Lannett Reports Fiscal 2022 Fourth-Quarter, Full-Year Financial Results

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TREVOSE, PA — Lannett Company, Inc. (NYSE: LCI) recently reported financial results for its fiscal 2022 fourth quarter and full year ended June 30, 2022.

“For the quarter, net sales were in line with our expectations, adjusted EBITDA was at the top end of our guidance range and adjusted gross margin was better than anticipated, rebounding from our adjusted gross margin in recent quarters,” said Tim Crew, chief executive officer of Lannett. “Our cash position was approximately $88 million at June 30, 2022; we continue to expect to receive sizable income tax refunds within the next couple of months.

“With regard to our pipeline, we have added several near-term product opportunities, of which a few have the potential to be meaningful contributors to our financial results, especially in the second half of the current fiscal year. Our durable large market partnered product opportunities continue to progress and achieve notable development milestones (details discussed below). As part of our pre-launch activities for biosimilar insulin, we have initiated preliminary discussions with a number of states and other organizations around initiatives and programs to make insulin more accessible and affordable to millions of patients. We welcome these initiatives and believe our significant scale and competitive cost structure will help position us to support and prosper from these initiatives on affordable insulin.

“Looking ahead, our efforts will be focused on commercializing recently added product opportunities, which we believe will help increase our full-year gross margin in fiscal 2023. At the same time, we intend to maintain operating discipline to reduce expenses and make the most of our cash resources, all while working to further develop with our partners our high value pipeline of insulin and respiratory products, expand our existing strategic alliances and form new ones.”

Key Pipeline Update Subject to FDA Approval

  • Company reported that it anticipates launching over the next several months Zolmitriptan, a nasal spray product for migraine and cluster headaches, and Fludarabine, an injectable product currently in short supply;
  • By the end of the current fiscal year, the company anticipates launching Sucralfate, an oral suspension product, and two additional partnered products. Sevoflurane, an inhaled anesthetic product, and Mesalamine Delayed Release Tablets 1.2 gram;
  • Biosimilar insulin glargine. More than 90% of the subject enrollment goal has been achieved and the pivotal clinical trial for biosimilar insulin glargine is expected to be completed next month. Thus far no serious adverse events have been reported. Top-line results are expected toward the end of this calendar year, and filing of the Biologics License Application (BLA) is anticipated next Spring, and thus a potential launch of the product in the first half of calendar year 2024;
  • Biosimilar insulin aspart: The company’s partner is producing insulin aspart at commercial scale and will be requesting a Type 2 meeting with the FDA later this calendar year. An IND filing is anticipated for later this fiscal year. The company estimates initiating the clinical study next summer and completing the study in the spring of calendar 2024. The company anticipates a potential launch of the product in the middle of calendar year 2025;
  • Generic ADVAIR DISKUS®, fluticasone propionate and salmeterol inhalation powder, remains on priority review. The company anticipates fully responding to the CRL next year, with a launch possible in 2024.
  • Generic Flovent Diskus®, fluticasone propionate inhalation powder: the pivotal clinical end-point study and PK trials for the 100 mcg/blister were successfully completed in the first attempt. The FDA has granted the company’s request for CGT status and the filing of the ANDA is estimated for earlier next calendar year;
  • The company reports that it expects its partner to commence a pilot PK study of generic Spiriva® Handihaler® by year end and is targeting an ANDA filing by early 2024.
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Restructuring, Cost Reduction Initiatives

The major elements of the company’s restructuring plan announced in November 2021 have been completed. The transfer of certain products from the company’s recently sold Carmel plant to its main plant is progressing on schedule and the manufacturing of Lannett-labeled product at that site will largely be completed by the end of this calendar year.

Fourth-Quarter Financial Results: Fiscal 2022 vs Fiscal 2021

GAAP basis:

  • Net sales were $74.2 million compared with $106.0 million
  • Gross profit was $7.9 million, or 11% of net sales, compared with $22.7 million, or 21% of net sales
  • Asset impairment charges were $53.9 million compared with $18.6 million
  • Net loss was $93.3 million, or $2.30 per share, compared with $177.9 million, or $4.50 per share

Non-GAAP basis:

  • Net sales were $74.2 million compared with $106.0 million
  • Adjusted gross profit was $10.4 million, or 14% of net sales, compared with $26.4 million, or 25% of net sales
  • Adjusted interest expense increased to $13.1 million from $12.1 million
  • Adjusted net loss was $17.8 million, or $0.44 per share compared with $7.4 million, or $0.19 per share
  • Negative adjusted EBITDA was $1.3 million versus adjusted EBITDA of $12.1 million

Full-Year Financial Results: Fiscal 2022 vs Fiscal 2021

GAAP basis:

  • Net sales were $340.6 million compared with $478.8 million
  • Gross profit was $33.2 million, or 10% of net sales, compared with $75.6 million, or 16% of net sales
  • Restructuring expenses were $2.8 million compared with $4.0 million
  • Asset impairment charges were $103.3 million compared with $216.6 million
  • Net loss was $231.6 million, or $5.74 per share, compared with $363.5 million, or $9.23 per share
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Non-GAAP basis:

  • Net sales were $340.6 million compared with $478.8 million
  • Adjusted gross profit was $50.0 million, or 15% of net sales, compared with $122.3 million, or 26% of net sales
  • Adjusted interest expense increased to $51.7 million from $43.7 million
  • Adjusted net loss was $61.0 million, or $1.51 per share, compared with $1.0 million, or $0.03 per share

Guidance for Fiscal 2023

Based on its current outlook, the company provided guidance for fiscal year 2023, as follows:

GAAP

Adjusted*

Net sales

$275 million to $300 million

$275 million to $300 million

Gross margin %

Approximately 13% to 15%

Approximately 15% to 17%

R&D expense

$23 million to $25 million

$23 million to $25 million

SG&A expense

$64 million to $67 million

$56 million to $59 million

Interest and other

Approximately $60 million

Approximately $53 million

Effective tax rate

Approximately 0% to 4%

Approximately 23.5% to 24.5%

(Negative) Adjusted EBITDA

N/A

($12 million) to $0 million

Capital expenditures

Approximately $8 million to $12 million

Approximately $8 million to $12 million

*A reconciliation of Adjusted amounts to most directly comparable GAAP amounts and additional details can be found at www.lannett.com.

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