Lannett Company, Inc. (NYSE: LCI) is making a run for the top in the market this morning, trading on gains of more than 40% in the premarket. The gains come after the comapny announced that it has entered into a new distribution agreement and that a product launch would be coming soon. Here’s what’s going on:
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LCI Stock Rockets On Distribution Agreement
In a press release issued early this morning, Lannett Company announced that it has entered into an agreement with Sinotherapeutics Inc. Under the terms of the agreement, Lannett will be the exclusive United States distributor of Posaconazole 100mg delayed-release tablets.
Posaconazole has already received regulatory approval from the United States Food and Drug Administration. The drug is a generic equivalent of Merck’s (MRK) Noxafil Delayed-Release Tablets.
In the release, LCI said that it plans on shipping its first orders of the treatment relatively shortly. From a brand name perspective, in the 12 months leading up to June 2019, the treatment generated $325 million in sales.
While generic markets are expected to be quite lower, for a company with a sub $250 million market cap, tapping into this high-value market offers up incredible potential for growth.
As part of the agreement, the company announced that it will make milestone payments based on market dynamics and performance. The company will provide sales, marketing and distribution. In exchange, it will receive a share of profits generated.
In a statement, Tim Crew, CEO at LCI, had the following to offer:
The Sinotherapeutics team is highly skilled at formulating particularly difficult to develop products, such as Posaconazole Delayed-Release Tablets. Given the market dynamics of the product, we expect Posaconazole to be a meaningful contributor to our business.
This News Is Huge
At the end of the day, the news released by Lannett Company was huge for the company and its investors. As mentioned above, the stock currently trades with a market cap under $250 million. Considering this, an opportunity to tap into even a $50 million annual opportunity is a big deal, and I believe that the generic drug distribution agreement will lead to at least that.
Moreover, the benefits here go further. With this agreement, LCI is positioning itself as a choice for international companies to break into the United States market. Should all go well with the commercialization of the drug, the company may attract new commercialization partners down the road.
All in all, this could be the start of a very strong revenue stream down the road!
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