What happened
Shares of Lannett Company (LCI) rose as much as 46.8% today after the company made several announcements. First, the generic drug specialist said it would advise Cediprof on how best to proceed with efforts to commercialize generic drug products in the United States. The deal has the potential to provide services revenue and deepen the pair's working relationship, which could land Lannett lucrative manufacturing, supply, and distribution deals.
Second, the business announced it had entered into a new agreement to become the exclusive U.S. distributor of posaconazole delayed-release tablets, an antifungal medication, from Sinotherapeutics of China. Third, Lannett Company announced fiscal full-year 2019 operating results that exceeded expectations and provided fiscal full-year 2020 guidance far ahead of what Wall Street was expecting.
As of 12:23 p.m. EDT on Wednesday, the stock had settled to a 39.6% gain.
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So what
Today's news items are significant for Lannett, especially in light of the volatility and uncertainty that has gripped the stock in the last two years following the loss of its former top customer.
The advisory deal with Cediprof may not yield much in terms of direct services revenue, but it could make Lannett the partner of choice as Cediprof looks to expand its presence in the U.S. generics market. Lannett is currently the supply and distribution partner for Cediprof's levothyroxine sodium tablets.
The exclusive distribution deal with Sinotherapeutics for posaconazole tablets will have a more direct impact on operations. The innovator drug brand, Noxafil from Merck, generated $325 million in U.S. revenue in the 12-month period ending June 30. The generic drug brands resulting from Lannett's manufacturing and distribution will launch into a less lucrative market opportunity (generic drugs sell for lower prices and have to compete with the trust of the innovator brand), but capturing even 10% of the market represents a significant growth opportunity.
Meanwhile, Lannett reported $655 million in revenue for fiscal 2019, which eclipsed the most recent expectations calling for $645 million at best. The results are significantly better than the expectations from six months ago, when management expected no more than $635 million in full-year revenue. The company currently expects $535 million in fiscal full-year 2020 revenue, easily topping the average estimate on Wall Street of just $506 million, according to numbers compiled by Yahoo! Finance.
Now what
While shares of Lannett Company have fallen 75% in the last three years, investors have to be pleased with management's efforts to outgrow the uncertainty. It will still take time to replace the former top customer (the most recent quarter was the first without it), but the business appears to be headed in the right direction. That said, it may be best to wait for further signs of progress before investing in the stock.
