Lannett Shares Fall After Article Raises Questions Regarding Anti-Trust Lawsuits and Potential Fines

Shares of Philadelphia-based Lannett Company fell nearly 5 percent in trading on Tuesday following the publication of an article on Seeking Alpha alleging the company could go bankrupt due to potential fines related to a multi-state generic drug price-fixing scheme currently under investigation by the federal government.

The article is written by an anonymous poster known as “The Capitolist” who claims he/she is short on Lannett Company stock. The writer lays multiple claims at the feet of the company, including the fact that any potential involvement with the price-fixing scheme being investigated could cause the company to pay exorbitant fines that it could not cover. The amount of the potential fines “would call into question the firm's ability to remain solvent,” the author contends. Then, the author of the article puts forth what he/she asserts is a reasonable methodology of how any fine levied against the company by the state or federal government could impact the generic drugmaker.

The anti-trust investigation into price fixing for generic drugs involves 16 companies, including generic giants like Mylan, Sun, Novartis, Dr. Reddy’s and Teva. The Connecticut attorney general has been leading the investigation. In December, the Washington Post originally reported the probe covers some 300 different generic drugs. The investigation was being led by the office of former Connecticut Attorney General George Jepsen, who completed his term of office in January. As BioSpace reported after the news first broke, executives from the generic drugmakers met regularly to discuss agreements about inflating the price of generic drugs so that every company could profit from the plan.

“Generic drug sales in 2017 were about $104 billion. Specific details of alleged overcharges have not been released, although investigators indicate that with a market that big, even a small percentage of price manipulation could lead to billions of dollars of overcharges,” BioSpace reported in December.

While the original report from the Post does not include Lannett, the Capitolist notes in the article on Seeking Alpha that the Pennsylvania-based company is involved due to unredacted court documents. The documents show there was some level of communication between Lannett and Heritage Pharmaceuticals on price hike agreements for Doxycycline. Two former executives of Heritage have pleaded guilty and are cooperating with the U.S. Department of Justice. The information appears to surround price increases for two Lannett drugs, levothyroxine and Digoxin, both of which saw significant price hikes in 2013 and 2014.

Lannett has publicly addressed the allegations made in the Seeking Alpha article. Shares of the company fell to $7.44 on Tuesday.

Last month, Lannett won approval from the U.S. Food and Drug Administration for a combination of for aspirin and extended-release Dipyridamole, a generic for the blood thinner Aggrenox, which was developed by Boehringer Ingelheim.