Lannett (LCI)

Risks

• The generic pharmaceutical industry is highly competitive.
• We have and will continue to enter into strategic alliances and collaborations with third parties, including companies based outside of the U.S., for the commercialization of some of our drug candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these drug candidates.
• The development, approval process, manufacture and commercialization of biosimilar products involve unique challenges and uncertainties, and our failure to successfully introduce biosimilar products could have a negative impact on our business, financial condition, results of operations and cash flows.
• If we are unable to obtain sufficient supplies from key suppliers that in some cases may be the only source of finished products or raw materials, our ability to deliver our products to the market may be impeded.
• Our policies regarding returns, allowances and chargebacks and marketing programs adopted by wholesalers may reduce our revenues in future fiscal periods.
• Health care initiatives and other third-party payor cost-containment pressures have and could continue to cause us to sell our products at lower prices, resulting in decreased revenues.
• Sales of our products may continue to be adversely affected by the continuing consolidation of our distribution network and the concentration of our customer base.
• We expend a significant amount of resources on research and development efforts that may not lead to successful product introductions.
• Our substantial indebtedness may adversely affect our financial health.
• The agreements and instruments governing our debt, contain restrictions and limitations that could significantly impact our ability to operate our business.
• Due to many factors beyond our control, we may not be able to generate sufficient cash to service all of our indebtedness and meet our other ongoing liquidity needs and we may be forced to take other actions to satisfy our obligations under our debt agreements, which may not be successful.
• Our gross profit may fluctuate from period to period depending upon our product sales mix, our product pricing and our costs to manufacture or purchase products.
• A relatively small group of products may represent a significant portion of our revenues, gross profit, or net earnings from time to time.
• If our intangible assets become impaired, we may be required to record a significant charge to earnings.
• We may incur additional tax liabilities related to our operations.
• Our tax returns and positions are subject to review and audit by the Internal Revenue Service and other tax authorities, and any adverse outcomes resulting from any examination of our tax returns could adversely affect our liquidity and financial condition.
• Governmental investigations into sales and marketing practices in the generic pharmaceutical industry and claims by private parties relating to such investigations may result in substantial penalties or settlements.
• The recent enactment of State laws affecting the pricing of our products could have the effect of reducing our profitability.
• Extensive industry regulation has had and will continue to have, a significant impact on our business in the area of cost of goods, especially our product development, manufacturing and distribution capabilities.
• If brand pharmaceutical companies are successful in limiting the use of generics through their legislative and regulatory efforts, our sales of generic products may suffer.
• The generic pharmaceutical industry is characterized by intellectual property litigation and third parties may claim that we infringe on their proprietary rights, which could result in litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages or prevent us from marketing our existing or future products.
• Our reporting and payment obligations related to our participation in U.S. federal healthcare programs, including Medicare, Medicaid and the Department of Veterans Affairs, are complex and often involve subjective decisions that could change as a result of new business circumstances, new regulations or agency guidance, or advice of legal counsel. Any failure to comply with those obligations could subject us to investigation, penalties, and sanctions.
• We may need to change our business practices to comply with changes to fraud and abuse laws.
• We may become subject to federal and state false claims litigation brought by private individuals and the government.
• Federal regulation of arrangements between manufacturers of brand and generic products could adversely affect our business.
• Investigations of the calculation of average wholesale prices may adversely affect our business.
• We may incur product liability losses or recall expenses relating to the sale of products containing nitrosamines.
• Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
• Public health threats, including a pandemic, epidemic or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business and financial results.
• The loss of key personnel could cause our business to suffer.
• We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
• Rising insurance costs, as well as the inability to obtain certain insurance coverage for risks faced by us, could negatively impact profitability.