Cody Labs plans to sell product lines
By Rhonda Schultz
Cody Enterprise
Via Wyoming News Exchange
CODY — Lannett Co., owner of Wyoming’s only drug-manufacturing business, plans to sell all but one of the active pharmaceutical ingredients produced at Cody Laboratories.
Manufacturing of the finished dosage form of the cocaine hydrochloride product line is the only API excluded from the sale. An API is the part of any drug that produces its effects.
Cody Labs, founded 18 years ago, is now managed from its Philadelphia corporate office as further changes are apparently in store for the local manufacturer that produces generic prescription pain medications from the former Walmart building at 601 West Yellowstone.
Bernhard Opitz is no longer president of Cody Labs. The company did not provide details about his departure; however, Lannett Co. has appointed John Alt as president. Alt works from the corporate office. According to his job summary, he joined Lannett as vice president of quality in 2015 and was appointed president of Cody Labs in 2018.
In the spring of 2017 Lannett, owner of Cody Labs since 2007, broke ground on a $50.5 million, five-building drug-production campus on Road 2AB in the North Industrial park. After about a year of activity, Lannett shut down construction indefinitely. In July, the company announced plans to cut 50 jobs – a reduction of nearly 40 percent – as it restructured under new CEO Timothy Crew. Crew assumed leadership duties Jan. 1 upon Arthur Bedrosian’s retirement.
At the time, Lannett said the restructuring would save $10 million annually.
Then on Friday stock market website headlines proclaimed Lannett’s decision to record a $27-$33 million impairment charge on the first quarter of fiscal 2019 in connection with the company’s plans to sell most assets at its Cody API manufacturing and distribution business.
Lannett Co. spokesperson Robert Jaffe responded to the Enterprise’s request for further details by emailing links to a series of Form 8-K documents filed with the U.S. Securities and Exchange Commission. The write-off, called an impairment charge, is a noncash event that does not directly impact company finances.
Forward Cody president James Klessens said he could not comment. The local economic development corporation leases a chemical storage warehouse on Road 2AB to Cody Labs and was instrumental in the creation of a state large business development loan program to benefit Lannett’s plans to expand in Cody. Although state officials approved a total $23 million in low interest loans for the production campus project, Lannett did not complete the loan process before the construction shut down.
An explanatory note on the Form 8-K says the company is now “analyzing and exploring various financing and operational courses to improve the company’s base business.”
Lannett approved a plan to sell in September. In their decision, company officials considered the API business timeline to profitability, ongoing investment needed to be competitive and the estimated $18 million savings in annual operating expenses.
Recently, Lannett Co. has seen its stock drop to under $4 from a high of more than $70 in 2015. Earlier this fall the stock lost 20 percent of its value after Lannett announced a $340 million write-off for “goodwill.” The move caused advisers to re-evaluate the company’s options related to its debt and capital structure, according to a summary by Douglas W. House, Seeking Alpha news editor.
“Will the stock ever quit being a ‘falling knife’?” he asked.
Describing Lannett as an “out of favor company,” he attributed the decline to several factors, including:
• A bad acquisition in 2015 when Lannett paid $1.23 billion for the New Jersey-based drug maker Kremers Urban Pharmaceuticals. The disastrous merger with Kremers loaded the company with debt while a large Kremers’ customer was lost.
• “Pricing headwinds” in the sector; and
• The recent loss of a distribution deal with Jerome Stevens Pharmaceuticals, its biggest customer. Lannett announced in August its supply contract with JSP to distribute three products would not be renewed, meaning the contract will expire in March 2019.
In another hit, an Oct. 25 Schall Law Firm press release announced the firm is investigating claims against Lannett and encouraged investors with losses in excess of $100,000 to contact the firm.
The Schall Law Firm is investigating whether the company issued false or misleading statements or failed to disclose information pertinent to investors.
“Lannett faced a high risk of losing its exclusivity arrangement with Jerome Stevens Pharmaceuticals, which made the company’s reported revenues not sustainable into the future,” alleges the firm. “Based on that fact, the company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about Lannett, investors suffered damages.”
Schall Law Firm represents investors around the world and specializes in securities class action lawsuits and shareholder rights litigation.