Lannett — Investor Presentation (September 2019)
32 slides from Lannett's investor presentation, Sep 24, 2019
Slide 1: Cautionary Statements
Cautionary Statements This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of m
Slide 2: Lannett at a glance
Lannett at a glance Business and financial highlights Founded in 1942 and headquartered in Philadelphia, PA Rare, pure play US-centric pharma company with a highly reliable, US focused manufacturing base - Manufacturing facilities: Seymour (IN), Carmel (NY) - Senior management, commercial and R&
Slide 3: Lannett has a deep history in generics and has transformed itself in a post-Levo world
Lannett has a deep history in itself in a post-Levo world generics and has transformed 2019 2018 Early History (Pre-2013) M&A and expansion (2013-2017) Product launches & deleveraging (2018 and beyond) Tim Crew becomes the new CEO of Lannett (Jan 2018) - Bolstered commercial and operational teams
Slide 4: Concurrent cost rationalization and new product launches position Lannett well for the post-Levo world
Concurrent cost rationalization and new product launches position Lannett well for the post-Levo world Completed restructuring program Focus on new products and pipeline Successfully executed recent cost savings initiatives Current Focus on new product launches Cody Labs restructuring, spending an
Slide 5: Concurrent cost rationalization and new product launches position Lannett well for the post-Levo world
Concurrent cost rationalization and new product launches position Lannett well for the post-Levo world Completed restructuring program Focus on new products and pipeline "= Focus on new product launches ‘ANDAs filed and 18 new products launched in FY 2019 Coty Labs return, spending and headcountredu
Slide 6: Generics industry pricing pressures expected to begin to ameliorate as US generic volume continues to grow
Generics industry expected begin to ameliorate to grow as pricing pressures US generic volume continues to grow at 4%... US generic industry market value (US generic volume, units(1) in millions) (Projected US generic drug revenues, $ in billions) Generics Branded generics 4,024 $86 3,668 3,451 $83
Slide 7: Generic industry becoming increasingly fragmented as smaller players take share
Generic industry becoming increasingly fragmented as smaller players take share US generic industry market share of top players shrinking Only pure play, US generics player 2018A sales(2) by segment 2018A sales(2) by geography Company Teva 17% Other 2016 Top 5: Mylan 10% $0.7bn Other 54% 45% share S
Slide 8: Generic industry becoming increasingly fragmented as smaller players take share
Generic industry becoming increasingly fragmented as smaller players take share US generic industry market share of top players shrinking ‘Only pure play, US generics player jan 2019 YTD") * Wise Top 5: = nes 2Rshare Tammnoat weno = &Qe (i]Mylan teva = >) R 2018A sales? 2018A sales? Company by segme
Slide 9: Key Investment Highlights
Key Investment Highlights Diversified, mature portfolio with strong market share and limited revenue concentration 1 2 Recent track record of growth and margins Balanced and sustainable growth through strategic new product launches and focused in-line execution 3 Attractive generic market dynamics f
Slide 10: Diversified, mature portfolio with strong market share and limited revenue concentration
Diversified, mature portfolio with strong market share and limited revenue concentration 1 Balanced portfolio with no significant revenue concentration Diversification across therapeutic areas Product 1 15% (% by revenue) (% by revenue) Cardiovascular 22% Other 35% Product 2 7% Product 3 5% Product
Slide 11: Recent track record of growth and margins
Recent track record of growth and margins 2 Lannett continues to demonstrate strong QoQ growth ex-Levo ($ in millions) $134 Q1'19 Q2'19 Q3'19 Q4'19 44% 44% 45% 45% gross margin(1) (%) (1) Denotes total gross margins as reported; includes Levothyroxine contribution between FY19 Q1-Q3 and excludes any
Slide 12: Recent track record of growth and margins (cont'd)
Recent track record of growth and margins (cont’d) 2 Excluding Levo, above-trend revenue growth across selected generic pharma peers(1) (% YoY growth) Excluding the impact of Levo, Lannett demonstrated positive revenue growth in FY 2019 and outperformed peer group over that period Above average
Slide 13: Balanced and sustainable growth through strategic new product launches and focused in-line execution
Balanced and sustainable growth through strategic new 3 product launches and focused in-line execution A B In-line execution Strategic new product launches 1 2 1 Internal development External development Portfolio optimization demand Reinvigorated internal R&D - 9 ANDAs filed in FY 2019 - 15+ projec
Slide 14: Acceleration of new product launches, supported by a strong pipeline of internal R&D projects
Acceleration of new product launches, supported by a strong pipeline of internal R&D projects 3A Lannett has accelerated product launches since 2017… … and maintains a strong pipeline of ANDAs and R&D projects Filed ANDAs pending Approval 20+ 15+ internally developed R&D projects (6/30/19) (selected
Slide 15: Strong track record of BD execution and identified opportunities to replenish the pipeline
Strong track record of BD execution and identified 3A opportunities to replenish the Recent BD track record: 20+ deals executed covering 49 new products since Jan ’18 pipeline Disciplined approach to BD (declined ~60% of opps) & prolific win rate for the first 6 months of 2019… pursued …with strong
Slide 16: Lannett is a BD partner of choice
Lannett is a BD partner of choice 3A BD partner of choice choice Lack of global Business development case study (from identification to execution) Mar-18 May-18 Jul-18 Oct-18 Sep-18 Oct-18 Nov-17 Nov-17 Dec-17 Feb-18 Apr-18 Jul-18 1 2 3 4 5 6 Identify market Large commercial opportunit
Slide 17: Uniquely positioned to optimize and grow in-line portfolio
Uniquely positioned to optimize and grow in-line portfolio 3B 1 2 Portfolio optimization Opportunistic demand Status quo permanently grow share and value Competitor Competitor potential stock Customer Customer Customer 17 Temporarily disrupted due to supply issues / shortages Competitor exits mark
Slide 18: Lannett is uniquely positioned to take advantage of industry-wide disruption
Lannett is uniquely wide disruption positioned to take advantage of industry-4 Generics Industry Strong inspection history driving reliable supply and ability to capitalize on opportunistic sales Supply disruptions Discontinuation of core generics products New product l
Slide 19: Optimized manufacturing footprint provides highly reliable supply while managing costs
Optimized manufacturing footprint provides highly reliable 5 supply while Seymour, IN managing costs Carmel, NY Employees ~630 ~90 5.5M bottles / 1.2M liters - 1.8B units as of FY 2017; increase of ~1.5B capacity Oral solutions, oral suspensions, packaging (laser drill), pellets, packaging and d
Slide 20: Superior track record of regulatory compliance driven by strong culture of inspection
Superior track record of regulatory compliance FY2019 Inspection summary inspection driven by strong culture of 5 2016-2018 FDA& DEA inspection summary 20 Site DEA Inspection Outcome All Sites Seven (7) DEA No regulatory action Site FDA Inspection Outcome Philadelphia Plant FDA GMP (9/16) 2 minor ob
Slide 21: Strong historical cash flow generation and track record of debt reduction
Strong historical cash flow debt reduction Free cash flow profile (excluding working capital impact) generation and track record of 6 2017 2018 2019 (4) ($ in millions) (–) Cash taxes(1) (–) Cash interest expense(2) (–) Capital expenditures (–) Purchases of intangibles (19) (67) (49) – 7 (64) (52) (
Slide 22: Proven management team with deep generics experience
Proven management team with deep generics experience 7 Name and Title Experience Name and Title Experience 25 years of experience in the industry, 2 at Lannett Past work experience includes Teva, Cipla, Dr. Reddy’s, Bristol-Myers Squibb 29 years of experience in the industry, 3 at Lannett Past work
Slide 23: Key Investment Highlights
Key Investment Highlights Diversified, mature portfolio with strong market share and limited revenue concentration 1 2 Recent track record of growth and margins Balanced and sustainable growth through strategic new product launches and focused in-line execution 3 Attractive generic market dynamics f
Slide 24: Historical Financial Overview
HISTORICAL FINANCIAL OVERVIEW
Slide 25: Historical financial overview (incl. Levo)
Historical financial overview (incl. Levo) Net revenue Adjusted EBITDA and % margin ($ in millions) ($ in millions) (2) $259 $685 $655 $249 $637 (2) 2017 2018 2019 2017 2018 2019 Capital expenditures and % of sales(1) R&D expense and % of sales ($ in millions) ($ in millions) $42 $39 $52 $49 2017 20
Slide 26: Historical financial overview (cont'd)
Historical financial overview (cont’d) Total debt Gross leverage ($ in millions) 3.8x $982 $897 2017 2018 2019 2017 2018 2019 Cumulative free cash flow (excluding working capital impact) Commentary ($ in millions) Headline net leverage driven by Kremers acquisition and subsequent deleveraging Th
Slide 27: Quarterly historical financials
Quarterly historical financials Revenue ($ in millions) $184 $174 $171 $155 $69 Adjusted gross margin (%) (1) Our fourth quarter results are the only historical results that reflect a full absence of sales of Levothyroxine. Also as previously disclosed, the fourth quarter ended June 30, 2019 benefit
Slide 28: Quarterly historical financials
Quarterly historical financials Revenue ‘Sinmaiony $155 ars, 0218, 318 ani, Revenue (ex-Levo) Adjusted gross profit, Siemens sor fa a fa 7 ors 218 i a ons Adjusted gross margin (34) oT T TT 50% 52% HE HE HE HK BH BE (©) Ou fours qurer ess aethe ony histor ous ht ett a il absence of sales of Levchyrx
Slide 29: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Adjusted EBITDA Add-back descriptions 2017A 2018A 2019A Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels and estimated sales forecasts. A Net income ($547) $28,690 ($272,107) (
Slide 30: Update on Ongoing Litigation Matters
Update on Ongoing Litigation Matters The Company is a defendant along with dozens of other companies in a number of consolidated class action lawsuits as well as two lawsuits filed by the States attorneys general of approximately 41 states, alleging anti-competitive behavior The Company’s share of
Slide 31: Update on Ongoing Litigation Matters
Update on Ongoing Litigation Matters o ‘The Company is a defendant along with dozens of other ‘companies in a number of consolidated class action lawsuits as well as two lawsuits filed by the States attorneys general of approximately 41 states, alleging anti-competitive behavior Although the States
Slide 32: Lannett
Lannett