Lannett (LCI) to Buy Kremers Urban Pharmaceuticals for $1.23B

Shares of Lannett Company (LCI) were trading up +8.27 or +16.71 percent to $57.75 per share in Thursday's premarket after the company announced it would be acquiring UCB's Kremers Urban Unit for $1.23 billion yesterday after the market close. Lannett Company stock closed at $49.48, up +2.19 or +4.63 percent in Wednesday's regular trading session.

Philadelphia, Pennsylvania based Lannett Company was founded in 1942 and is a one of the top twenty companies in the United States involved in the development, manufacture, marketing and distribution of generic versions of name brand pharmaceutical products.
Among the company's top products is Levothyroxine Sodium tablets, also known as "Levo". In addition, the company produces a limited amount of private label pharmaceuticals products for other firms and through its wholly owned subsidiary manufactures API's or active pharmaceutical ingredients.

Princeton, New Jersey based Kremers Urban Pharmaceuticals is a specialty pharmaceutical manufacturer and a subsidiary of Belgian pharmaceutical company, UCB (UCB). Its principal product is a generic version of Johnson & Johnson's Concerta, a treatment for attention deficit hyperactivity disorder. The company was taken over after the unit was sold as part of Schwarz Pharmaceutical, which UCB acquired in 2006. UCB attempted to sell the unit last year for $1.53 billion to an investment group; however the deal fell through after the U.S. FDA changed ratings for Concerta generics and requested more information on the bioequivalence of the generic product to Concerta.

The agreement, which was announced late yesterday, will have Lannett Company pay $1.23 billion for the UCB subsidiary in addition to potential contingency payments. Lannett anticipates tax benefits of more than $100 million from the acquisition. In addition, Lannett expects accretive to adjusted earnings per share in the mid to high digits for 2016 and +20 to 25 percent in 2017.

Lannett will fund the acquisition with a combination of cash on hand and a fully committed tem loan. The deal is still subject to regulatory approvals and other usual closing conditions. The transaction is expected to close by the fourth quarter of this year and was unanimously approved by the boards of both companies.

Arthur Bedrosian, Chief Executive Officer of Lannett said in the company's press release that, "The acquisition diversifies and augments our current product offerings and significantly enhances our opportunities for continued growth by expanding our pipeline with a number of large market opportunity and complementary product candidates. KU brings considerable manufacturing capacity, a first class research and development team and the potential for advancing our active pharmaceutical ingredients business. This transaction delivers on our objective to supplement and boost our organic growth with strategic acquisitions."

The deal will add a diversified portfolio of 18 products and a pipeline of 11 product applications with the FDA to Lannett's current portfolio. As part of the deal, Lannett will receive KU's 381,000 square foot facility in Seymour, Indiana. The space has substantial warehousing and manufacturing capabilities and can also be used as a dedicated product development space.

Lannett Company stock is reflecting investors' enthusiasm for the acquisition; nevertheless, the stock is still trading significantly below its 52 week high of $72.44 per share. UCB SA stock is also higher by more than two percent in this morning's premarket as a result of the deal.

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Published on Sep 3, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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