Market Overview

Lannett Tumbles After Engaging Strategic Advisors

Lannett Tumbles After Engaging Strategic Advisors

Lannett Company, Inc. (NYSE: LCI) announced Monday that it has engaged advisors to explore ways to address the company’s debt and capital structure.

What Happened

Lannett said in a press release it will be working with advisors to analyze ways to increase revenue, reduce costs and manage its finances. Kirkland & Ellis LLP and Lazard Ltd. will serve as advisors. Lannett said it expects to remain in compliance with its debt obligations through at least the end of fiscal 2019.

Why It’s Important

Lannett stock crashed more than 60 percent in August after the company lost a key contract with Jerome Stephens Pharmaceuticals.

Starting in March 2019, Lannett will no longer be able to distribute JSP’s butalbital, aspirin, caffeine with codeine phosphate capsules USP; digoxin tablets USP; and levothyroxine sodium tablets USP.

The stock dropped another 19 percent Monday on the latest news as investors grow increasingly concerned about Lannett’s financial situation.

What’s Next

Despite the negative market reaction, activist Lannett investor Guy Gentile told Benzinga that the identity of the advisors suggests a buyout is likely for Lannett at a price of around $8 per share.

“For about $1.2 billion, that would wipe out the debt, and they’d have a company grossing $500 million with around $75-100 million in profits,” Gentile said. “It’s a no-brainer.”

Gentile told Benzinga last week he has increased his stake from 1.99 million shares to “over 2.5 million” shares since Sept. 20 and “will keep adding” to his stake.

Investors will be watching closely to see what strategies the advisors come up with and whether or not a potential buyout is in the works.

Lannett shares were down nearly 21 percent at $3.74 at the time of publication Monday. 

Related Links:

Activist Investor Guy Gentile Increases Stake In Lannett

Q2 13F Roundup: How Buffett, Einhorn, Loeb And Others Adjusted Their Portfolio

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