Exhibit 99.1
|
|
Contact: | Robert Jaffe |
| Robert Jaffe Co., LLC | ||
| (424) 288-4098 |
LANNETT REPORTS IMPROVED FISCAL 2023 SECOND QUARTER FINANCIAL RESULTS; RAISES FULL-YEAR GUIDANCE
Q2 Business and Financial Highlights:
| · | Net Sales were $80.9 Million |
| · | Gross Margin was 18%, Adjusted Gross Margin was 19% |
| · | Net Sales, Gross Margin and Adjusted Gross Margin Up Versus Preceding Two Quarters |
| · | $19 Million Income Tax Refund Received, Cash Balance of $56 Million at December 31st |
Pipeline Updates:
| · | Pivotal Biosimilar Insulin Glargine Clinical Trial Top-line Results Anticipated in Current Quarter; BLA Filing Targeted for Middle of Calendar 2023 |
| · | Positive Results from Study of Biosimilar Insulin Aspart vs US NovoLog®; Commencement of Pivotal Trial Anticipated by Fall of Current Year |
| · | Executed Sub-License Agreement Related to Insulin Pen Delivery Device, Improving Ability to Freely Market Insulin Products Upon Approval |
| · | Generic FLOVENT® DISKUS® ANDA Filing Anticipated by Mid Year |
Trevose, PA – February 1, 2023 – Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2023 second quarter ended December 31, 2022.
“For the quarter, net sales, gross margin and adjusted gross margin increased compared with the two preceding quarters,” said Tim Crew, chief executive officer of Lannett. “This improved performance was in part driven by higher product sales across our offering, notably, generic pAdderall due to an ongoing market shortage where our partner was able to maintain their supply; the sale of certain products under a private label agreement; and less competitive intensity than we anticipated. During the quarter, we received, as expected, approximately $19 million of income tax refunds.
“With regard to our pipeline, we are nearing the launch, subject to approval, of a few products that have the potential to be meaningful contributors to our financial results. For our biosimilar insulin glargine product, initial results from the pivotal trial are expected shortly; and with regard to our biosimilar insulin aspart product, positive results from the animal study indicated that our product was highly comparable to the reference biologic. Importantly, we previously entered into a supply agreement for a pen injector delivery device for use with our biosimilar insulin glargine and biosimilar insulin aspart products. Recently we acquired a sublicense to the various patents held by the reference product owner, related to the pen injector device, thereby removing potential related litigation risk associated with the insulin glargine product and improving our ability to freely market our biosimilar insulin products, once approved.
“Looking ahead, we have raised our full-year guidance for net sales and adjusted gross margin, which reflects, in part, our improved performance over the first half of our current fiscal year and our belief that our and our partners’ reliable and high quality supply of affordable medicines has contributed to some stabilization of our current business."
Restructuring, Cost Reduction Initiatives
In December 2022, the company authorized a restructuring and cost savings plan that, once fully implemented, is estimated to generate cost savings of approximately $11 million, annually. The plan includes operational improvements and cost efficiencies, as well as a restructuring of the company’s research and development (R&D) function. These actions will result in a workforce reduction of approximately 60 staffed positions and 40 recently vacant positions, which will be implemented in phases over the remainder of the company’s current fiscal year. The company also anticipates exiting two facilities located in Philadelphia, Pennsylvania this year. While the plan is expected to reduce certain R&D-related costs, the company plans to maintain its level of investment in product development.
Second-Quarter Financial Results: Fiscal 2023 vs Fiscal 2022
GAAP basis:
| · | Net sales were $80.9 million compared with $86.5 million |
| · | Gross profit was $14.3 million, or 18% of net sales, compared with $5.7 million, or 7% of net sales |
| · | Asset impairment charges were $6.0 million compared with $49.4 million |
| · | Net loss was $36.3 million, or $0.88 per share, compared with $81.1 million, or $2.01 per share |
Non-GAAP basis:
| · | Net sales were $80.9 million compared with $86.5 million |
| · | Adjusted gross profit was $15.7 million, or 19% of net sales, compared with $9.7 million, or 11% of net sales |
| · | Adjusted interest expense increased to $13.3 million from $12.9 million |
| · | Adjusted net loss was $14.0 million, or $0.34 per share compared with $15.9 million, or $0.39 per share |
| · | Adjusted EBITDA was $1.0 million versus negative adjusted EBITDA of $1.0 million |
Guidance for Fiscal 2023
Based on its current outlook, the company raised guidance for fiscal year 2023, as follows:
| GAAP | Adjusted* | |
| Net sales | $285 million to $305 million, up from $275 million to $300 million | $285 million to $305 million, up from $275 million to $300 million |
| Gross margin % | Approximately 15% to 17%, up from approximately 13% to 15% | Approximately 17% to 19%, up from approximately 15% to 17% |
| R&D expense | $21 million to $23 million, down from $23 million to $25 million | $21 million to $23 million, down from $23 million to $25 million |
| SG&A expense | $66 million to $68 million, up from $64 million to $67 million | $61 million to $63 million, up from $56 million to $59 million |
| Restructuring expenses | $3 million to $4 million, up from $0 to $1 million | -- |
| Asset impairment charges | $10.7 million, up from $4.7 million | -- |
| Interest and other | Approximately $67 million, up from approximately $60 million | Approximately $53 million, unchanged |
| Effective tax rate | Approximately 0% to 1%, changed from approximately 0% to 4% | Approximately 20% to 22%, down from approximately 23.5% to 24.5% |
| (Negative) Adjusted EBITDA | N/A | ($5 million) to $1 million, changed from ($12 million) to $0 million |
| Capital expenditures | Approximately $8 million to $10 million, changed from approximately $8 million to $12 million | Approximately $8 million to $10 million, changed from approximately $8 million to $12 million |
*A reconciliation of Adjusted amounts to most directly comparable GAAP amounts can be found in the financial tables following this release.
Conference Call Information and Forward-Looking Statements
Later today, the company will host a conference call at 4:30 p.m. ET to review its results of operations for its fiscal 2023 second quarter ended December 31, 2022. The conference call will be available to interested parties by dialing 877-407-9716 from the U.S. or Canada, or 201-493-6779 from international locations. 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.
Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company’s financial status and performance, regulatory and operational developments, and any comments the company may make about its future plans or prospects in response to questions from participants on the conference call.
Use of Non-GAAP Financial Measures
This release contains references to non-GAAP financial measures, including Adjusted EBITDA, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Management uses these measures internally for evaluating its operating performance. The company’s management believes that the presentation of non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor’s overall understanding of the financial results for the company’s core business. Additionally, it provides a basis for the comparison of the financial results for the company’s core business between current, past and future periods. The company also believes that including Adjusted EBITDA and the other non-GAAP financial measures presented in this release is appropriate to provide additional information to investors. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP.
Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables following this release.
Non-GAAP financial measures exclude, among others, the effects of (1) amortization of purchased intangibles and other purchase accounting entries, (2) restructuring expenses, (3) asset impairment charges, (4) non-cash interest expense, as well as (5) certain other items considered unusual or non-recurring in nature.
NovoLog® is a registered trademark of Novo Nordisk A/S. ADVAIR DISKUS® and Flovent® Diskus® are registered trademarks of GlaxoSmithKline. Spiriva® Handihaler® is a registered trademark of Boehringer Ingelheim.
About Lannett Company, Inc.:
Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of medical indications – see financial schedule below for net sales by medical indication. For more information, visit the company’s website at www.lannett.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts and can be identified by the words “estimate,” “expect,” “believe,” “target,” “anticipate” and other similar expressions. Any such statements, including, but not limited to, statements regarding the company’s competitive environment and other market conditions; regulatory and operational developments; the timing related to commencing and successfully completing the pivotal clinical trials, filing the Biologics License Applications, and successfully launching any products, including biosimilar insulin glargine and biosimilar insulin aspart; the potential material impact of COVID-19 on future financial results; the timing of the company’s restructuring plan and its ability to realize estimated cost reductions and other benefits therefrom; the company’s financial status and performance; and the company’s ability to achieve the financial metrics stated in the company’s guidance for fiscal 2023, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated due to a number of factors beyond the company’s control. Such factors include, but are not limited to, the difficulty in predicting the timing or outcome of FDA or other regulatory approvals or actions, the ability to successfully commercialize products upon approval, including acquired products, and the company’s estimated or anticipated future financial results, future inventory levels, future competition or pricing future levels of operating expenses, product development efforts or performance, and other risk factors discussed in the company’s latest Form 10-K, subsequent Form 8-Ks and 10-Qs and other documents filed with the Securities and Exchange Commission from time to time. You should not place undue reliance upon any such forward-looking statements, which represent the company's judgment as of the date of this release. To the fullest extent permitted by law, the company disclaims any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
# # #
FINANCIAL SCHEDULES FOLLOW
LANNETT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| (Unaudited) | ||||||||
| December 31, 2022 | June 30, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 55,850 | $ | 87,854 | ||||
| Accounts receivable, net | 80,344 | 56,241 | ||||||
| Inventories | 94,776 | 95,158 | ||||||
| Current income taxes receivable | - | 36,793 | ||||||
| Assets held for sale | 1,300 | - | ||||||
| Other current assets | 18,257 | 14,070 | ||||||
| Total current assets | 250,527 | 290,116 | ||||||
| Property, plant and equipment, net | 116,473 | 133,178 | ||||||
| Intangible assets, net | 29,639 | 32,179 | ||||||
| Operating lease right-of-use asset | 9,274 | 9,646 | ||||||
| Income taxes receivable | 17,984 | - | ||||||
| Other assets | 14,462 | 19,316 | ||||||
| TOTAL ASSETS | $ | 438,359 | $ | 484,435 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 33,165 | $ | 29,737 | ||||
| Accrued expenses | 25,688 | 23,667 | ||||||
| Accrued payroll and payroll-related expenses | 9,151 | 8,342 | ||||||
| Rebates payable | 21,377 | 21,568 | ||||||
| Royalties payable | 7,466 | 5,677 | ||||||
| Restructuring liability | 410 | 490 | ||||||
| Current operating lease liabilities | 2,074 | 2,064 | ||||||
| Other current liabilities | 12,885 | 13,395 | ||||||
| Total current liabilities | 112,216 | 104,940 | ||||||
| Long-term debt, net | 623,855 | 614,948 | ||||||
| Long-term operating lease liabilities | 9,441 | 9,994 | ||||||
| Other liabilities | 5,121 | 5,616 | ||||||
| TOTAL LIABILITIES | 750,633 | 735,498 | ||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Common stock ($0.001 par value, 100,000,000 shares authorized; 42,996,851 and 42,269,137 shares issued; 41,247,806 and 40,704,572 shares outstanding at December 31, 2022 and June 30, 2022, respectively) | 43 | 42 | ||||||
| Additional paid-in capital | 367,134 | 363,957 | ||||||
| Accumulated deficit | (660,713 | ) | (596,386 | ) | ||||
| Accumulated other comprehensive loss | (367 | ) | (411 | ) | ||||
| Treasury stock (1,749,045 and 1,564,565 shares at December 31, 2022 and June 30, 2022, respectively) | (18,371 | ) | (18,265 | ) | ||||
| Total stockholders' deficit | (312,274 | ) | (251,063 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 438,359 | $ | 484,435 | ||||
LANNETT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
| Three months ended | Six months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net sales | $ | 80,894 | $ | 86,508 | $ | 155,973 | $ | 188,033 | ||||||||
| Cost of sales | 65,258 | 76,990 | 126,543 | 157,998 | ||||||||||||
| Amortization of intangibles | 1,358 | 3,808 | 2,553 | 7,804 | ||||||||||||
| Gross profit | 14,278 | 5,710 | 26,877 | 22,231 | ||||||||||||
| Operating expenses (income): | ||||||||||||||||
| Research and development expenses | 4,928 | 4,747 | 12,107 | 10,511 | ||||||||||||
| Selling, general and administrative expenses | 18,317 | 18,791 | 35,014 | 37,696 | ||||||||||||
| Restructuring expenses | 335 | 891 | 481 | 891 | ||||||||||||
| Asset impairment charges | 5,969 | 49,361 | 10,637 | 49,361 | ||||||||||||
| Gain on sale of intangible assets | (500 | ) | - | (3,563 | ) | - | ||||||||||
| Total operating expenses | 29,049 | 73,790 | 54,676 | 98,459 | ||||||||||||
| Operating loss | (14,771 | ) | (68,080 | ) | (27,799 | ) | (76,228 | ) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Investment income | 399 | 46 | 491 | 80 | ||||||||||||
| Interest expense | (15,184 | ) | (14,430 | ) | (30,214 | ) | (28,654 | ) | ||||||||
| Loss on loan receivable | (6,826 | ) | - | (6,826 | ) | - | ||||||||||
| Other | 106 | 11 | 87 | (51 | ) | |||||||||||
| Total other expense, net | (21,505 | ) | (14,373 | ) | (36,462 | ) | (28,625 | ) | ||||||||
| Loss before income tax | (36,276 | ) | (82,453 | ) | (64,261 | ) | (104,853 | ) | ||||||||
| Income tax expense (benefit) | 32 | (1,368 | ) | 66 | (1,426 | ) | ||||||||||
| Net loss | $ | (36,308 | ) | $ | (81,085 | ) | $ | (64,327 | ) | $ | (103,427 | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic | $ | (0.88 | ) | $ | (2.01 | ) | $ | (1.57 | ) | $ | (2.58 | ) | ||||
| Diluted | $ | (0.88 | ) | $ | (2.01 | ) | $ | (1.57 | ) | $ | (2.58 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 41,170,839 | 40,358,137 | 41,056,607 | 40,142,974 | ||||||||||||
| Diluted | 41,170,839 | 40,358,137 | 41,056,607 | 40,142,974 | ||||||||||||
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
(In thousands, except percentages, share and per share data)
| Six months ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Cost
of sales | Amortization of intangibles | Gross Profit | Gross Margin % | R&D expenses | SG&A expenses | Restructuring expenses | Asset impairment charges | Gain
on sale of intangible assets | Operating loss | Other expense | Loss before income tax | Income tax expense (benefit) | Net loss | Diluted loss per share (k) | |||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 155,973 | $ | 126,543 | $ | 2,553 | $ | 26,877 | 17 | % | $ | 12,107 | $ | 35,014 | $ | 481 | $ | 10,637 | $ | (3,563 | ) | $ | (27,799 | ) | $ | (36,462 | ) | $ | (64,261 | ) | $ | 66 | $ | (64,327 | ) | $ | (1.57 | ) | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (2,553 | ) | 2,553 | - | - | - | - | - | 2,553 | - | 2,553 | - | 2,553 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (90 | ) | - | 90 | - | (16 | ) | - | - | - | 106 | - | 106 | - | 106 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (2,102 | ) | - | - | - | 2,102 | - | 2,102 | - | 2,102 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring expenses (d) | - | - | - | - | - | - | (481 | ) | - | - | 481 | - | 481 | - | 481 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (e) | - | - | - | - | - | - | - | (10,637 | ) | - | 10,637 | - | 10,637 | - | 10,637 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of intangible assets (f) | - | - | - | - | - | - | - | - | 3,563 | (3,563 | ) | - | (3,563 | ) | - | (3,563 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (g) | - | - | - | - | - | - | - | - | - | - | 3,637 | 3,637 | - | 3,637 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on loan receivable (h) | - | - | - | - | - | - | - | - | - | - | 6,826 | 6,826 | - | 6,826 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (i) | - | - | - | - | - | (2,603 | ) | - | - | - | 2,603 | (140 | ) | 2,463 | - | 2,463 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (j) | - | - | - | - | - | - | - | - | - | - | - | - | (7,945 | ) | 7,945 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 155,973 | $ | 126,453 | $ | - | $ | 29,520 | 19 | % | $ | 12,107 | $ | 30,293 | $ | - | $ | - | $ | - | $ | (12,880 | ) | $ | (26,139 | ) | $ | (39,019 | ) | $ | (7,879 | ) | $ | (31,140 | ) | $ | (0.76 | ) | ||||||||||||||||||||||||||
| (a) | To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI | |
| (b) | To exclude the operating results of the ceased Cody API business | |
| (c) | To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition | |
| (d) | To exclude expenses primarily associated with the 2022 Restructuring Plan | |
| (e) | To exclude asset impairment charges related to the Company's State Road and Torresdale facilities | |
| (f) | To exclude the gain on sale of assets related to several ANDAs, primarily purchased by Chartwell Pharmaceuticals, Inc. | |
| (g) | To exclude non-cash interest expense associated with debt issuance costs | |
| (h) | To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business | |
| (i) | To primarily exclude costs related to strategic review initiatives and the gain on a legal settlement | |
| (j) | To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates | |
| (k) | The weighted average share number for the six months ended December 31, 2022 is 41,056,607 for GAAP and non-GAAP loss per share calculations. |
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
(In thousands, except percentages, share and per share data)
| Six months ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Cost
of sales | Amortization of intangibles | Gross Profit | Gross Margin % | R&D expenses | SG&A expenses | Restructuring expenses | Asset impairment charges | Operating loss | Other expense | Loss before income tax | Income tax benefit | Net loss | Diluted loss per share (j) | ||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 188,033 | $ | 157,998 | $ | 7,804 | $ | 22,231 | 12 | % | $ | 10,511 | $ | 37,696 | $ | 891 | $ | 49,361 | $ | (76,228 | ) | $ | (28,625 | ) | $ | (104,853 | ) | $ | (1,426 | ) | $ | (103,427 | ) | $ | (2.58 | ) | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (7,804 | ) | 7,804 | - | - | - | - | 7,804 | - | 7,804 | - | 7,804 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (50 | ) | - | 50 | (6 | ) | (270 | ) | - | - | 326 | - | 326 | - | 326 | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (2,102 | ) | - | - | 2,102 | - | 2,102 | - | 2,102 | ||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring expenses (d) | - | - | - | - | - | - | (891 | ) | - | 891 | - | 891 | - | 891 | ||||||||||||||||||||||||||||||||||||||||||||||
| Distribution agreement renewal costs (e) | - | - | - | - | - | (219 | ) | - | - | 219 | - | 219 | - | 219 | ||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (f) | - | - | - | - | - | - | - | (49,361 | ) | 49,361 | - | 49,361 | - | 49,361 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (g) | - | - | - | - | - | - | - | - | - | 2,959 | 2,959 | - | 2,959 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other (h) | - | (177 | ) | - | 177 | (1 | ) | (5,944 | ) | - | - | 6,122 | - | 6,122 | - | 6,122 | ||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (i) | - | - | - | - | - | - | - | - | - | - | - | (7,162 | ) | 7,162 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 188,033 | $ | 157,771 | $ | - | $ | 30,262 | 16 | % | $ | 10,504 | $ | 29,161 | $ | - | $ | - | $ | (9,403 | ) | $ | (25,666 | ) | $ | (35,069 | ) | $ | (8,588 | ) | $ | (26,481 | ) | $ | (0.66 | ) | ||||||||||||||||||||||||
| (a) | To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI | |
| (b) | To exclude the operating results of the ceased Cody API business | |
| (c) | To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition | |
| (d) | To exclude expenses associated with the 2021 Restructuring Plan | |
| (e) | To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC | |
| (f) | To exclude asset impairment charges primarily related to the KUPI product rights intangible assets and the facility and certain equipment at Silarx in Carmel, NY | |
| (g) | To exclude non-cash interest expense associated with debt issuance costs | |
| (h) | To primarily exclude the reimbursement of legal costs associated with a distribution agreement, one-time employee retention awards and separation costs related to the Company's former Chief Information Officer | |
| (i) | To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates | |
| (j) | The weighted average share number for the six months ended December 31, 2021 is 40,142,974 for GAAP and non-GAAP loss per share calculations. |
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
(In thousands, except percentages, share and per share data)
| Three months ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Cost of sales | Amortization
of intangibles | Gross Profit | Gross Margin % | R&D expenses | SG&A expenses | Restructuring expenses | Asset
impairment charges | Gain
on sale of intangible assets | Operating loss | Other expense | Loss
before income tax | Income
tax expense (benefit) | Net loss | Diluted
loss per share (k) | |||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 80,894 | $ | 65,258 | $ | 1,358 | $ | 14,278 | 18 | % | $ | 4,928 | $ | 18,317 | $ | 335 | $ | 5,969 | $ | (500 | ) | $ | (14,771 | ) | $ | (21,505 | ) | $ | (36,276 | ) | $ | 32 | $ | (36,308 | ) | $ | (0.88 | ) | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (1,358 | ) | 1,358 | - | - | - | - | - | 1,358 | - | 1,358 | - | 1,358 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (40 | ) | - | 40 | - | (7 | ) | - | - | - | 47 | - | 47 | - | 47 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (1,051 | ) | - | - | - | 1,051 | - | 1,051 | - | 1,051 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring expenses (d) | - | - | - | - | - | - | (335 | ) | - | - | 335 | - | 335 | - | 335 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (e) | - | - | - | - | - | - | - | (5,969 | ) | - | 5,969 | - | 5,969 | - | 5,969 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of intangible assets (f) | - | - | - | - | - | - | - | - | 500 | (500 | ) | - | (500 | ) | - | (500 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (g) | - | - | - | - | - | - | - | - | - | - | 1,860 | 1,860 | - | 1,860 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on loan receivable (h) | - | - | - | - | - | - | - | - | - | - | 6,826 | 6,826 | - | 6,826 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other (i) | - | - | - | - | - | (1,500 | ) | - | - | - | 1,500 | (140 | ) | 1,360 | - | 1,360 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (j) | - | - | - | - | - | - | - | - | - | - | - | - | (3,954 | ) | 3,954 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 80,894 | $ | 65,218 | $ | - | $ | 15,676 | 19 | % | $ | 4,928 | $ | 15,759 | $ | - | $ | - | $ | - | $ | (5,011 | ) | $ | (12,959 | ) | $ | (17,970 | ) | $ | (3,922 | ) | $ | (14,048 | ) | $ | (0.34 | ) | ||||||||||||||||||||||||||
| (a) | To exclude amortization of purchased intangible assets | |
| (b) | To exclude the operating results of the ceased Cody API business | |
| (c) | To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition | |
| (d) | To exclude expenses primarily associated with the 2022 Restructuring Plan | |
| (e) | To exclude asset impairment charges related to the Company's Torresdale facility | |
| (f) | To exclude the gain on sale of one of the Company's ANDAs | |
| (g) | To exclude non-cash interest expense associated with debt issuance costs | |
| (h) | To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business | |
| (i) | To primarily exclude costs related to strategic review initiatives and the gain on a legal settlement | |
| (j) | To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates | |
| (k) | The weighted average share number for the three months ended December 31, 2022 is 41,170,839 for GAAP and non-GAAP loss per share calculations. |
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(UNAUDITED)
(In thousands, except percentages, share and per share data)
| Three months ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Cost of sales | Amortization
of intangibles | Gross Profit | Gross
Margin % | R&D expenses | SG&A expenses | Restructuring expenses | Asset
impairment charges | Operating loss | Other expense | Loss
before income tax | Income
tax benefit | Net loss | Diluted
loss per share (i) | ||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 86,508 | $ | 76,990 | $ | 3,808 | $ | 5,710 | 7 | % | $ | 4,747 | $ | 18,791 | $ | 891 | $ | 49,361 | $ | (68,080 | ) | $ | (14,373 | ) | $ | (82,453 | ) | $ | (1,368 | ) | $ | (81,085 | ) | $ | (2.01 | ) | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (3,808 | ) | 3,808 | - | - | - | - | 3,808 | - | 3,808 | - | 3,808 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (17 | ) | - | 17 | - | (257 | ) | - | - | 274 | - | 274 | - | 274 | |||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (1,051 | ) | - | - | 1,051 | - | 1,051 | - | 1,051 | ||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring expenses (d) | - | - | - | - | - | - | (891 | ) | - | 891 | - | 891 | - | 891 | ||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (e) | - | - | - | - | - | - | - | (49,361 | ) | 49,361 | - | 49,361 | - | 49,361 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (f) | - | - | - | - | - | - | - | - | - | 1,520 | 1,520 | - | 1,520 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other (g) | - | (177 | ) | - | 177 | (1 | ) | (3,525 | ) | - | - | 3,703 | - | 3,703 | - | 3,703 | ||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (h) | - | - | - | - | - | - | - | - | - | - | - | (4,588 | ) | 4,588 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 86,508 | $ | 76,796 | $ | - | $ | 9,712 | 11 | % | $ | 4,746 | $ | 13,958 | $ | - | $ | - | $ | (8,992 | ) | $ | (12,853 | ) | $ | (21,845 | ) | $ | (5,956 | ) | $ | (15,889 | ) | $ | (0.39 | ) | ||||||||||||||||||||||||
| (a) | To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI | |
| (b) | To exclude the operating results of the ceased Cody API business | |
| (c) | To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition | |
| (d) | To exclude expenses associated with the 2021 Restructuring Plan | |
| (e) | To exclude asset impairment charges primarily related to the KUPI product rights intangible assets and the facility and certain equipment at Silarx in Carmel, NY | |
| (f) | To exclude non-cash interest expense associated with debt issuance costs | |
| (g) | To primarily exclude the reimbursement of legal costs associated with a distribution agreement, one-time employee retention awards and separation costs related to the Company's former Chief Information Officer | |
| (h) | To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates | |
| (i) | The weighted average share number for the three months ended December 31, 2021 is 40,358,127 for GAAP and non-GAAP loss per share calculations. |
LANNETT COMPANY, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)
($ in thousands)
| Three months ended | ||||
| December 31, 2022 | ||||
| Net loss | $ | (36,308 | ) | |
| Interest expense | 15,184 | |||
| Depreciation and amortization | 6,287 | |||
| Income tax expense | 32 | |||
| EBITDA | (14,805 | ) | ||
| Share-based compensation | 1,532 | |||
| Inventory write-down | 592 | |||
| Asset impairment charges (a) | 5,969 | |||
| Loss on loan receivable (b) | 6,826 | |||
| Investment income | (399 | ) | ||
| Gain on sale of intangible assets (c) | (500 | ) | ||
| Other non-operating expense | (106 | ) | ||
| Restructuring expenses | 335 | |||
| Other (d) | 1,548 | |||
| Adjusted EBITDA (Non-GAAP) | $ | 992 | ||
(a) To exclude asset impairment charges related to the Company's Torresdale facility
(b) To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business
(c) To exclude the gain on sale of one of the Company's ANDAs
(d) To primarily exclude costs related to strategic review initiatives
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
($ in millions)
| Fiscal Year 2023 Guidance | |||||||
| Non-GAAP | |||||||
| GAAP | Adjustments | Adjusted | |||||
| Net sales | $285 - $305 | - | $285 - $305 | ||||
| Gross margin percentage | approx. 15% to 17% | 2% | (a) | approx. 17% to 19% | |||
| R&D expense | $21 - $23 | - | $21 - $23 | ||||
| SG&A expense | $66 - $68 | ($5) | (b) | $61 - $63 | |||
| Restructuring expenses | $3 - $4 | ($3 - $4) | (c) | - | |||
| Asset impairment charges | $10.7 | ($10.7) | (d) | - | |||
| Interest and other | approx. $67 | ($14) | (e) | approx. $53 | |||
| Effective tax rate | approx. 0% to 1% | - | approx. 20% to 22% | ||||
| Adjusted EBITDA | N/A | N/A | $(5) - $1 | ||||
| Capital expenditures | $8 - $10 | - | $8 - $10 | ||||
(a) The adjustment primarily reflects amortization of purchased intangible assets
(b) The adjustment primarily excludes costs related to strategic review initiatives as well as depreciation on previously capitalized software integration costs associated with the KUPI acquisition
(c) To exclude expenses associated primarily with the 2022 Restructuring Plan
(d) To exclude asset impairment charges related to the Company's State Road and Torresdale facilities
(e) To primarily exclude non-cash interest expense associated with debt issuance costs and the write-down of a loan receivable to a third party company operating in the online pharmaceutical business
LANNETT COMPANY, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)
($ in millions)
| Fiscal Year 2023 Guidance | ||||||||
| Low | High | |||||||
| Net loss | $ | (122.2 | ) | $ | (118.5 | ) | ||
| Interest expense | 60.0 | 60.0 | ||||||
| Depreciation and amortization | 24.0 | 24.0 | ||||||
| Income taxes | - | (1.0 | ) | |||||
| EBITDA | (38.2 | ) | (35.5 | ) | ||||
| Share-based compensation | 6.0 | 6.4 | ||||||
| Inventory write-down | 6.3 | 7.2 | ||||||
| Asset impairment charges (a) | 10.7 | 10.7 | ||||||
| Restructuring expenses (b) | 3.0 | 4.0 | ||||||
| Gain on sale of assets (c) | (3.6 | ) | (3.6 | ) | ||||
| Loss on loan receivable (d) | 6.8 | 6.8 | ||||||
| Other (e) | 4.0 | 5.0 | ||||||
| Adjusted EBITDA (Non-GAAP) | $ | (5.0 | ) | $ | 1.0 | |||
(a) To exclude asset impairment charges related to the Company's State Road and Torresdale facilities
(b) To exclude expenses associated primarily with the 2022 Restructuring Plan
(c) To exclude the gain on sale of assets related to several ANDAs, primarily purchased by Chartwell Pharmaceuticals, Inc.
(d) To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business
(e) To primarily exclude costs related to strategic review initiatives
LANNETT COMPANY, INC.
NET SALES BY MEDICAL INDICATION
| Three months ended | Six months ended | |||||||||||||||
| ($ in thousands) | December 31, | December 31, | ||||||||||||||
| Medical Indication | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Analgesic | $ | 2,592 | $ | 3,919 | $ | 6,016 | $ | 9,233 | ||||||||
| Anti-Psychosis | 2,575 | 2,095 | 5,195 | 5,810 | ||||||||||||
| Cardiovascular | 13,089 | 9,753 | 23,971 | 23,853 | ||||||||||||
| Central Nervous System | 21,782 | 22,340 | 42,576 | 45,125 | ||||||||||||
| Endocrinology | 5,831 | 8,297 | 13,143 | 16,142 | ||||||||||||
| Gastrointestinal | 8,716 | 14,023 | 16,658 | 29,263 | ||||||||||||
| Infectious Disease | 4,989 | 6,520 | 10,058 | 19,035 | ||||||||||||
| Migraine | 3,574 | 4,446 | 6,898 | 9,131 | ||||||||||||
| Respiratory/Allergy/Cough/Cold | 1,468 | 1,868 | 2,670 | 4,982 | ||||||||||||
| Other | 10,955 | 10,275 | 19,714 | 20,627 | ||||||||||||
| Contract Manufacturing revenue | 5,323 | 2,972 | 9,074 | 4,832 | ||||||||||||
| Net Sales | $ | 80,894 | $ | 86,508 | $ | 155,973 | $ | 188,033 | ||||||||