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Why Lannett Flopped on Friday

By Eric Volkman - May 28, 2021 at 4:39PM

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The generic-drug maker gets ejected from a top small-cap stock index.

What happened

On Friday, investors were refusing the pill that is generic-drug specialist Lannett (LCI 9.00%). The company's shares took a painful hit, sinking by 13% after the company got the toss from a high-profile stock index.

So what

After market close Thursday S&P Dow Jones Indices, the company responsible for the closely followed S&P suite of securities indexes, announced a set of adjustments to three of its stock indicators. Unfortunately for Lannett, as a result of these changes, its stock will no longer be a component of the S&P SmallCap 600 index.

A row of prescription pill bottles on a shelf.

Image source: Getty Images.

Its place is being taken by real estate investment trust (REIT) Service Properties Trust (SVC 1.99%). The index manager's changes become effective before market open next Friday, June 4.

Lannett became a component the S&P SmallCap 600 index in 2014. It hasn't been a popular stock lately, falling by 33% since the beginning of this year.

What didn't help was the pharmaceutical company's third-quarter results, published earlier this month. The company's net sales fell by 22% year over year to $112 million, and although it narrowed its net loss considerably to just over $7.1 million, it still fell well short of analyst expectations.

Now what

While inclusion on, or exclusion from, a high-profile stock index doesn't directly affect a company's fundamentals, it does impact its reputation and visibility. Given its S&P SmallCap 600 index chop, on the back of that lackluster Q3, Lannett has much work to do to restore the confidence of investors.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lannett Company, Inc. Stock Quote
Lannett Company, Inc.
LCI
$0.63 (9.00%) $0.05
Service Properties Trust Stock Quote
Service Properties Trust
SVC
$8.21 (1.99%) $0.16

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