Company's Strategic Plan to Boost Share Price and Diversify Product Portfolio

2023-07-10

Lannett Company, Inc. held its earnings call meeting, with participants including Suthan Sukumar, Peter Brereton, and Mark Bentler. During the meeting, the management discussed their short-term uncertainty in increasing the company's share price, despite achieving significant milestones. However, they presented a long-term plan to improve the share price by introducing more products into the market.

One positive development highlighted by the management was the expiration of the Lannett partnership, which is expected to have a positive impact on profitability. With the partnership ending, the company will have more control over selling other products. Additionally, the management emphasized the success of their product, Kirko, which generated twice as much revenue in just 12 weeks compared to a competitor's entire year.

While revenue is expected to increase, the management acknowledged that profitability may be affected by higher costs in the sales and marketing department. They identified strong demand, sales and marketing investments, and research and development (R&D) as the key drivers of the business.

Looking ahead, the company's plans for product and service expansion include introducing a couple more products within the next year or two. They aim to actively sell their products, potentially even considering selling products from another company. Furthermore, they mentioned the possibility of taking the CEO's salary in cash in the future.

In terms of the company's outlook for the quarter and year, the focus is on making structural changes, aggressively pursuing financial targets, and generating excitement about brand plans and innovation. The management highlighted that SKU rationalization has improved gross margins, and savings are expected to come in fiscal '25 to fuel initiatives.

While there is a shift in revenue impacting the sales outlook for the quarter, no other significant changes were mentioned. The company maintains its guidance of a decline in adjusted EPS for the first half of the year. Some growth investment spending is planned for the second quarter, which may result in a slight decrease in EPS compared to the first quarter.

During the meeting, the management also acknowledged the impact of wildfire dynamics on the demand for air purifiers. However, the extent of the impact remains unclear.

Overall, the company has made progress on its strategic initiatives, including setting up sales and marketing, moving products in-house, and increasing revenues. Despite these achievements, the share price has not seen significant movement. The CEO acknowledged this and mentioned a long-term plan to launch more products in the future. The expiration of the Lannett partnership is seen as a positive development, as it allows the company to sell additional products and diversify their product portfolio, ultimately improving their financial performance.