– Recent 17 Product Launches Contributed $40 Million of Net Sales in Fiscal 2019 YTD
– Five New Product Launches in the Quarter
– Successful Credit Agreement Amendment Provides Financial Flexibility
– $33 Million Net Cost Reduction Plan Well Underway
– Levothyroxine Transaction Improved Liquidity; Cash Balance of $164 Million at December 31 Continues to Grow
“Stellar sales across our product offering drove our strong fiscal 2019 second quarter financial results,” said Tim Crew, chief executive officer of Lannett. “The 17 products launched during calendar year 2018 were key contributors to the growth in the quarter and are expected to contribute approximately $75 million in fiscal 2019 net sales with at least 35% of gross margin. Complementing our second quarter performance was a well-executed plan associated with the transition of Levothyroxine.
“We are increasingly confident about our future. With approximately 60 products in various stages of operational readiness and development, of which we plan to launch 10 over the next several months, we expect to regularly bring new products to market for the foreseeable future at a similar pace and value as we have in the recent past. With regard to our cost reduction plan, virtually all main actions have been completed or are in-process to achieve the $33 million of targeted net annualized savings. In addition, we executed an amendment to our credit agreement, which further enhances our financial flexibility and better positions us to capitalize on more growth opportunities. As a result of our progress, we have raised our financial guidance for fiscal 2019.”
Crew went on to say that by the end of fiscal 2020 the company is on track to replace a substantial majority of normalized gross profit from Levothyroxine, which approximates $100 million and excludes the impact of recent market disruptions and associated share gains.
For the fiscal 2019 second quarter, on a GAAP basis, net sales were $193.7 million compared with $184.3 million for the second quarter of fiscal 2018. Gross profit was $69.8 million, or 36% of total net sales, compared with $87.5 million, or 47% of total net sales. Research and development (R&D) expenses were $9.7 million compared with $10.7 million for the fiscal 2018 second quarter. Selling, general and administrative (SG&A) expenses decreased to $23.2 million from $28.5 million. Restructuring expenses were $0.2 million compared with $1.0 million. Operating income was $36.7 millioncompared with $47.1 million. Interest expense was $21.5 million compared with $20.7 million for the second quarter of fiscal 2018. Net income was $12.4 million, or $0.32 per share, compared with $14.0 million, or $0.37 per diluted share, for the fiscal 2018 second quarter.
For the fiscal 2019 second quarter reported on a Non-GAAP basis, adjusted net sales were $193.7 million compared with $184.3 million for the second quarter of fiscal 2018. Adjusted gross profit was $86.0 million, or 44% of adjusted net sales, compared with $96.7 million, or 52% of adjusted net sales, for the prior-year second quarter. Adjusted R&D expenses were $8.7 million compared with $10.7 million. Adjusted SG&A expenses were $17.4 million compared with $20.9 million. Adjusted operating income was $59.9 million compared with $65.1 million for the prior-year second quarter. Adjusted interest expense was $17.1 million compared with $16.2 million for the second quarter of fiscal 2018. Adjusted net income was $33.6 million, or $0.86 per diluted share, compared with $40.6 million, or $1.06 per diluted share, for the fiscal 2018 second quarter.
Guidance for Fiscal 2019Based on its current outlook, the company has revised its estimates, as follows:
GAAP
|
Adjusted
| |
Net sales
|
$615 million to $635 million, up from $585 million to $615 million
|
$615 million to $635 million, up from $585 million to $615 million
|
Gross margin %
|
37% to 38%, down from 38% to 39%
|
44% to 45%, unchanged
|
R&D expense
|
$35 million to $37 million, up from $32 million to $36 million
|
$33 million to $35 million, up from $30 million to $34 million
|
SG&A expense
|
$78 million to $81 million, up from $75 million to $78 million
|
$66 million to $69 million, up from $63 million to $66 million
|
Restructuring expense
|
$3 million to $4 million, unchanged
|
$ —
|
Asset impairment charges
|
$369 million, unchanged
|
$ —
|
Interest and other
|
$84 million to $86 million, up from $81 million to $83 million
|
$66 million to $68 million, up from $63 million to $65 million
|
Effective tax rate
|
22% to 23%, unchanged
|
22% to 23%, unchanged
|
Capital expenditures
|
$30 million to $35 million, unchanged
|
$30 million to $35 million, unchanged
|
Conference Call Information and Forward-Looking StatementsLater today, the company will host a conference call at 4:30 p.m. ET to review its results of operations for its fiscal 2019 second quarter ended December 31, 2018. The conference call will be available to interested parties by dialing 866-436-9172 from the U.S. or Canada, or 630-691-2760 from international locations, passcode 48172671. 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.
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