February 2, 2016
By Alex Keown, BioSpace.com Breaking News Staff
PHILADELPHIA – Generic drugmaker Lannett Company, Inc. will undergo a restructuring program including an immediate 10 percent reduction in employment as part of an effort to streamline operations and reduce costs as the company adapts to the acquisition of Kremers Urban Pharmaceuticals Inc., the company announced Tuesday morning.
Lannett said the restructuring will ultimately include a 20 percent workforce reduction over the next three years and is expected to save the company about $40 million over the next 12 months, including $27 million in fiscal 2016. By 2018, Lannett said it expects to save about $50 million and $65 million by 2020. In addition to the 10 percent termination of employees, Lannett said it has already initiated some of the restructuring moves, which included the closing of Kremers Urban corporate offices in Princeton, N.J.
“Our efforts, which include consolidating our research and product development functions and streamlining our manufacturing, packaging and distribution operations, are designed to build a sustainable, strong foundation for future growth, leverage the combined company’s size and scale, and enhance our competitive position,” Arthur Bedrosian, chief executive officer of Lannett Company said in a statement.
When Lannett announced the acquisition, Bedrosian said the addition of Kremers Union will create “a specialty pharmaceuticals company that has substantial size, scale and reach.” In the United States there are four major distributors that control generic drugs—McKesson Corporation (MCK), CVS Health Corp., through a partnership with Cardinal Health , Walgreens Boots Alliance, Inc., through a relationship with AmerisourceBergen Corporation and Wal-Mart Stores Inc.
The layoff announcement comes one day before the company planned on releasing its quarterly report. In a preliminary report, Lannett said it expects to report net sales of $127 million for the second quarter of 2016. For the prior year second quarter, the company recorded net sales of $114.8 million, it announced. Lannett said it expects net sales of in the range of $585 million to $595 million for 2016. Lannett’s net sales for year-end June 30 were $406.8 million.
Lannett stock is down about 2 percent this morning, hitting a low of $25.50 per share, down from a high of $26.48 per share.
Lannett completed the $1.23 billion acquisition of Kremers Urban, the U.S. specialty generic pharmaceuticals subsidiary of Belgium-based biopharmaceuticals company UCB S.A., in January. Kremers Union markets 18 generic drugs and has 11 drug applications currently pending with the U.S. Food and Drug Administration (FDA). It also has 17 drug candidates in development.
Lannett expects to incur aggregate costs to implement the plan of approximately $20 million to $22 million.
In June, Lannett acquired privately held Silarx Pharmaceuticals, which provided the company with four Abbreviated New Drug Applications with Paragraph 4 certification pending with the U.S. Food and Drug Administration, as well as a number of complementary products.
