Cost of sales 21,795,016 20,876,050 80,890,575 71,272,859 Amortization of intangible assets 448,667 448,667 1,794,667 1,787,167 Product royalties   185,011     510,846     1,152,900     697,720     Gross profit 11,331,329 13,613,311 41,339,807 45,244,469   Research and development expenses 2,141,295 2,741,967 11,251,421 8,427,135 Selling, general, and administrative expenses 5,170,175 6,942,905 17,375,320 26,059,104 (Gain) loss on sale of investments (1,623 ) 6,718 (1,623 ) (53,524 ) (Gain) loss on sale of assets   (295,701 )   31,124     (315,330 )   30,885     Operating income   4,317,183     3,890,597     13,030,019     10,780,869     Other income (expense): Foreign currency gain 1,837 - 4,595 - Interest income 12,877 (6,416 ) 62,328 209,188 Interest expense   (71,838 )   (62,694 )   (275,870 )   (321,751 )   (57,124 )   (69,110 )   (208,947 )   (112,563 )   Income before income tax expense 4,260,059 3,821,487 12,821,072 10,668,306 Income tax expense   1,288,071     1,393,983     4,813,044     4,090,716   Consolidated net income 2,971,988 2,427,504 8,008,028 6,577,590 Less net income attributable to noncontrolling interest   (155,737 )   (6,968 )   (186,961 )   (43,345 )   Net income attributable to Lannett Company, Inc. $ 2,816,251   $ 2,420,536   $ 7,821,067   $ 6,534,245     Earnings per common share - Lannett Company, Inc.: Basic $ 0.11 $ 0.10 $ 0.32 $ 0.27 Diluted $ 0.11 $ 0.10 $ 0.31 $ 0.27   Weighted average number of shares outstanding: Basic 24,880,253 24,515,756 24,743,902 24,447,016 Diluted 25,261,703 24,844,964 25,199,373 24,587,378     LANNETT COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS     (Unaudited)   June 30, 2010 June 30, 2009  

ASSETS

Current Assets Cash and cash equivalents $ 21,895,648 $ 25,832,456 Investment securities - available for sale 604,464 347,921 Trade accounts receivable (net of allowance of $123,192 and $132,000, respectively) 38,324,258 29,945,748 Inventories, net 19,056,868 16,195,361 Interest receivable 9,631 90,425 Deferred tax assets 5,337,391 4,296,929 Other current assets   2,506,114     602,335   Total Current Assets 87,734,374 77,311,175   Property, plant and equipment 50,160,114 41,431,158 Less accumulated depreciation   (21,531,845 )   (18,533,773 ) 28,628,269 22,897,385   Construction in progress 2,939,898 591,685 Investment securities - available for sale 183,742 801,748 Intangible assets (product rights) - net of accumulated amortization 7,785,298 9,118,710 Deferred tax assets 12,544,330 13,757,545 Other assets   147,886     98,873   Total Assets $ 139,963,797   $ 124,577,121    

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Current Liabilities Accounts payable $ 16,280,675 $ 16,805,468 Accrued expenses 3,464,181 1,842,434 Accrued payroll and payroll related 6,304,465 5,150,104 Income taxes payable 1,479,658 711,073 Current portion of long-term debt 4,851,278 435,386 Rebates, chargebacks and returns payable   15,249,412     13,734,540   Total Current Liabilities 47,629,669 38,679,005   Long-term debt, less current portion 2,868,549 7,703,382 Unearned grant funds 500,000 500,000 Other long-term liabilities   7,864     47,111   Total Liabilities 51,006,082 46,929,498 Commitment and Contingencies  

SHAREHOLDERS' EQUITY

Common stock - authorized 50,000,000 shares, par value $0.001; issued and outstanding, 24,882,123 and 24,517,696 shares, respectively 24,882 24,518 Additional paid in capital 79,862,940 76,250,309 Retained earnings 9,564,632 1,743,565 Noncontrolling interest 111,982 93,654 Accumulated other comprehensive income   44,692     24,751   89,609,128 78,136,797 Less: Treasury stock at cost - 110,108 and 82,228 shares, respectively   (651,413 )   (489,174 ) TOTAL SHAREHOLDERS' EQUITY   88,957,715     77,647,623     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 139,963,797   $ 124,577,121