LCI - Lannett

I have seen and heard this stock touted around and had it on the watchlist. I am coming back to it now as it has fallen dramatically and seems to meet Saul like criteria…

This is a 40 year older generics company that has just made an acquisition of Urban pharma and feeling digestion. They had a customer of the acquired company defect although they have replaced 30% of the defection and are renewing talks with said customer. The acquisition also landed them an FDA manufacturing facility which would save them enormous capital build out. They have just had 2 products approved by FDA.

Of course they are under political focus thanks to Hilary’s comments on drug pricing and the recent Valeant issues. Management is under criticism over the acquisition too.

They stand at a p/e of ~5
Prospective PEG is 0.58
Retro PEG is bouncing around in the recent quarters thanks to the acquisition.

Revenue Progression:
Annual - June Yr/End
2013 151m
2014 273m
2015 406m

Q1 99.35m
Q2 99.27m
Q3 106.43m
Q4 127.06m

Net Inc Progression:
Annual - June Yr/End
2013 13m
2014 57m
2015 149m

Q1 36m
Q2 33m
Q3 33m
Q4 13m

Forecasts for 2016 are:
Net revenues: $555-565m (36% growth)
Net Inc est: $120m

Anyone have any views on this stock?


Anyone have any views on this stock?

They do

Lannett Revises Fiscal 2016 Full Year Guidance

Having said that, we are experiencing softness in the generic drug market similar to that which a number of companies in our industry have recently reported. In our case, certain key products face competitive pressure. In addition, product launches anticipated in our fiscal 2016 third and fourth quarters will be temporarily delayed. Accordingly, we now expect our operating performance for the fiscal 2016 full year will be below our previous expectations.…

LCI is a falling knife. I would expect another drop when 2016 returns are in. Many will have forgotten the “guidance” and will compare 2016 to previous years. I think the prudent thing, if you like the company, is to keep tracking and to buy after you see a “real” bottom.

Consider also that when the chips are down often management takes the opportunity to dump all the negatives they can into the earnings report to make future comparisons look better. Sort of like spring cleaning. :wink:

Denny Schlesinger

Patience Grasshopper!

I hope you don’t mind the pun. :wink:


Yeh - I don’t mind it Denny, you know me well.

I knew about the revised guidance and yes this could get worse as the full year ends in June and with the presidential elections with half the candidates foaming at the mouth over pharma and healthcare.

A waiting could be the way to go.


1 Like

I looked at LCI a while ago and gave it a pass. Several of their generics are in the schedule 1 controlled drug class (opioid analgesics). The heat is getting turned up way high on these drugs. I don’t anticipate that the spigot will get shut off, but I do expect more rigid controls. In that a lot of these drugs had previously found their way onto the street market the net effect could be a serious damper on sales.