Lannett Company, Inc. reported financial results for its fiscal 2014 second quarter and six months ended December 31, 2013.
In a release on February 6, the Company noted that for the fiscal 2014 second quarter, net sales rose 84 percent to $67.3 million from $36.6 million in last year's second quarter. Gross profit more than tripled to $41.0 million, or 61 percent of net sales, from $13.4 million, or 37 percent of net sales, for the fiscal 2013 second quarter. Research and development (R&D) expenses increased to $5.8 million from $3.6 million for the fiscal 2013 second quarter. Selling, general and administrative (SG&A) expenses were $9.9 million, compared with $5.2 million in the same quarter of the prior year. Operating income grew substantially to $25.4 million from $4.7 million for the second quarter of fiscal 2013. Net income attributable to Lannett Company grew nearly six-fold to $16.6 million, or $0.46 per diluted share, from $2.9 million, or $0.10 per diluted share.
"For the fiscal 2014 second quarter, we recorded the highest net sales, gross margin and net income in our company's history," said Arthur Bedrosian, president and chief executive officer of Lannett. "Our excellent financial performance was driven by price increases, strong sales of existing products and favorable product mix. The successful recent stock offering and newly established $50 million credit facility provide liquidity to fund our future growth, which includes the development of our deep pipeline as well as potential acquisitions. We continue to believe our company's future is very bright."
Bedrosian added, "We have now recorded five consecutive quarters of record sales, crossed the billion dollar market cap threshold and, in December, began trading on the New York Stock Exchange."
For the first six months of fiscal 2014, net sales rose 57 percent to $113.2 million from $71.9 million for the first six months of fiscal 2013. Cost of sales for the first six months of fiscal 2014 included a non-recurring, pre-tax charge of $20.1 million related to the previously announced contract extension with Jerome Stevens Pharmaceuticals, Inc. (JSP) to continue as the exclusive distributor in the United States of three JSP products. Accordingly, gross profit was $42.3 million, or 37 percent of net sales. Excluding the JSP contract renewal charge, gross profit was $62.4 million, or 55 percent of net sales, compared with $27.0 million, or 38 percent of net sales, for the first six months of fiscal 2013. R&D expenses increased to $10.5 million, compared with $7.3 million for the fiscal 2013 period. SG&A expenses increased to $17.1 million, compared with $11.3 million in the same period of the prior year. Operating income was $14.7 million. Excluding the JSP contract renewal charge, operating income grew to $34.8 million from $8.4 million in the first half of fiscal 2013.
For the first six months of fiscal 2014, net income attributable to Lannett Company grew to $10.6 million, or $0.31 per diluted share. Adjusted net income, which excludes the impact of the non- recurring JSP contract renewal charge equal to $12.6 million after- tax, was $23.2 million, or $0.69 per diluted share, compared to net income attributable to Lannett Company of $5.8 million, or $0.20 per diluted share, for the first six months of the prior year. The first six months of fiscal 2013 included a favorable pre-tax litigation settlement of $1.3 million, equal to $0.03 per diluted share.
Guidance for Fiscal 2014
Based on Lannett's current outlook, the company revised upward its financial guidance for the fiscal 2014 full year as follows:
-Net sales in the range of $275 million to $285 million, up approximately 12 percent from previous guidance of $245 million to $255 million;
-Gross margin as a percentage of net sales of approximately 61 percent to 63 percent, up 4 percentage points from 57 percent to 59 percent;
-R&D expense in the range of $30 million to $32 million, up from $27 million to $29 million;
-SG&A expense ranging from $39 million to $41 million, up from $35 million to $37 million;
-The full year effective tax rate to be in the range of 36 percent to 38 percent, unchanged from previous guidance; and
-Capital expenditures in fiscal 2014 in the range of $28 million to $32 million, unchanged from previous guidance, which includes $15 million for the purchase and partial fit-out of two buildings recently acquired by the company.
The company noted that its guidance for fiscal 2014 does not include the impact of the JSP contract extension, which resulted in the non-recurring pre-tax charge of $20.1 million recorded in the first quarter of fiscal 2014.
Lannett Company develops, manufactures, packages, markets and distributes generic pharmaceutical products for a range of medical indications.
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