This generic drug company just beat estimates by $0.20 per share, and is expected to see sales growth of 76% next year.
Lannett Company, Inc. (LCI)
from BI Research
Lannett Company, Inc. (LCI) recently landed the #8 spot on Forbes’ annual list of America’s 100 Best Small Companies. The Company is a generic pharmaceutical company with 44 marketed products, 21 ANDA’s awaiting FDA approval (including 4 paragraph 4’s with exclusivity), several more to be filed shortly, and in all 43 in various stages of development.
Products focus on the areas of thyroid deficiency, cardiovascular disease and pain management, the latter being the focus of increasing attention. Lannett preannounced earnings on 10/23, giving a range of $.91 - $.94. This propelled the shares from $50 to a high of $57. However part of this run was also fueled by the October 30th announcement of FDA approval of its generic of Letrozole, which had a branded market of $359 million at wholesale, making it one of the Company’s larger approvals.
On 11/3 Lannett announced EPS of $.94, hitting the top end of that range, and it was apparently time to sell on the news. This was well above the consensus of $.74 at the time of the preannouncement. The consensus had only risen to $.84 by the time official results were released a week later. So while this officially goes down as a $.10 beat, it was really a $.20 beat—not bad.
Further, this exceeded last year’s $.22 by multiples. Revenues doubled to $93 million. Much of this was due to price increases. While this is not the best way to grow, this was the eighth consecutive quarter of record net sales as well as the eleventh consecutive quarter in which net sales and adjusted EPS exceeded the comparable prior year period.
Management also offered up guidance for all the pieces of the FY6/15 income statement, allowing the calculation of EPS of about $3.35 for the full year on revenues of $370 to $390 million vs. $274 million last year. Nonetheless analysts have raised estimates from $2.77 a month ago to $3.49 today.
While the Company believes that it has more room to raise prices even into 2016, by the end of that year this will likely have run its course. However, by about that time the Company’s push into higher margined controlled pain relief medications should be kicking in.
Also Lannett remains acquisitive here and abroad and might even do a tax inversion strategy. So there are a lot of possibilities for growth here.
All in all, the generic drug industry is a good place to be invested right now and I have confidence in Lannett’s ability to continue to find ways to grow. So while there are some risks noted above, the BI Rank of 11 says it’s still okay to Buy.
Tom Bishop, BI Research, www.biresearch.com, November 26, 2014