Strougo v. Lannett Company, Inc. et al 2:18-cv-03635 — On August 24, 2018, investors sued Lannett Company, Inc. (“Lannett” or the “Company”) in United States District Court, Eastern District of Pennsylvania. Plaintiffs in the LCI Class Action allege that they acquired Lannett stock at artificially inflated prices between February 7, 2018 and August 17, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. For more information on the LCI Lawsuit, please contact us today!
Summary of the Allegations
The Company (NYSE: LCI) bills itself as “a leading manufacturer of over 100 unique pharmaceutical product families that save and enhance people’s lives.” As such, it says it has “top-notch facilities for research and development, manufacturing, packaging, business, and distribution” in four states.
According to the August 24 complaint, most of the Company’s revenue is generated through the sale of drugs that are “bioequivalent to certain patented drugs once their patent expires.”
The Company’s claims about its exclusivity agreement with its leading supplier, Jerome Stevens Pharmaceuticals (“JSP”) are at the heart of the August 24 complaint.
Summary of Facts
Lannett and two of its senior officers (the “Individual Defendants”) now stand accused of deceiving investors by lying and withholding critical information about the Company’s business practices during the Class Period.
Specifically, they are accused of omitting truthful information about the status of Lannett’s agreement with JSP from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused the Company’s stock to trade at artificially inflated prices during the time in question.
The truth came out before the market opened on August 20, 2018, when the Company announced that its distribution agreement with JSP would not be renewed.
A closer look…
As alleged in the August 24 complaint, the Company and/or Individual Defendants repeatedly made false or misleading public statements during the Class Period.
For example, in a press release issued on February 7, 2018, one of the Individual Defendants said in pertinent part: “While we have revised several components of our outlook, we expect our profitability on an adjusted basis for the fiscal 2018 full year to slightly improve from our previous guidance.”
Then, on a form filed with the SEC on February 8, 2018, the Company referred to its JSP Distribution Agreement, saying in relevant part: “During the renewal term of the JSP Distribution Agreement, the Company is required to use commercially reasonable efforts to purchase minimum dollar quantities of JSP products. If the Company does not meet the minimum purchase requirements, JSP’s sole remedy is to terminate the JSP Distribution Agreement.”
Finally, on an earnings call with analysts for the third quarter of 2018, one of the Individual Defendants answered a question about the JSP Distribution Agreement, saying in relevant part: “…I’m optimistic that we’ll get a chance to renew this agreement when it’s right for, there is clearly nothing more important to our business than doing so, and we’ll continue to be focused on doing just that.”
What the Company failed to disclose, however, was that it “faced a substantial risk of the loss of its exclusivity agreement with JSP,” and that as a result, its reported revenues were unsustainable.
Impact of the Alleged Fraud on Lannett’s Stock Price and Market Capitalization
|Closing stock price prior to disclosures:
|Closing stock price the trading day after disclosures:
|One day stock price decrease (percentage) as a result of disclosures:
The following chart illustrates the stock price during the class period:
Actions You May Take
If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.
NOTE: The deadline to file for lead plaintiff in this class action is October 26, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.
In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Lannett common stock using court-approved loss calculation methods.
Recently Filed Cases
Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action. Please contact us if you would like an LK report for any of these cases:
Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse. With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.
Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients. Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.