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Q4 2013 Earnings Call
September 10, 2013 4:30 pm ET
Robert Jaffe - Principal and Senior Vice President
Arthur P. Bedrosian - Chief Executive Officer, President, Director, Member of Strategic Planning Committee and Member of Chairman's Committee
Martin P. Galvan - Chief Financial Officer, Vice President of Finance and Treasurer
Steven F. Crowley - Craig-Hallum Capital Group LLC, Research Division
Elliot Wilbur - Needham & Company, LLC, Research Division
Randall Stanicky - Canaccord Genuity, Research Division
Scott R. Henry - Roth Capital Partners, LLC, Research Division
Rohit Vanjani - Oppenheimer & Co. Inc., Research Division
Dan Trang - Stonegate Securities Inc., Research Division
» Lannett Management Discusses Q2 2013 Results - Earnings Call Transcript
» Isis Pharmaceuticals' Management Presents at Morgan Stanley Global Healthcare Conference (Transcript)
I will now turn the call over to Mr. Robert Jaffe. Mr. Jaffe, you may begin.
Thanks, Leslie. Good afternoon, everyone, and thank you for joining us today to discuss Lannett Company's fiscal 2013 fourth quarter and full year financial results.
On the call today are Arthur Bedrosian, President and CEO; and Marty Galvan, our Chief Financial Officer.
This call is being broadcast live on the Internet at www.lannett.com. A playback will be available for 3 months and is accessible on Lannett's website.
I would like to make the cautionary statement and remind everyone that all of the information discussed on today's call is covered under the Safe Harbor provisions of the Litigation Reform Act. The company's discussion will include forward-looking information, reflecting management's current forecasts of certain aspects of the company's future, and actual results could differ materially from those stated or implied.
This afternoon, Arthur will provide a brief overview and Marty will discuss the financial results for the quarter and full year in more detail, followed by Arthur's concluding remarks. We will then open the call for questions.
With that said, I'll now turn the call over to Arthur Bedrosian. Arthur?
Arthur P. Bedrosian
Thanks, Robert, and good afternoon, everyone. Today, I have the pleasure of reporting record results for our fiscal 2013 fourth quarter and full year. Net income for the full year more than tripled, compared with the prior year and was the highest in our company's 71-year history. We also reported record net sales for both the fourth quarter and full year.
I want to take a moment to recognize and thank all of my colleagues and co-workers for their hard work and dedication in achieving this extraordinary accomplishment.
The key drivers for our outstanding performance were the combination of sales growth across nearly all of our key product categories and higher gross margin percentage due to a favorable sales mix, price increases and efficient manufacturing. I'm pleased to report that we believe these positive trends will continue throughout fiscal 2014, which Marty will address in our guidance.
Before he reviews our financial results, I think it's important to point out that we achieved these results while continuing to invest in the company's future. This past year, we significantly increased our R&D spending by nearly 40%. We believe we enhanced our long-term prospects by expanding our product development activities to include therapies that have the opportunity to meaningfully contribute to our top and bottom line.
We also recently completed negotiations with Jerome Stevens Pharmaceuticals to extend our arrangement. Under the amended agreement, Lannett will continue to be exclusive distributor of substantially all Jerome Stevens products for an additional 5 years through March 2019. Then, signing the initial contract nearly 10 years ago, the products covered under this agreement have combined to contribute significantly to our financial results. We're obviously pleased to continue this highly rewarding and mutually beneficial relationship with the JSP staff.
Finally, last month, we entered into an agreement to purchase 196,000 square-foot building located in Philadelphia. Our long-term plans for the facility include consolidating existing facilities and providing space for future expansion.
And with our API facility, we have been asked by the city and state to consider an expansion onto a larger site in Cody, Wyoming.
With that brief overview, I'd like to now turn the call over to Marty to review the financials in more detail. Then I will provide an operational update, and we'll open the call to questions. Marty?
Martin P. Galvan
Thank you, Arthur, and good afternoon, everyone. As Arthur mentioned, our positive momentum continued into the fourth quarter, resulting in excellent financial results for both the fourth quarter and the full year.
Starting with our fiscal 2013 fourth quarter results. Net sales increased 13% to $40.2 million from $35.7 million in last year's fourth quarter. I want to note that the sales growth for the most recent quarter was achieved despite no sale of oxycodone for which we soon expect FDA approval of our ANDA. We had approximately $1.5 million of oxycodone sales in last year's fourth quarter.
Gross profit rose to $15.2 million from $12.0 million in last year's fourth quarter. As a percent of net sales, gross margin rose to 38% from 34% for the fourth quarter of fiscal 2012.
R&D expense decreased modestly to $3.7 million from $4.0 million.
SG&A increased to $5.8 million from $5.4 million for the prior year fourth quarter.
Operating income more than doubled to $5.7 million from $2.6 million.
And lastly, net income attributable to Lannett increased to $3.6 million or $0.12 per diluted share, compared with $1.4 million or $0.05 per diluted share for the fiscal 2012 fourth quarter.
Turning to our fiscal 2013 full year results. Net sales increased 23% to $151 million from $123 million last year.
Net sales for our largest product category, thyroid deficiency, grew to $58.0 million or 38% of our total net sales. Our 2 other largest categories, cardiovascular and pain management, had net sales of $25.9 million and $21.2 million, respectively, representing 17% and 14% of our total net sales, respectively. As to net sales of our remaining categories: antibiotic was $9.2 million or 6% of total net sales; glaucoma was $6.4 million or 4%; gallstone was $6.1 million, equal to 4%; migraine was $5.4 million, also 4%; gout was $5.1 million or 3%; obesity was $4.7 million or 3%; and other represented $9.1 million or 7% of our total net sales.