Lannett Company, Inc.
- Company Name
- Lannett Company, Inc.
- Stock Symbol
- Class Period
- February 7, 2018 to August 17, 2018
- Motion Deadline
- October 26, 2018
- Eastern District of Pennsylvania
The complaint charges Lannett and certain of its officers with violations of the Securities Exchange Act of 1934. Lannett develops, manufactures, packages, markets and distributes solid oral (tablets and capsules), extended release, topical and oral solution finished dosage forms of drugs that address a wide range of therapeutic areas. Lannett also produces, through its subsidiary Cody Laboratories, Inc., active pharmaceutical ingredients. Lannett derives the majority of its revenue from the sale of drugs that are bioequivalent to certain patented drugs once their patents expire.
Certain of Lannett’s products are manufactured by others – primarily Jerome Stevens Pharmaceuticals (“JSP”) – and distributed by the Company. Lannett has had an exclusive distribution agreement with JSP since 2004. The exclusive distribution agreement is set to expire on March 23, 2019. During the Class Period, purchases of finished goods from JSP accounted for more than one-third of Lannett’s inventory purchases.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose material adverse facts about the Company's business, operations and prospects, including that Lannett faced a substantial risk of the loss of its exclusive distribution agreement with JSP and, accordingly, Lannett's reported revenues derived from that agreement were unsustainable. As a result of these false statements and/or omissions, Lannett securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $20 per share.
On August 20, 2018, before the market opened, Lannett announced that its distribution agreement with JSP would not be renewed when it expired in March 2019. Lannett stated that it “intend[ed] to redouble [its] continuing efforts to explore options for addressing [its] capital structure.” On this news, Lannett's share price fell $8.15 per share, or more than 60%, to close at $5.35 per share on August 20, 2018.