BMO Capital Markets: Lannett Making Progress With Pipeline, Cost Savings

Lannett Company, Inc. LCI reported solid second-quarter results Wednesday and raised its 2019 guidance.

The pharma company is making good progress in preparing for the loss of levothyroxine with new launches and cost-cutting initiatives, according to BMO Capital Markets.

The Analyst

BMO Capital Markets’ Gary Nachman maintained a Market Perform rating on Lannett and raised the price target from $7 to $10.

The Thesis

Lannett reported Q2 revenue of $194 million, convincingly beating the consensus expectation of $161 million. The company’s EPS came in at 86 cents, significantly higher than the 67-cent Street estimate.

The upside was driven by levothyroxine, as the company recorded a part of the $50-million margin pre-payment from Amneal Pharmaceuticals Inc AMRX in the quarter, Nachman said in a Wednesday note. 

Lannett is preparing for levothyroxine’s transition and is executing well on new launches, the analyst said. The company already announced 17 launches in 2018 that generated $40 million in the first half of fiscal 2019. These should contribute $75 million for the full year, he said. 

Another 20 launches are being targeted annually, with a pipeline of 60 products at different stages of development, Nachman said. 

Lannett expects 10 launches in the first half of 2019 to contribute $10 million for the second half, and a total of 20 launches in 2019 to contribute $75 million in the full year, according to BMO. 

The company has made good progress on cost curtailment, with annualized net savings of $33 million expected by the close of 2020, Nachman said. This gives the company more flexibility to take care of debt while pursuing various business development opportunities, he said. 

Price Action

Lannett shares were up 4.93 percent at $8.94 at the time of publication Thursday. 

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