Lannett's net sales rise 23% to $99.3 million in fourth quarter fiscal 2015

Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2015 fourth quarter and full year ended June 30, 2015. On June 1, 2015, the company completed the acquisition of Silarx Pharmaceuticals, Inc. The financial results presented below include approximately one month of operations for Silarx, which were not material.

For the fiscal 2015 fourth quarter, net sales rose 23% to $99.3 million from $80.6 million in last year's fourth quarter. Gross profit increased 29% to $72.0 million, or 72% of net sales, from $55.9 million, or 69% of net sales. Research and development (R&D) expenses increased to $7.0 million from $6.6 million for the fiscal 2014 fourth quarter. Selling, general and administrative (SG&A) expenses were $13.9 million, which included $1.6 million of acquisition-related expenses, compared with $12.0 million. Operating income grew 37% to $51.0 million from $37.4 million. Net income attributable to Lannett Company increased 44% to $33.9 million, or $0.91 per diluted share, from $23.5 million, or $0.64 per diluted share, for the prior year fourth quarter.

"Our fourth quarter performance was in line with expectations and reflects higher sales and gross margin across a number of product categories," said Arthur Bedrosian, chief executive officer of Lannett. "We have now reported fourteen consecutive quarters in which net sales and adjusted EPS exceeded the comparable prior-year period.

"Also during the fourth quarter, we completed the Silarx acquisition, which expands and diversifies our product pipeline, adds greater capacity to manufacture liquid pharmaceuticals and increases our current research and development capabilities. I am pleased to report that we expect the acquisition to be immediately accretive to our fiscal 2016 financial results and the integration of Silarx's operations is proceeding smoothly and is nearly complete."

For the fiscal 2015 full year, net sales rose 49% to $406.8 million from $273.8 million in the prior year. Gross profit was $306.4 million, or 75% of net sales. This compares with gross profit for fiscal 2014 of $154.4 million, or 56% of net sales, which included a non-recurring pre-tax charge of $20.1 million related to the contract extension with Jerome Stevens Pharmaceuticals, Inc. (JSP). Excluding the JSP contract renewal charge, gross profit was $174.5 million, or 64% of net sales. R&D expenses increased to $30.3 million from $27.7 million. SG&A expenses were $49.5 million, compared with $38.6 million. Included in SG&A expenses for fiscal 2015 were $4.3 million in acquisition-related expenses. Operating income was $226.5 million compared with $88.1 million for the prior year. Excluding the JSP contract renewal charge, operating income for the prior-year period was $108.2 million. Net income attributable to Lannett Company was $149.9 million, or $4.04 per diluted share, compared with $57.1 million, or $1.62 per diluted share, for fiscal 2014. Adjusted net income, which excludes the impact of the JSP contract renewal charge equal to $12.6 million after-tax, was $69.7 million, or $1.98 per diluted share, in fiscal 2014.

Guidance for Fiscal 2016

• Based on Lannett's current outlook, the company provided financial guidance for the fiscal 2016 full year as follows:
• Net sales in the range of $425 million to $435 million;
• Gross margin as a percentage of net sales of approximately 71% to 73%;
• R&D expense in the range of $33 million to $35 million;
• SG&A expense ranging from $57 million to $59 million, which includes approximately $5.0 million in acquisition-related expenses;
• The full year effective tax rate to be in the range of 34% to 35%; and
• Capital expenditures in fiscal 2016 in the range of $60 million to $70 million, which includes $30 million to continue the partial fit-out of company-owned buildings.