What happened?

Shares of Lannett Company (NYSE:LCI) -- a generic drug manufacturer -- are down by 20.3% as of 12:24 p.m. EDT on Thursday. The company released its fiscal third-quarter earnings report after the market closed on Wednesday, and investors were not impressed with Lannett's financial results. 

So what

During the third quarter of its fiscal year 2020, Lannett's net sales were $144.4 million, a decrease of about 16.4% from the prior-year quarter. Still, Lannett's net sales came in ahead of the $134.5 million in net sales analysts had been expecting. The company's better-than-expected net sales came as a result of the COVID-19 pandemic: "For our fiscal 2020 third quarter, net sales were higher than expected due to COVID-19, as patients appear to have purchased extra supply of their medications and some customers increased their purchases of some of our products to address patient demand and avoid shortages," management said.

Man holding his head in panic with a downward pointing graph on the background.

Image source: Getty Images.

However, Lannett's earnings per share (EPS) fell short of analyst estimates. During the third quarter of its fiscal year 2020, the healthcare company reported a non-GAAP (adjusted) net income of $11.7 million -- or $0.27 on a per-share basis, compared to a non-GAAP EPS of $0.68 during the year-ago period. On average, analysts were expecting an adjusted EPS of $0.29. Lannett ended the quarter with a cash balance of $101.5 million.

Now what

In its quarterly update, Lannett tightened (and lowered) the range of its guidance for its fiscal year 2020. The company had previously expected its net sales for the year to be between $530 million to $550 million. Now Lannett expects its net sales to come in between $530 million and $545 million. After today's slump, Lannett's shares -- which were outperforming the broader market this year before its third-quarter earnings release -- are down by 13.4% year to date. The company's earnings miss, and its decision to slightly lower its guidance for the year, may have been the main catalysts behind Lannett's stock falling off a cliff today.