Lannett Announces Fiscal 2021 First-quarter Financial Results; Affirms Guidance

Financial and Business Highlights:

- Q1 Net Sales of $126 Million

- Q1 Adjusted EBITDA of $33 Million

- Commenced Marketing Four Products in FY21 Q1

- Fully Implemented $15 Million of Cost Reduction Initiatives

- Recently Announced the Marketing of an Authorized Generic for Tirosint® (Levothyroxine Sodium Capsules)

News provided by

Lannett Company, Inc.

Nov 04, 2020, 16:15 ET

PHILADELPHIA, Nov. 4, 2020 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2021 first quarter ended September 30, 2020. 

"We view our fiscal 2021 first quarter net sales of $126 million as a solid achievement, given our current competitive landscape and overall decline of total prescriptions related to the ongoing pandemic," said Tim Crew, chief executive officer of Lannett. "During the quarter, we fully implemented our cost reduction plan that we estimate will lower expenses by approximately $15 million, annually, and launched four new products, including Levothyroxine Sodium Tablets, a meaningful product for us. More recently, we began marketing two additional products, including the exclusive authorized generic of Tirosint® (Levothyroxine Sodium Capsules), a medication that complements and expands our thyroid deficiency portfolio of products. Our plans include launching approximately seven more products over the balance of the current fiscal year. Based on the aforementioned, we are affirming our previous guidance for the fiscal 2021 full year.

"At the end of this month, we intend to use a portion of our existing cash to pay down, in full, our Term A Loans. This milestone will lower our annual interest expense and principal payments by approximately $30 million, thus improving our financial flexibility. Moreover, our remaining debt is free of financial covenants and the nearest maturity is in November of 2022, two years away.

"We continue to advance a number of drug candidates in our portfolio that we believe have durable value and the potential to be catalysts for significant growth. Our respiratory and biosimilar product candidates with large addressable markets remain on track, and we expect to expand such durable portfolio assets over the course of this fiscal year."

For the fiscal 2021 first quarter on a GAAP basis, net sales were $126.5 million compared with $127.3 million for the first quarter of fiscal 2020. Gross profit was $25.7 million, or 20% of net sales, compared with $42.7 million, or 33% of net sales. The company recorded restructuring expenses of $4.0 million compared with $1.4 million in the prior-year first quarter. Net loss was $6.5 million, or $0.17 per share, compared with $12.2 million, or $0.32 per share, for the first quarter of fiscal 2020.

For the fiscal 2021 first quarter reported on a Non-GAAP basis, net sales were $126.5 million compared with $127.3 million for the first quarter of fiscal 2020. Adjusted gross profit was $34.4 million, or 27% of net sales, compared with $52.6 million, or 41% of net sales, for the prior-year first quarter. Adjusted interest expense decreased to $11.2 million compared with $15.3 million for the first quarter of fiscal 2020. Adjusted net income was $2.2 million, or $0.06 per diluted share, compared with $8.8 million, or $0.22 per diluted share, for the fiscal 2020 first quarter. Adjusted EBITDA for the fiscal 2021 first quarter was $33.2 million.

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 its fiscal 2021 first quarter ended September 30, 2020. 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 49992942. The call will be broadcast via the Internet at www.lannett.com. Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. A playback of the call will be archived and accessible on the same website 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, 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.

Use of Non-GAAP Financial Measures

This news release contains references to Non-GAAP financial measures, including Adjusted EBITDA, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Management uses these measures internally for evaluating its operating performance. The Company's management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor's overall understanding of the financial results for the Company's core business. Additionally, it provides a basis for the comparison of the financial results for the Company's core business between current, past and future periods. The company also believes that including Adjusted EBITDA, as defined in the company's existing Credit Agreement, is appropriate to provide additional information to investors to demonstrate the company's ability to comply with financial debt covenants. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP. 

Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included with this release.

Non-GAAP financial measures exclude, among others, the effects of (1) amortization of purchased intangibles and other purchase accounting entries, (2) restructuring expenses, (3) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.

Adjusted EBITDA excludes the same adjustments discussed above, as well as additional adjustments permitted under the company's existing Credit Agreement.

About Lannett Company, Inc.:

Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of medical indications – see financial schedule below for net sales by medical indication. 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, successfully commercializing recently introduced products, launching and successfully commercializing additional products in fiscal 2021, achieving cost savings from the recently announced restructuring and cost savings plan, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company's guidance for fiscal 2021, 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, including acquired products, and 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.

FINANCIAL SCHEDULES FOLLOW

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)






(Unaudited)







September 30, 2020


June 30, 2020








ASSETS






Current assets:





Cash and cash equivalents

$                               108,774


$                  144,329

Accounts receivable, net

138,796


125,688

Inventories


156,478


142,867

Income taxes receivable


19,703


14,419

Assets held for sale


2,678


2,678

Other current assets


15,787


13,227

Total current assets

442,216


443,208

Property, plant and equipment, net

176,984


179,518

Intangible assets, net


369,146


374,735

Operating lease right-of-use asset 

9,085


9,343

Deferred tax assets


120,462


117,890

Other assets


14,027


11,861

TOTAL ASSETS


$                            1,131,920


$               1,136,555















LIABILITIES





Current liabilities:





Accounts payable


$                                  47,539


$                    32,535

Accrued expenses


15,609


14,962

Accrued payroll and payroll-related expenses

9,581


16,304

Rebates payable


43,247


38,175

Royalties payable


18,366


20,863

Restructuring liability

405


27

Current operating lease liabilities

2,018


1,097

Short-term borrowings and current portion of long-term debt

81,314


88,189

Other current liabilities

1,125


2,713

Total current liabilities

219,204


214,865

Long-term debt, net


586,270


592,940

Long-term operating lease liabilities

9,546


9,844

Other liabilities


17,585


16,010

TOTAL LIABILITIES


832,605


833,659








STOCKHOLDERS' EQUITY




Common stock($0.001 par value, 100,000,000 shares authorized; 40,687,784




and 39,963,127 shares issued; 39,393,357 and 38,798,787 shares outstanding at




September 30, 2020 and June 30, 2020, respectively)

41


40

Additional paid-in capital

324,788


321,164

Accumulated deficit


(7,790)


(1,291)

Accumulated other comprehensive loss

(548)


(627)

Treasury stock(1,294,427 and 1,164,340 shares at September 30, 2020 and June 30, 2020, respectively)

(17,176)


(16,390)

Total stockholders' equity

299,315


302,896

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 

$                            1,131,920


$               1,136,555






LANNETT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)








Three months ended 



September 30,



2020


2019






Net sales


$             126,479


$         127,342

Cost of sales 


92,187


77,656

Amortization of intangibles


8,589


7,028

Gross profit


25,703


42,658

Operating expenses:





Research and development expenses


6,539


8,940

Selling, general and administrative expenses


15,136


21,308

Restructuring expenses


4,043


1,388

Asset impairment charges


-


1,618

Total operating expenses


25,718


33,254

Operating income (loss)


(15)


9,404

Other income (loss):





Loss on extinguishment of debt


-


(2,145)

Investment income


45


729

Interest expense


(14,486)


(19,292)

Other


(23)


934

Total other loss


(14,464)


(19,774)

Loss before income tax


(14,479)


(10,370)

Income tax expense (benefit)


(7,980)


1,787

Net loss 


$                (6,499)


$         (12,157)






Loss per common share:





     Basic


$                  (0.17)


$             (0.32)

     Diluted (1) 


$                  (0.17)


$             (0.32)






Weighted average common shares outstanding:





     Basic


39,070,982


38,309,267

     Diluted (1) 


39,070,982


38,309,267


(1) Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)
















Three months ended September 30, 2020


Net sales

Cost of sales

Amortization of intangibles

Gross Profit

Gross Margin %

R&D expenses

SG&A expenses

Restructuring expenses

Operating income
(loss)

Other income (loss)

Income (loss) before income tax

Income tax expense (benefit)

Net income (loss)

Diluted earnings (loss) per share (h)




GAAP Reported

$126,479

$     92,187

$        8,589

$ 25,703

20%

$     6,539

$      15,136

$        4,043

$              (15)

$ (14,464)

$   (14,479)

$ (7,980)

$    (6,499)

$         (0.17)

Adjustments:















Amortization of intangibles (a)

-

-

(8,589)

8,589


-

-

-

8,589

-

8,589

-

8,589


Cody API business (b)

-

(74)

-

74


(2)

(427)

-

503

-

503

-

503


Depreciation on capitalized software costs (c)

-

-

-

-


-

(1,051)

-

1,051

-

1,051

-

1,051


Restructuring expenses (d)

-

-

-

-


-

-

(4,043)

4,043

-

4,043

-

4,043


Non-cash interest (e)

-

-

-

-


-

-

-

-

3,277

3,277

-

3,277


Other (f)

-

-

-

-


-

(951)

-

951

-

951

-

951


Tax adjustments (g)

-

-

-

-


-

-

-

-

-

-

9,669

(9,669)

















Non-GAAP Adjusted

$  126,479

$       92,113

$              -

$   34,366

27%

$       6,537

$        12,707

$              -

$          15,122

$   (11,187)

$        3,935

$    1,689

$       2,246

$            0.06
















(a)

To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI 







(b)

To exclude the operating results of the ceased Cody API business









(c)

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition






(d)

To exclude expenses associated with the 2020 Restructuring Plan









(e)

To exclude non-cash interest expense associated with debt issuance costs









(f)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement 







(g)

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates








(h)

The weighted average share number for the three months ended September 30, 2020 is 39,070,982 for GAAP and 40,717,506 for non-GAAP earnings (loss) per share calculations


LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

















Three months ended September 30, 2019


Net sales

Cost of sales

Amortization of intangibles

Gross Profit

Gross Margin %

R&D expense

SG&A expense

Restructuring expenses

Asset impairment charges

Operating income

Other income (loss)

Income (loss) before income tax

Income tax expense

Net income (loss)

Diluted earnings (loss) per share (k)




GAAP Reported

$        127,342

$           77,656

$             7,028

$            42,658

33%

$             8,940

$           21,308

$             1,388

1,618

$             9,404

$         (19,774)

$         (10,370)

$            1,787

$          (12,157)

$             (0.32)

Adjustments:
















Amortization of intangibles (a)

-

-

(7,028)

7,028


-

-

-

-

7,028

-

7,028

-

7,028


Cody API business (b)

-

(1,722)

-

1,722


(420)

(214)

-


2,356

-

2,356

-

2,356


Depreciation on capitalized software costs (c)

-

-

-

-


-

(1,058)

-

-

1,058

-

1,058

-

1,058


Decommissioning of Philadelphia sites (d)

-

(989)

-

989


-

-

-

-

989

-

989

-

989


Restructuring expenses (e)

-

-

-

-


-

-

(1,388)

-

1,388

-

1,388

-

1,388


Asset impairment charges (f)

-

-

-

-


-

-

-

(1,618)

1,618

-

1,618

-

1,618


Non-cash interest (g)

-

-

-

-


-

-

-

-

-

4,008

4,008

-

4,008


Loss on extinguishment of debt (h)

-

-

-

-


-

-

-

-

-

2,145

2,145

-

2,145


Other (i)

-

(208)

-

208


-

(2,090)

-

-

2,298

(966)

1,332

-

1,332


Tax adjustments (j)

-

-

-

-


-

-

-

-

-

-

-

999

(999)


















Non-GAAP Adjusted

$           127,342

$             74,737

$                   -

$             52,605

41%

$               8,520

$            17,946

$                    -

$                     -

$            26,139

$           (14,587)

$             11,552

$               2,786

$               8,766

$                 0.22

















(a)

 To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc. 








(b)

 To exclude the operating results of the ceased Cody API business 












(c)

 To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition 









(d)

 To exclude the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites 








(e)

 To exclude expenses associated with the Cody API Restructuring Plan 











(f)

 To exclude impairment charges primarily associated with an operating lease right-of-use asset 










(g)

 To exclude non-cash interest expense associated with debt issuance costs 











(h)

 To exclude the loss on extinguishment of debt primarily related to the partial repayment of outstanding Term Loan A balance 








(i)

 To primarily exclude accrued separation costs related to the Company's former Chief Financial Officer as well as gains on sales of assets previously held for sale 






(j)

 To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates 










(k)

 The weighted average share number for the three months ended September 30, 2019 is 38,309,267 for GAAP and 40,653,053 for the non-GAAP earnings (loss) per share calculations. As a result of the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.


LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)






Three months ended 



September 30, 2020




Net loss


$                                 (6,499)




Interest expense


14,486

Depreciation and amortization


14,342

Income tax benefit


(7,980)

EBITDA


14,349




Share-based compensation


3,342

Inventory write-down


2,605

Investment income


(45)

Other non-operating loss


23

Restructuring expenses


4,043

Restructuring payments


(3,666)

Unrealized cost savings (a)


11,250

Other(b)


1,313

Adjusted EBITDA (Non-GAAP)


$                                33,214



(a)

To include the remaining cost savings expected to be realized as a result of the 2020 Restructuring Plan

(b)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement, as well as the operating results of the ceased Cody API business

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION







Three months ended


($ in thousands)

September 30,


Medical Indication

2020


2019


Analgesic

$             3,120


$             1,884


Anti-Psychosis

13,028


28,034


Cardiovascular

19,714


21,606


Central Nervous System

22,525


19,257


Endocrinology

3,233


-


Gastrointestinal

17,100


16,962


Infectious Disease

21,932


11,895


Migraine

9,690


9,143


Respiratory/Allergy/Cough/Cold

1,426


2,707


Urinary

1,458


435


Other

7,634


9,861


Contract Manufacturing revenue

5,619


5,558


   Net Sales

$          126,479


$          127,342


Contact:

Robert Jaffe


Robert Jaffe Co., LLC


(424) 288-4098

SOURCE Lannett Company, Inc.