Lannett Company (LCI) Stock Climbs On Distribution Agreement

Lannett Company LCI Stock News

Lannett Company, Inc. (NYSE: LCI) is making a run for the top in the market this morning, even while the overall market is trading in the red. The gains come after the company announced that it has entered into an exclusive distribution agreement. Here’s what’s going on:

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LCI Stock Pops On Exclusive Distribution Agreement

In the press release issued this morning, Lannett Company said that it has entered into an interim exclusive supply and distribution agreement with Cediprof. The agreement surrounds Cediprof’s FDA approved Levotheyroxine Sodium Tablets USP.

In the release, LCI said that the interim supply agreement with terminate on July 31, 2022. Following the termination of the interim agreement, the 10-year exclusive supply and distribution agreement will begin.

In the 12 months ending May 2020, the sales of the drug led to approximately $2.3 billion in revenue. This suggests that this manufacturing agreement has the potential to be an incredibly profitable one.

As part of the agreement, LCI will pay a transfer price plus royalties on net profits as it sells the drug. In a statement, Tim Crew, CEO at Lannett Company, had the following to offer:

Levothyroxine tablets is a critically important medication for those with thyroid deficiency and remains one the most prescribed drugs in the United States. This is a market that we know well, having participated in it for many years. Our team looks forward to launching all 12 currently marketed dosage strengths of Cediprof’s product.

Adding Levothyroxine tablets to our offering comes on the heels of six new product launches in our most recently completed quarter. We also recently took actions to improve our working capital and strengthen our balance sheet, which have increased our cash position to more than $140 million at our fiscal year end.

The above statement was followed up by Efren Ocampo, CEO at Cediprof. Here’s what he had to say:

We have selected Lannett as our new exclusive distribution partner for our FDA approved Levothyroxine product. Lannett’s sales and marketing expertise combined with the company’s intimate knowledge of the Levothyroxine market make them an ideal partner. We ceased manufacturing the product under the former partner’s label, and we have been building inventory of the same high quality Levothyroxine with the “Lannett” label. Our mutual goal is to ensure that current patients and customers can continue to receive an uninterrupted supply of the product.

This Is Big News

The news released by Lannett Company this morning is huge. Think about it, the company just licensed a product that produced more than $2 billion in sales in a 12 month period. While there will be a transfer fee and royalties paid here, the company stands to make out like a bandit.

In fact, I believe that if it weren’t for the fact that the markets are down overall today as bearish views of the economy, big tech, and COVID-19 take hold and the fact that the previous distribution partner may challenge the termination, the stock could be gaining in multiples.

Nonetheless, even with these headwinds, this is a huge opportunity, making LCI stock one for the watchlist.

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