LCI Lannett CO

Lannett Company, Inc. (NYSE AMEX: LCI) today reported financial results for the fiscal 2011 first quarter ended September 30, 2010.

For the first quarter of fiscal 2011, net sales were $25.4 million, compared with $31.4 million for the first quarter of fiscal 2010. Gross profit declined to $5.9 million from $11.5 million for the same period in the prior year. Research and development expenses decreased to $2.0 million from $3.0 million in the fiscal 2010 first quarter. Selling, general and administrative expenses rose to $4.6 million from $3.8 million in the same quarter of the prior year, primarily due to increased legal costs related to litigation with the FDA regarding the company’s Morphine Sulfate Oral solution product. Operating loss was $726,000 versus operating income of $4.7 million in the fiscal 2010 first quarter. Net loss was $404,000, or $0.02 per share, compared to net income of $2.9 million, or $0.11 per diluted share, for the prior year’s first quarter.

“As expected, sales and gross profit in the quarter were impacted by approximately $2.8 million in lost revenues resulting from the FDA’s action to force all but one competitor to cease distributing Morphine Sulfate Oral Solution, as well as pricing pressure and reduced profitability on certain key products,” said Arthur Bedrosian, president and chief executive officer of Lannett. “We continue to expect to receive FDA approval in the near future of our 505(b)(2) New Drug Application for Morphine Sulfate Oral Solution, with an anticipated re-launch of the drug in early calendar 2011.

“Our performance continues to be impacted by the lack of ANDA approvals due to the FDA backlog, as well as the FDA’s enforcement action regarding Morphine Sulfate, which had the additional effect of forcing us to reduce our workforce at the company’s pain management division.”

Bedrosian also said that during the quarter, the company purchased approximately 20,000 shares of Lannett common stock in open market transactions, and the FDA completed inspections of the company’s facilities in Wyoming, with only two minor 483 observations, and no observations in Philadelphia.

Conference Call Information and Forward-Looking Statements

Later today, the company will host a conference call at 4:30 p.m. ET to review its results of operations for the 2010 fiscal first quarter ended September 30, 2010. The conference call will be available to interested parties by dialing 888-771-4371 from the U.S. or Canada, or 847-585-4405 from international locations, passcode 28342817. 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 at least three months.

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 (UNAUDITED)     Three months ended September 30,

2010

2009

  Net sales $ 25,395,927 $ 31,434,989 Cost of sales 18,900,048 19,012,318 Amortization of intangible assets 448,667 448,667 Product royalties   143,271     439,774     Gross profit 5,903,941 11,534,230   Research and development expenses 2,042,369 3,027,841 Selling, general, and administrative expenses 4,600,681 3,763,161 Gain on sale of investments   (12,641 )   -     Operating (loss) income   (726,468 )   4,743,228     Other income (expense): Foreign currency gain 2,415 - Interest income 11,231 23,099 Interest expense   (70,844 )   (70,413 )   (57,198 )   (47,314 )   (Loss) income before income tax (benefit) expense (783,666 ) 4,695,914 Income tax (benefit) expense   (389,544 )   1,827,650   Net (loss) income (394,122 ) 2,868,264 Less net income attributable to noncontrolling interest   (9,439 )   (10,894 )   Net (loss) income attributable to Lannett Company, Inc. $ (403,561 ) $ 2,857,370     (Loss) earnings per common share - Lannett Company, Inc.: Basic $ (0.02 ) $ 0.12 Diluted $ (0.02 ) $ 0.11   Weighted average number of shares outstanding: Basic 24,899,530 24,533,562 Diluted 24,899,530 25,054,661     LANNETT COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS       (Unaudited)    

September 30, 2010

June 30, 2010

 

ASSETS

Current Assets Cash and cash equivalents $ 17,624,554 $ 21,895,648 Investment securities - available for sale 212,757 604,464 Trade accounts receivable (net of allowance of $123,192 and $123,192, respectively) 31,189,099 38,324,258 Inventories, net 21,036,591 19,056,868 Interest receivable 9,371 9,631 Prepaid taxes 498,215 - Deferred tax assets 5,133,873 5,337,391 Other current assets   2,162,319     2,506,114   Total Current Assets 77,866,779 87,734,374   Property, plant and equipment 51,882,758 50,160,114 Less accumulated depreciation   (22,293,000 )   (21,531,845 ) 29,589,758 28,628,269   Construction in progress 3,680,223 2,939,898 Investment securities - available for sale 183,771 183,742 Intangible assets (product rights) - net of accumulated amortization 7,326,945 7,785,298 Deferred tax assets 12,524,544 12,544,330 Other assets   138,858     147,886   Total Assets $ 131,310,878   $ 139,963,797    

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Current Liabilities Accounts payable $ 15,763,468 $ 16,280,675 Accrued expenses 2,498,862 3,464,181 Accrued payroll and payroll related 2,486,810 6,304,465 Income taxes payable - 1,479,658 Current portion of long-term debt 4,826,601 4,851,278 Rebates, chargebacks and returns payable   13,359,608     15,249,412   Total Current Liabilities 38,935,349 47,629,669   Long-term debt, less current portion 2,834,973 2,868,549 Unearned grant funds 500,000 500,000 Other long-term liabilities   6,558     7,864   Total Liabilities 42,276,880 51,006,082   Commitment and Contingencies - -  

SHAREHOLDERS' EQUITY

Common stock - authorized 50,000,000 shares, par value $0.001; issued and outstanding, 24,929,131 and 24,882,123 shares, respectively 24,929 24,882 Additional paid in capital 80,410,648 79,862,940 Retained earnings 9,161,071 9,564,632 Noncontrolling interest 121,421 111,982 Accumulated other comprehensive income   52,588     44,692   89,770,657 89,609,128 Less: Treasury stock at cost - 130,118 and 110,108 shares, respectively   (736,659 )   (651,413 ) TOTAL SHAREHOLDERS' EQUITY   89,033,998     88,957,715     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 131,310,878   $ 139,963,797