As Filed with the Securities and Exchange Commission on May 21, 2004
Registration No. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
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REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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LANNETT COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-0787-699
(State Or Other Jurisdiction (I.R.S. Employer Identification
Of Incorporation Or Organization) No)
9000 State Road
Philadelphia, Pennsylvania 19136
(215) 333-9000
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(Address, including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
William Farber
Chief Executive Officer
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
(215) 333-9000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
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Copies To:
Bradley S. Rodos, Esquire
Fox Rothschild LLP
2000 Market Street, Tenth Floor
Philadelphia, Pa 19103
(212) 299-2180
Approximate Date of Commencement of Proposed Sale to the Public:
From time to time after the effective date of this
Registration Statement, as determined by the selling security holders.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
Title of each class Amount of
of securities to be Amounts to Proposed maximum offering Proposed maximum registration
registered be registered price per unit(1) aggregate offering price fee
------------------- ------------- ------------------------- ------------------------ ------------
Common Stock 4,000,000 $ 16.15 $ 64,600,000 $ 8,184.82
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED WITHOUT
NOTICE. THE SELLING SECURITY HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION) DATED MAY 21, 2004
4,000,000 SHARES
LANNETT COMPANY, INC.
COMMON STOCK
We issued the shares offered by this prospectus in April 2004. Selling
security holders will use this prospectus to offer and resell their shares of
common stock. We will not receive any proceeds from such resales.
As used in this prospectus, the terms "we," "us," "our" and "the Company" mean
Lannett Company, Inc. and its subsidiaries (unless the context plainly indicates
another meaning), and the term "common stock" means our common stock.
THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2004
TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY................................................. 1
ABOUT THE COMPANY.................................................. 1
THE OFFERING....................................................... 8
RISK FACTORS....................................................... 9
FORWARD-LOOKING STATEMENTS......................................... 16
USE OF PROCEEDS.................................................... 17
SELLING SECURITY HOLDERS........................................... 17
PLAN OF DISTRIBUTION............................................... 18
DESCRIPTION OF CAPITAL STOCK....................................... 19
INCORPORATION BY REFERENCE......................................... 21
WHERE YOU CAN FIND MORE INFORMATION................................ 22
LEGAL MATTERS...................................................... 22
EXPERTS............................................................ 22
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION MORE FULLY DESCRIBED ELSEWHERE IN
THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. BECAUSE
IT IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN THE COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS, ESPECIALLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE 9, OUR
FINANCIAL STATEMENTS AND THE RELATED NOTES AND THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, INCLUDING OUR ANNUAL REPORT ON FORM 10-KSB FOR THE
YEARS ENDED JUNE 30, 2003 AND 2002, OUR QUARTERLY REPORTS ON FORM 10-Q FOR THE
QUARTERS ENDED SEPTEMBER 30, 2003, DECEMBER 31, 2003 AND MARCH 31, 2004, OUR
PROXY STATEMENT ON FORM 14A RELATING TO OUR 2004 ANNUAL MEETING OF STOCKHOLDERS
AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 2003, AND
OUR CURRENT REPORTS ON FORM 8-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON AUGUST 26, 2003, OCTOBER 29, 2003, DECEMBER 2, 2003, JANUARY 20,
2004, FEBRUARY 17, 2004, APRIL 28, 2004 AND MAY 5, 2004 BEFORE DECIDING TO
INVEST.
ABOUT THE COMPANY
We were incorporated in 1942 under the laws of the Commonwealth of
Pennsylvania. In 1991, we merged into Lannett Company, Inc., a Delaware
corporation. The sole purpose of the merger was to reincorporate us as a
Delaware corporation. We develop, manufacture, package, market and distribute
pharmaceutical products sold under generic chemical names. References herein to
a fiscal year refer to our fiscal year ending June 30.
Historically, we have competed for an increasing share of the generic
market. During each of the fiscal years ended June 30, 2003 and 2002, we have
surpassed our historical highs in terms of net sales, gross profit, operating
income, net income and total market capitalization value. This growth is a
result of additions to our line of generic products, new customers, higher unit
sales, increased product prices and a management focus on minimizing unnecessary
overhead and administrative costs. Some of the new generic products sold by us
during the past two fiscal years were developed and manufactured by us while
others are manufactured by Jerome Stevens Pharmaceutical, Inc. ("JSP"), one of
our primary suppliers.
PRODUCTS
Currently, we manufacture and/or distribute twenty-three products:
NAME OF PRODUCT MANUFACTURE SOURCE MEDICAL INDICATION EQUIVALENT BRAND
--------------- ------------------ ------------------
1.) Butalbital, Aspirin and
Caffeine Capsules Lannett Migraine Headache Fiorinal(R)
2.) Butalbital, Aspirin, Caffeine Fiorinal(R)
with Codeine Capsules JSP Migraine Headache W/Codeine
3.) Digoxin 0.125 mg Tablets JSP Heart Failure Lanoxin(R)
4.) Digoxin 0.25 mg Tablets JSP Heart Failure Lanoxin(R)
5.) Primidone 50 mg Tablets Lannett Epilepsy Mysoline(R)
6.) Primidone 250 mg Tablets Lannett Epilepsy Mysoline(R)
7.) Dicyclomine 10 mg Capsules Lannett Irritable Bowels Bentyl(R)
8.) Dicyclomine 20 mg Tablets Lannett Irritable Bowels Bentyl(R)
9.) Acetazolamide 250 mg Tablets Lannett Glaucoma Diamox(R)
10.) Prednisolone 5 mg Tablets Lannett Coricosteroid Not applicable
11.) Diphenoxylate with Atropine
Sulfate Tablets Lannett Diarrhea Lomotil(R)
12.) Isoniazid 300 mg Tablets Lannett Tuberculosis Not applicable
13.) Levothyroxine Sodium 0.025 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
14.) Levothyroxine Sodium 0.050 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
15.) Levothyroxine Sodium 0.075 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
16.) Levothyroxine Sodium 0.088 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
17.) Levothyroxine Sodium 0.100 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
18.) Levothyroxine Sodium 0.112 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
19.) Levothyroxine Sodium 0.125 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
20.) Levothyroxine Sodium 0.150 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
21.) Levothyroxine Sodium 0.175 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
22.) Levothyroxine Sodium 0.200 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
23.) Levothyroxine Sodium 0.300 mg
Tablets JSP Thyroid Deficiency Unithroid(R)
All of the products currently manufactured and/or sold by us are
ethical, or prescription, products. Of the products listed above, those
containing butalbital, digoxin, primidone and levothyroxine sodium were our key
products, contributing to more than 95% of our total net sales during the fiscal
year ended June 30, 2003.
In this prospectus, the names of all branded drugs are trademarked and
the holders of the trademarks are unaffiliated pharmaceutical manufacturers,
except for Unithroid, which is owned by Jerome Stevens Pharmaceuticals, Inc.
Pursuant to the terms of an agreement entered into on March 23, 2004, Jerome
Stevens Pharmaceuticals has licensed us the right to use the Unithroid(R) mark.
We also have several general products under development. These products
are all orally-administered, solid-dosage (i.e. tablet/capsule) products
designed to be generic equivalents to brand named innovator drugs. One of these
developmental products, an orally-administered obesity product, represents a
generic Abbreviated New Drug Application ("ANDA") currently owned by us, but not
currently manufactured and distributed for commercial consumption. As one of the
oldest generic drug manufacturers in the country, formed in 1942, we currently
own several ANDAs for products that we do not manufacture and market. These
ANDAs are simply
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dormant on our records. Occasionally, we review such ANDAs to determine if the
market potential for any of these older drugs has recently changed, so as to
make it attractive for us to reconsider manufacturing and selling the drug. If
we make the determination to reintroduce one of these products into the consumer
marketplace, we must review the ANDA and related documentation to ensure that
the approved product specifications, formulation and other features are feasible
in our current environment. Generally, in these situations, we must file a
supplement to the FDA for the applicable ANDA, informing the FDA of a
significant change in the manufacturing process, the formulation, the raw
material supplier or another major feature of the previously-approved ANDA. We
would then redevelop the product and submit it to the FDA for supplemental
approval. The FDA's approval process for ANDA supplements is similar to that of
a new ANDA.
Another developmental product is a new ANDA submitted to the FDA for
approval. This ANDA is for an orally-administered prescription capsule product
to treat obesity. The FDA has recently disclosed that the average amount of time
to review and approve a new ANDA is approximately eighteen months. Since we have
no control over the FDA review process, we are unable to anticipate whether or
when we will be able to begin commercially producing and shipping this product.
The remainder of the products in development represent either
previously approved ANDAs that we are planning to reintroduce (ANDA
supplements), or new formulations (new ANDAs). The products under development
are at various stages in the development cycle--formulation, scale-up, and/or
clinical testing. Depending on the complexity of the active ingredient's
chemical characteristics, the cost of the raw material, the FDA-mandated
requirement of bioequivalence studies, the cost of such studies and other
developmental factors, the cost to develop a new generic product varies. It can
range from $100,000 to $1 million. Some of our developmental products require
bioequivalence studies, while others do not. Since we have no control over the
FDA review process, we are unable to anticipate whether or when we will be able
to begin producing and shipping additional products.
We are also developing a drug product that does not require FDA
approval. The FDA allows generic manufacturers to manufacture and sell products
which are equivalent to innovator drugs which are grand-fathered, under FDA
rules, prior to the passage of the Hatch-Waxman Act of 1984. The FDA allows
generic manufacturers to produce and sell generic versions of such
grand-fathered products by simply performing and internally documenting the
product's stability over a period of time. Under this scenario, a generic
company can forego the time and costs related to a FDA-mandated ANDA approval
process. We currently have one product under development in this category. The
development drug is an orally administered solid dosage product.
We have also contracted with Spectrum Pharmaceuticals Inc., based in
California, to market generic products developed and manufactured by Spectrum
and/or its partners. The first applicable product under this agreement is
ciproflaxacin tablets, the generic version of Cipro, an anti-bacterial drug
marketed by Bayer prescribed to treat infections.
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RAW MATERIALS AND INVENTORY SUPPLIERS
The raw materials used by us in the production process consist of
pharmaceutical chemicals in various forms, which are generally available from
various sources. FDA approval is required in connection with the process of
using active ingredient suppliers. In addition to the raw materials purchased
for the production process, we purchase certain finished dosage inventories,
including capsule and tablet products. We then sell these finished dosage
products directly to our customers along with the finished dosage products
internally manufactured. Currently, our only finished product inventory supplier
is Jerome Stevens Pharmaceuticals, Inc. (JSP), in Bohemia, New York. Purchases
of finished goods inventory from JSP accounted for approximately 62% of our
inventory purchases in Fiscal 2003. Another supplier, Siegfried (USA), Inc.,
accounted for 12% of our raw inventory purchases in Fiscal 2003. Purchases of
finished goods inventory from JSP accounted for approximately 26% of our raw
material/finished goods inventory purchases in Fiscal 2002. Siegfried (USA),
Inc. supplied 30% of our raw inventory purchases in Fiscal 2002. Generally, the
raw materials purchased from suppliers are available from a number of vendors.
The finished products purchased from JSP may not be available from other sources
due to the limited number of FDA approvals of competitive products. If suppliers
of a certain material or finished product are limited, we will generally take
certain precautionary steps to avoid a disruption in supply. This includes
building a satisfactory inventory level, and obtaining contractual supply
commitments.
CUSTOMERS AND MARKETING
We sell our products primarily to wholesale distributors, generic drug
distributors, mail-order pharmacies, drug chains, and other pharmaceutical
companies. Sales of our pharmaceutical products are made on an individual order
basis. One customer, Cardinal Health, one of the largest wholesale distributors
in the country, accounted for approximately 13% of net sales during the fiscal
year ended June 30, 2003. Another customer, Qualitest Pharmaceuticals, a large
private-label wholesale distributor, accounted for approximately 12% and 22% of
net sales during the fiscal years ended June 30, 2003 and 2002, respectively. A
third customer, United Research Laboratories, a large private-label wholesale
distributor, accounted for 19% of net sales during the fiscal year ended June
30, 2002. We perform ongoing credit evaluations of our customers' financial
condition, and have experienced no significant collection problems to date.
Generally, we require no collateral from our customers. We believe that
ultimately consumer demand dictates the total volume of sales for various
products. In the event that our wholesale and retail customers adjust their
purchasing volumes, we believe that consumer demand will be fulfilled by other
wholesale or retail sources of supply. As such, we attempt to obtain strong
relationships with most of the major retail chains, wholesale distributors and
mail-order wholesalers in order to facilitate the supply of our products through
whatever channel the consumer prefers.
We promote our products through direct sales, the Internet, trade
shows, trade publications, and bids. We also market our products through private
label arrangements, whereby we produce our products with a label containing the
name and logo of a customer. This practice is commonly referred to as private
label business. It allows us to expand on our own internal sales efforts by
using the marketing services from other well-respected pharmaceutical dosage
suppliers. The focus of our sales efforts are the relationships we create with
our customer
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accounts. Strong customer relationships have created a positive platform for us
to increase our sales volumes. Advertising in the generic pharmaceutical
industry is generally limited to trade publications, read by retail pharmacists,
wholesale purchasing agents and other pharmaceutical decision-makers.
Historically and during the fiscal years ended June 30, 2003 and 2002, our
advertising expenses were immaterial. When the customer and our sales
representatives make contact, we will generally offer to supply the customer
with our products at fixed prices. If accepted, the customer's purchasing
department will coordinate the purchase, receipt and distribution of the
products throughout its distribution centers and retail outlets. Once a customer
accepts our supply of product, the customer generally expects a high standard of
service. This service standard includes shipping product in a timely manner on
receipt of customer purchase orders, maintaining convenient and effective
customer service functions and retaining a mutually-beneficial dialogue of
communication. We believe that although the generic pharmaceutical industry is a
commodity industry, where price is the primary factor for sales success, these
additional service standards are equally important to the customers that rely on
a consistent source of supply.
COMPETITION
The manufacture and distribution of generic pharmaceutical products is
a highly competitive industry. Competition is based primarily on price, service
and quality. We compete primarily on this basis, as well as by flexibility
(reacting to customer needs quickly and decisively - for example, shipping
samples of products via overnight delivery when the customer is in critical need
of inventory), availability of inventory, and by the fact that our products are
available only from a limited number of suppliers. The modernization of our
facilities, hiring of experienced staff, and implementation of inventory and
quality control programs have improved our competitive position over the past
five years.
GOVERNMENT REGULATION
Pharmaceutical manufacturers are subject to extensive regulation by the
federal government, principally by the FDA and the Drug Enforcement Agency
("DEA"), and, to a lesser extent, by other federal regulatory bodies and state
governments. The Federal Food, Drug and Cosmetic Act, the Controlled Substance
Act and other federal statutes and regulations govern or influence the testing,
manufacture, safety, labeling, storage, record keeping, approval, pricing,
advertising and promotion of our generic drug products. Noncompliance with
applicable regulations can result in fines, recall and seizure of products,
total or partial suspension of production, personal and/or corporate prosecution
and debarment, and refusal of the government to approve new drug applications.
The FDA also has the authority to revoke previously approved drug products.
Generally, FDA approval is required before a prescription drug can be
marketed. The approval procedures are quite extensive. A new drug is one not
generally recognized by qualified experts as safe and effective for its intended
use. New drugs are typically developed and submitted to the FDA by companies
expecting to brand the product, and sell it as a new medical treatment. The FDA
review process for new drugs is very extensive; and it requires a substantial
investment to research and test the drug candidate. However, less burdensome
approval procedures may be used for generic equivalents. Typically, the
investment required to
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develop a generic drug is less costly than the brand innovator drug. There are
currently three ways to obtain FDA approval of a drug:
New Drug Applications ("NDA"): Unless one of the two procedures discussed in the
following paragraphs is available, a manufacturer must conduct and submit to the
FDA complete clinical studies to establish a drug's safety and efficacy.
Abbreviated New Drug Applications ("ANDA"): An ANDA is similar to an NDA, except
that the FDA waives the requirement of complete clinical studies of safety and
efficacy, although it may require bioavailability and bioequivalence studies.
The FDA has recently stated that the average review and approval time for a new
ANDA is approximately 18 months. "Bioavailability" indicates the rate of
absorption and levels of concentration of a drug in the bloodstream needed to
produce a therapeutic effect. "Bioequivalence" compares one drug product with
another, and indicates if the rate of absorption and the levels of concentration
of a generic drug in the body are within prescribed statistical limits to those
of a previously approved drug. Under the Drug Price Act, an ANDA may be
submitted for a drug on the basis that it is the equivalent of an approved drug,
regardless of when such other drug was approved. The Drug Price Act, in addition
to establishing a new ANDA procedure, created statutory protections for approved
brand name drugs. Under the Drug Price Act, an ANDA for a generic drug may not
be made effective until all relevant product and use patents for the brand name
drug have expired or have been determined to be invalid. Prior to enactment of
the Drug Price Act, the FDA gave no consideration to the patent status of a
previously approved drug. Additionally, the Drug Price Act extends for up to
five years the term of a product or use patent covering a drug to compensate the
patent holder for the reduction of the effective market life of a patent due to
federal regulatory review. With respect to certain drugs not covered by patents,
the Drug Price Act sets specified time periods of two to ten years during which
ANDAs for generic drugs cannot become effective or, under certain circumstances,
cannot be filed if the brand name drug was approved after December 31, 1981. We
use the ANDA process for submission of our developmental generic drug
candidates.
Paper New Drug Applications ("PAPER NDA"): For a drug that is identical to a
drug first approved after 1962, a prospective manufacturer need not go through
the full NDA procedure. Instead, it may demonstrate safety and efficacy by
relying on published literature and reports. The manufacturer must also submit,
if the FDA so requires, bioavailability or bioequivalence data illustrating that
the generic drug formulation produces the same effects, within an acceptable
range, as the previously approved innovator drug. Because published literature
to support the safety and efficacy of post-1962 drugs may not be available, this
procedure is of limited utility to generic drug manufacturers. Moreover, the
utility of Paper NDAs has been further diminished by the recently broadened
availability of the ANDA process, as described above.
Among the requirements for new drug approval is the requirement that
the prospective manufacturer's methods conform to the FDA's current good
manufacturing practices ("CGMP Regulations"). The CGMP Regulations must be
followed at all times during which the approved drug is manufactured. In
complying with the standards set forth in the CGMP Regulations, the Company must
continue to expend time, money and effort in the areas of production and quality
control to ensure full technical compliance. Failure to comply with the CGMP
Regulations risks
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possible FDA action such as the seizure of noncomplying drug products or,
through the Department of Justice, enjoining the manufacture of such products.
We are also subject to federal, state and local laws of general
applicability, such as laws regulating working conditions, and the storage,
transportation or discharge of items that may be considered hazardous
substances, hazardous waste or environmental contaminants. We monitor our
compliance with all environmental laws. Compliance costs are charged against
operations when incurred. We incurred no monitoring costs during the fiscal
years ended June 30, 2003 and 2002.
RECENT DEVELOPMENTS
Perrigo Transaction
William Farber ("Mr. Farber"), our Chief Executive Officer and Chairman
of the Board of the Company, beneficially owns 13,518,629 shares of our common
stock which represents approximately 56.2% of our outstanding common stock.
Pursuant to a Stock Purchase Option Agreement (the "Option"),
incorporated by reference in this prospectus, Mr. Farber has granted an
irrevocable option to Perrigo Company ("Perrigo") to purchase all of his shares
of our common stock for $14.56 per share plus contingent additional
consideration. Perrigo has the right to exercise the Option, and buy Mr.
Farber's stock, any time between now and August 6, 2004. If Perrigo exercises
the Option and acquires Mr. Farber's shares of our common stock, Perrigo is
obligated pursuant to the Option to either make a tender offer (to the extent
permitted by law) to our remaining shareholders or to use its commercially
reasonable efforts to enter into a business combination with us that could
result in Perrigo acquiring the remaining outstanding shares of our common
stock. The total price per share to be paid pursuant to any such tender offer or
business combination must be no less than the higher of (i) $17.84, and (ii) the
total price per share paid to Mr. Farber, including any contingent additional
consideration. The decision to recommend or not recommend any such tender offer
or approve or disapprove of any such business combination will rest with a
special committee of the Company's Board of Directors and/or the remaining
stockholders.
Because of Mr. Farber's large percentage ownership interest in our
Company, if Perrigo exercises the Option, such a sale of his Common Stock would
constitute a change of control and could lead to other consequences, including a
change in our present board of directors or management. However, this decision
would rest solely in the hands of Perrigo.
Jerome Stevens Pharmaceuticals Transaction
On March 23, 2004, we entered into an agreement with JSP granting us
exclusive distribution rights in the United States to the current line of JSP
products, in exchange for four million (4,000,000) shares of our common stock.
We have agreed to register these shares and these shares are the shares being
registered under this Registration Statement. According to the agreement, which
has a term of ten years, JSP will supply us with Butalbital with Aspirin,
Caffeine and Codeine Phosphate capsules, Digoxin tablets and Levothroxine Sodium
tablets sold under the generic name and the brand name "Unithroid" (collectively
referred to as the "JSP Products"). Our obligation to issue the four million
(4,000,000) shares was subject to the receipt
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of a fairness opinion issued by a recognized and reputable investment banking
firm in opining that the issuance of the four million (4,000,000) shares and the
resulting dilution of the ownership interest of or minority stockholders was
fair to such stockholders in view of the JSP Products' contribution or potential
contribution to our profitability. We received the fairness opinion on April 20,
2004 and issued the shares to JSP's designees on that date.
THE OFFERING
ISSUER Lannett Company, Inc
SECURITIES OFFERED 4,000,000 shares of Common Stock
TRADING The shares of Common Stock are eligible for trading
on The American Stock Exchange under the symbol
"LCI".
USE OF PROCEEDS We will not receive any proceeds from the sale by the
selling security holders of the common stock. See
"Use of Proceeds."
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RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE
OTHER INFORMATION CONTAINED, OR INCORPORATED BY REFERENCE, IN THIS PROSPECTUS
BEFORE PURCHASING ANY COMMON STOCK. THESE FACTORS, AND OTHERS, COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED AND
REFLECTED IN FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS AND PRESENTED
ELSEWHERE BY OUR MANAGEMENT FROM TIME TO TIME. SEE "FORWARD-LOOKING STATEMENTS."
OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE NEW
PRODUCTS.
Our future results of operations depend, to a significant degree, upon
our ability to successfully commercialize additional generic pharmaceutical
products. We must develop, test and manufacture generic products as well as
prove that our generic products are the bio-equivalent to their branded
counterparts. All of our products must meet regulatory standards and receive
regulatory approvals. The development and commercialization process is both time
consuming and costly and involves a high degree of business risk. Our products
currently under development, if and when fully developed and tested, may not
perform as we expect, necessary regulatory approvals may not be obtained in a
timely manner, if at all, and such products may not be able to be successfully
and profitably produced and marketed. If we are unable to offer our customers
numerous products that respond to their market-driven need for a variety of
generic alternatives, our revenues and profitability may be negatively impacted.
Delays in any part of the process or our inability to obtain regulatory approval
of our products could adversely affect our operating results by restricting our
introduction of new products. Generally, the successful commercial marketing of
our products depends on completing the following steps in a time frame to allow
us to be among the first to market a particular generic version of a product:
developing and testing the product; proving that the generic product is
bio-equivalent to the reference listed drug product; and filing for and
receiving regulatory approvals to manufacture and sell the product in a timely
manner.
OUR GENERIC PHARMACEUTICAL PRODUCTS FACE INTENSE COMPETITION FROM BRAND-NAME
COMPANIES THAT SELL THEIR OWN GENERIC PRODUCTS OR SUCCESSFULLY EXTEND THEIR
MARKET EXCLUSIVITY PERIOD.
Competition in the U.S. generic pharmaceutical market continues to
intensify as the pharmaceutical industry adjusts to increased pressures to
contain health care costs. Brand-name companies continue to sell their products
into the generic market directly by acquiring or forming strategic alliances
with generic pharmaceutical companies ("authorized generics"). No regulatory
approvals are required for a brand-name manufacturer to sell directly or through
a third party to the generic market. Brand-name manufacturers do not face any
other significant barriers to entry into such market. In addition, such
companies continually seek new ways to defeat generic competition, such as
filing new patents on drugs whose original patent protection is about to expire,
developing patented controlled-release products, changing product claims and
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product labeling or developing and marketing as over-the-counter products those
branded products which are about to face generic competition, where the FDA
allows the switch from prescription drugs only to over-the-counter drugs.
OUR REVENUES AND PROFITS FROM ANY PARTICULAR GENERIC PHARMACEUTICAL DECLINE AS
OUR COMPETITORS INTRODUCE THEIR OWN GENERIC EQUIVALENTS.
Generic pharmaceuticals that are launched when there is limited or no
other generic competition are typically sold at higher selling prices than when
there are several generic pharmaceutical alternatives available. As a result,
such products often produce higher gross profit margins. As competition from
other manufacturers intensifies, selling prices and gross profit margins
typically decline. To the extent that we succeed in being first to market with a
generic version of a significant product, our sales and profitability can be
substantially increased in the period following the introduction of such product
and prior to additional competitors' introduction of an equivalent product. Our
ability to sustain our sales and profitability on our products over time is
dependent on both the number of new competitors for such products and the timing
of their approvals. Our overall profitability depends on our ability to
continuously introduce new products as to which it can be first to market or
otherwise can gain significant market share.
IF BRANDED PHARMACEUTICAL COMPANIES ARE SUCCESSFUL IN LIMITING THE USE OF
GENERICS THROUGH THEIR LEGISLATIVE AND REGULATORY EFFORTS, OUR SALES OF GENERIC
PRODUCTS MAY SUFFER.
Many branded pharmaceutical companies increasingly have used state and
federal legislative and regulatory means to delay generic competition. These
efforts have included:
- pursuing new patents for existing products which may be
granted just before the expiration of one patent which could
extend patent protection for additional years or otherwise
delay the launch of generics;
- using the Citizen Petition process to request amendments to
FDA standards;
- seeking changes to U.S. Pharmacopeia, an organization which
publishes industry recognized compendia of drug standards;
- attaching patent extension amendments to non-related federal
legislation; and
- engaging in state-by-state initiatives to enact legislation
that restricts the substitution of some generic drugs which
could have an impact on products that we are developing; and
- listing with the FDA patents that have the effect of
potentially delaying approval of the off-patent product by up
to 30 months, and in some cases, such patents have been listed
with the FDA after the key chemical patent on the branded drug
product has expired or been litigated, causing additional
delays in obtaining FDA approval.
If branded pharmaceutical companies are successful in limiting the use of
generic products through these or other means, our sales of generic products may
decline. If we experience a
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material decline in generic product sales, our results of operations, financial
condition and cash flows will suffer.
THE DESIGN, DEVELOPMENT, MANUFACTURE AND SALE OF OUR PRODUCTS INVOLVES THE RISK
OF PRODUCT LIABILITY CLAIMS BY CONSUMERS AND OTHER THIRD PARTIES, AND INSURANCE
AGAINST SUCH POTENTIAL CLAIMS IS EXPENSIVE AND MAY BE DIFFICULT TO OBTAIN.
The design, development, manufacture and sale of our products involve
an inherent risk of product liability claims and the associated adverse
publicity. Insurance coverage is expensive and may be difficult to obtain, and
may not be available in the future on acceptable terms, or at all. We are
subject to renewal of most of our insurance policies each year and changes are
anticipated at each renewal. In recent years, we have experienced significant
increases in our insurance costs and coverage reductions including coverage
exclusions pertaining to certain products that we now manufacture or may
manufacture in the future. Our inability to obtain and maintain sufficient
insurance coverage on reasonable terms could materially adversely affect our
business, financial condition and results of operations. Although we currently
maintain product liability insurance for our products in amounts we believe to
be commercially reasonable, if the coverage limits of these insurance policies
are not adequate, a claim brought against us, whether covered by insurance or
not, could have a material adverse effect on our business, results of
operations, financial condition and cash flows. Even unsuccessful product
liability claims could require us to spend money on litigation, divert
management's time, damage its reputation and impair the marketability of our
products.
OUR STOCK IS CONTROLLED BY ONE SHAREHOLDER, WHO HAS GRANTED AN OPTION TO ACQUIRE
ALL OF HIS SHARES.
As of May 5, 2004, William Farber beneficially owned approximately
56.2% of the outstanding shares of our common stock. Mr. Farber is able to
control the outcome of stockholder votes, including votes concerning the
election of the majority of directors, the adoption or amendment of provisions
in the Company's certificate of incorporation or bylaws, the approval of
mergers, decisions affecting its capital structure and other significant
corporate transactions. The interests of Mr. Farber may conflict with your
interests. His control could also have the effect of deterring hostile
takeovers, delaying or preventing changes in control or changes in management or
limiting the ability of our shareholders to approve transactions that they may
deem to be in their best interests.
Mr. Farber has granted Perrigo Company the right, through August 6,
2004, to acquire all of the shares of our common stock held by him and his
spouse. If Perrigo Company exercises such right, it has committed to either
making a tender offer to our remaining shareholders or to use its commercially
reasonable efforts to enter into a business combination with us. Perrigo Company
has not indicated whether it intends to exercise its option.
11
THIRD PARTIES MAY CLAIM THAT WE INFRINGE THEIR PROPRIETARY RIGHTS AND MAY
PREVENT US FROM MANUFACTURING AND SELLING SOME OF OUR PRODUCTS.
The manufacture, use and sale of new products that are the subject of
conflicting patent rights have been the subject of substantial litigation in the
pharmaceutical industry. These lawsuits relate to the validity and infringement
of patents or proprietary rights of third parties. We may have to defend against
charges that we violated patents or proprietary rights of third parties. This is
especially true in the case of generic products on which the patent covering the
branded product is expiring, an area where infringement litigation is prevalent,
and in the case of new branded products where a competitor has obtained patents
for similar products.
Companies that seek to market generic versions of brand-name products
can be sued for infringing patents that purportedly cover such products and/or
methods of using such products if the proposed marketing is to occur before such
patents expire. More specifically, when we file an ANDA with the FDA for
approval of a generic drug, we must certify that no patents are listed in the
Orange Book, the FDA's reference listing of approved drugs, or listed patents
that have expired. On the other hand, we may certify that any patent listed as
covering the brand-name product and/or a method of using that product is
invalid, is unenforceable, or will not be infringed by the manufacture, sale or
use of the generic drug for which the ANDA is filed - usually referred to as a
Paragraph IV Certification. In that case, we are required to notify the patent
holder and NDA holder that such patent is not infringed, is unenforceable, or is
invalid. The patent holder has forty-five (45) days from receipt of the notice
in which to sue for patent infringement to obtain injunctive relief and, in some
instances, to seek attorneys' fees. Currently, we have not filed any Paragraph
IV Certifications in our ANDAs because the ANDAs submitted did not contest with
any patents for the applicable innovator drugs.
Litigation may be costly and time-consuming, and could divert the
attention of our management and technical personnel. In addition, if we infringe
on the rights of others, we could lose our right to develop or manufacture
products or could be required to pay monetary damages or royalties to license
proprietary rights from third parties. Although the parties to patent and
intellectual property disputes in the pharmaceutical industry have often settled
their disputes through licensing or similar arrangements, the costs associated
with these arrangements may be substantial and could include ongoing royalties.
Furthermore, we cannot be certain that the necessary licenses would be available
to us on terms we believe to be acceptable. As a result, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from manufacturing and selling a number of
our products, which could harm our business, financial condition, results of
operations and cash flows.
WE ARE SUBJECT TO GOVERNMENT REGULATION THAT INCREASES OUR COSTS AND, IF WE ARE
UNABLE TO OBTAIN REGULATORY APPROVALS, IT COULD PREVENT US FROM MARKETING OR
SELLING OUR PRODUCTS.
We are subject to extensive pharmaceutical industry regulation. We
cannot predict the extent to which we may be affected by legislative and other
regulatory developments concerning our products.
We are dependent on obtaining timely regulatory approvals before
marketing the majority of our products. Any manufacturer failing to comply with
FDA or other applicable
12
regulatory agency requirements may be unable to obtain approvals for the
introduction of new products and, even after approval, initial product shipments
may be delayed. The FDA also has the authority to revoke drug approvals
previously granted and remove from the market previously approved drug products
containing ingredients no longer approved by the FDA. Our major facilities and
products are periodically inspected by the FDA, which has extensive enforcement
powers over the activities of pharmaceutical manufacturers, including the power
to suspend approval of new drug applications, seize, force to recall and
prohibit the sale or import of non-complying products, and halt operations of
and criminally prosecute non-complying manufacturers. Although we devote
significant time, effort and expense to addressing the extensive government
regulations applicable to our business and obtaining regulatory approvals, we
remain subject to the risk of being unable to obtain necessary approvals on a
timely basis, if at all. Delays in receiving regulatory approvals could
adversely affect our ability to market our products.
RECENT CHANGES IN THE REGULATORY ENVIRONMENT MAY PREVENT US FROM EXPLOITING THE
EXCLUSIVITY PERIODS THAT ARE CRITICAL TO THE SUCCESS OF OUR GENERIC PRODUCTS.
The FDA's policy regarding the award of 180-days market exclusivity to
generic manufacturers who challenge patents relating to specific products
continues to be the subject of much litigation in the United States. The FDA's
current interpretation of the Waxman-Hatch Act is to award 180 days of
exclusivity to the first generic manufacturer who files a Paragraph IV
certification under the Act challenging the patent of the branded product,
regardless of whether the manufacturer was sued for patent infringement.
Although the FDA's interpretation may benefit some of the products in our
pipeline, it may adversely affect others.
The Waxman-Hatch Act provides that the period of 180-day exclusivity is
triggered by the earlier of a court decision finding the patent at issue
invalid, unenforceable or not infringed or the commercial marketing of the
product. Under certain circumstances, we may not be able to exploit our 180-day
exclusivity period completely since it may be triggered prior to our being able
to market the product.
For example, the exclusivity may be triggered by a court decision
before we have received final FDA approval. If we choose to bring a product to
market prior to receiving a final ruling and an appellate court overturns the
initial ruling, we could face significant infringement damages. In addition to
these issues, our patent challenges may be unsuccessful, which may result in a
bar to the FDA granting market approval until the relevant patent expires.
Another recent FDA ruling allows for joint 180-day exclusivity under certain
circumstances. As a result, there may be certain circumstances in which we may
share our exclusivity with one or more companies. In addition, new legislation
was recently enacted, which may have an effect on the FDA's interpretation of
180-day exclusivity in ways that we cannot predict at this time.
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.
We are required to identify the supplier(s) of all the raw materials
for our products in our applications with the FDA. To the extent practicable, we
attempt to identify more than one
13
supplier in each drug application. However, some products and raw materials are
available only from a single source and, in some of our drug applications, only
one supplier of products and raw materials has been identified, even in
instances where multiple sources exist. From time to time, certain of our
outside suppliers have experienced regulatory or supply-related difficulties
that have inhibited their ability to deliver products and raw materials to us,
causing supply delays or interruptions. In the event an existing supplier should
lose its regulatory status as an approved source, we would attempt to locate a
qualified alternative. To the extent any difficulties experienced by our
suppliers cannot be resolved within a reasonable time, and at reasonable cost,
or if raw materials for a particular product become unavailable from an approved
supplier and we are required to qualify a new supplier with the FDA, our profit
margins and market share for the affected product could decrease, as well as
delay our development and sales and marketing efforts. One supplier, JSP,
accounted for 65% of our raw material and finished goods inventory purchased
during the fiscal year ended June 30, 2003.
DUE TO OUR DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS, OUR BUSINESS WILL BE
MATERIALLY ADVERSELY AFFECTED IF THESE PRODUCTS DO NOT PERFORM AS WELL AS
EXPECTED.
We generate a significant portion of our total revenues and gross margin from
the sale of a limited number of products. For the fiscal year ended June 30,
2003, approximately 95% of our total revenues were derived from the aggregate
sales of Primidone tablets, Levothryoxine tablets, Digoxin tablets, Butalbital,
Aspirin, Caffeine capsules and Butalbital, Aspirin, Caffeine with Codeine
capsules. For the nine months ended March 31, 2004, approximately 98% of our
total revenues were derived from the aggregate sales of Primidone tablets,
Levothyroxine tablets, Digoxin tablets, Butalbital, Aspirin, Caffeine capsules
and Butalbital, Aspirin, Caffeine with Codeine capsules. Any material adverse
developments, including increased competition, with respect to the sale or use
of these products, or our failure to successfully introduce other key products,
could have a material adverse effect on our revenues and gross margin.
OUR POLICIES REGARDING RETURNS, ALLOWANCES AND CHARGEBACKS, AND MARKETING
PROGRAMS ADOPTED BY WHOLESALERS, MAY REDUCE OUR REVENUES IN FUTURE FISCAL
PERIODS.
Based on industry practice, generic product manufacturers, including
us, have liberal return policies and have been willing to give customers
post-sale inventory allowances. Under these arrangements, from time to time, we
give our customers credits on our generic products that our customers hold in
inventory after we have decreased the market prices of the same generic
products. Therefore, if new competitors enter the marketplace and significantly
lower the prices of any of their competing products, we would likely reduce the
price of our product. As a result, we would be obligated to provide significant
credits to our customers who are then holding inventories of such products,
which could reduce sales revenue and gross margin for the period the credit is
provided. Like our competitors, we also give credits for chargebacks to
wholesale customers that have contracts with us for their sales to hospitals,
group purchasing organizations, pharmacies or other retail customers. A
chargeback is the difference between the price the wholesale customer pays and
the price that the wholesale customer's end-customer pays for a product.
Although we establish reserves based on our prior experience and our best
estimates of the impact that these policies may have in subsequent periods, we
cannot ensure that our reserves are adequate or that actual product returns,
allowances and chargebacks will not exceed our estimates.
14
THE LOSS OF OUR KEY PERSONNEL COULD CAUSE OUR BUSINESS TO SUFFER.
The success of our present and future operations will depend, to a
significant extent, upon the experience, abilities and continued services of key
personnel. For example, although we have other senior management personnel, a
significant loss of the services of William Farber, our Chief Executive Officer,
Arthur Bedrosian, our President, Kevin Smith, our Vice President of Sales and
Marketing, or Larry Dalesandro, our Chief Financial Officer, or other senior
executive officers could cause our business to suffer. We cannot assure the
holders that we will be able to attract and retain key personnel. We have
entered into employment agreements with certain of our senior executive
officers, including Mr. Bedrosian. We do not carry key-man life insurance on any
of our officers.
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.
Our principal customers are mail order pharmacies, wholesale drug
distributors and major retail drug store chains. These customers comprise a
significant part of the distribution network for pharmaceutical products in the
U.S. This distribution network is continuing to undergo significant
consolidation marked by mergers and acquisitions among wholesale distributors
and the growth of large retail drug store chains. As a result, a small number of
large wholesale distributors control a significant share of the market. We
expect that consolidation of drug wholesalers and retailers will increase
pricing and other competitive pressures on drug manufacturers, including our
company. For the fiscal year ended June 30, 2003, our two largest customers
accounted for 13% and 12%, respectively, of our net revenues. The loss of either
of these customers could materially adversely affect our business, results of
operations and financial condition. In addition, none of our customers are party
to any long-term supply agreements with us, which would enable them to change
suppliers freely should they wish to do so.
OUR ANTICIPATED GROWTH COULD PLACE A STRAIN ON OUR MANAGEMENT, AND IF WE FAIL TO
MANAGE SUCCESSFULLY OUR EXPANSION, OUR OPERATIONS MAY BE DISRUPTED AND OUR
BUSINESS MAY BE ADVERSELY AFFECTED.
We believe that we need to continue to expand our operations,
organically and/or through acquisitions, in order to remain competitive. We have
recently experienced an increase in our revenues that, together with our
anticipated growth, could place a strain on our management and accounting
systems and financial and other resources. Our ability to implement successfully
our business plan in a rapidly evolving market will require an effective
planning and management process, close coordination with, and the support of,
our suppliers and ensuring the availability of adequate working capital
financing. We must continue to improve and effectively utilize our existing, and
assimilate any later acquired, operational, management, accounting, marketing
and financial systems and successfully recruit, hire, train, retain and manage
personnel, which we may be unable to do. Further, we will need to develop and
maintain close coordination among our technical, finance, accounting, marketing,
sales and production staffs. We cannot assure you that we will be able to
successfully manage our expansion.
15
INVESTORS SHOULD NOT LOOK TO DIVIDENDS AS A SOURCE OF INCOME.
We have not paid any cash dividends since inception. In addition, we do
not anticipate paying cash dividends in the foreseeable future. Consequently,
any economic return to a stockholder will be derived, if at all, from
appreciation in the price of our stock, and not as a result of dividend
payments.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference certain
forward-looking statements, and we intend that such forward-looking statements
be subject to the safe harbor provisions of the federal securities laws. When
used, statements that are not historical in nature, including those containing
words such as "anticipate," "estimate," "should," "expect," "believe," "plan,"
"may," "will," "intend" and words of similar import, are intended to identify
forward-looking statements. In addition, we, through our senior management, from
time to time make forward-looking oral and written public statements concerning
our future operations and other events and developments. You are cautioned that,
while our forward-looking statements reflect our good faith belief and
reasonable judgment based upon current information, they are not guarantees of
future performance and are subject to known and unknown risks and uncertainties.
Statements regarding the following subjects are forward-looking by their nature:
- competitive factors;
- general economic and financial conditions;
- relationships with pharmaceutical companies, supplies and
customers;
- the ability to develop safe and efficacious drugs;
- variability, amounts of revenues and gross margin;
- ability to enter into future collaborative agreements;
- governmental regulation;
- changes in industry practices;
- one-time or non-recurring events;
- our business strategy;
- projected sources and uses of funds from operations;
- potential liability with respect to legal proceedings; and
- potential effects of proposed legislation and regulatory
action.
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Other risks, uncertainties and other factors, including those discussed
under the "Risk Factors" section of this prospectus, could cause our actual
results to differ materially from those projected in any forward-looking
statements that we make. We are not obligated, and assume no duty, to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Any forward-looking statements, whether made in this
prospectus or elsewhere, should be considered in context with the risk factors
discussed or incorporated by reference in this prospectus and the disclosures
made by us about our business and operations in our public reports incorporated
herein by reference.
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling security holder of
the shares of common stock.
SELLING SECURITY HOLDERS
We originally issued the shares being registered hereunder on April 20, 2004
pursuant to a supply agreement that we entered into as of March 23, 2004 with
Jerome Stevens Pharmaceuticals, Inc.
The following table contains information as of May 5, 2004, with respect to the
selling security holders and the number of shares of common stock beneficially
owned by each of the selling security holders that may be offered using this
prospectus.
Percentage
of Outstanding
Common Stock
Percentage of to be Beneficially
Number of Shares of Outstanding Common Number of Shares Owned after
Common Stock Stock Beneficially of Common Stock Conducting
Name Beneficiary Owned Owned(1) to be Sold the Offering(1)
---- ------------------- ------------------ ---------------- ------------------
Ronald Steinlauf 1,000,000 4.2% 1,000,000 -
Deborah A. Akeson 1,000,000 4.2% 1,000,000 -
The Steinlauf Family Trust 1,000,000 4.2% 1,000,000 -
Jerome Steinlauf 500,000 2.1% 500,000 -
Amelia Steinlauf 500,000 2.1% 500,000 -
(1) Calculated based on 24,074,335 shares of common stock outstanding as of May
5, 2004.
We prepared this table based upon the information supplied to us in writing by
the selling security holders named in the table.
The selling security holders listed in the above table may have sold or
transferred, in transactions intended to be exempt from the registration
requirements of the Securities Act, some or all of their shares since the date
on which the information in the above table is presented. Information about the
selling security holders may change over time. Any changed or additional
information will be set forth in prospectus supplements or amendments to the
registration statement of which this prospectus is a part, if required.
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Because the selling security holders may offer all or some of their shares of
common stock from time to time, we cannot estimate the amount of shares of
common stock that will be held by the selling security holders at any given
time. See "Plan of Distribution."
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the resale of the shares of common
stock offered by this prospectus. The shares of common stock may be resold from
time to time to purchasers:
- directly by the selling security holders; or
- through underwriters, broker-dealers or agents that may
receive compensation in the form of discounts, concessions or
commissions from the selling security holders or the
purchasers of the common stock.
The selling security holders and any such broker-dealers or agents who
participate in the distribution of the common stock may be deemed to be
"underwriters." As a result, any profits on the sale of the shares of common
stock by selling security holders and any discounts, commissions or concessions
received by any such broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act. If the selling security
holders were to be deemed underwriters, the selling security holders may be
subject to certain statutory liabilities of, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
If the shares of common stock are sold through underwriters or broker-dealers or
agents, the selling security holders will be responsible for all underwriting
discounts or commissions or agent's commissions.
The shares of common stock may be sold in one or more transactions at fixed
prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on
which the shares of common stock may be listed or quoted at
the time of the sale, including the American Stock Exchange;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services
or in the over-the-counter market; or
- through the writing of call or put options.
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These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of the shares of common stock or otherwise, the
selling security holders may enter into hedging transactions with
broker-dealers. These broker-dealers may, in turn, engage in short sales of the
shares of common stock in the course of hedging their positions. The selling
security holders may also sell the shares of common stock short and deliver
shares of common stock to close out short positions, or loan or pledge shares of
common stock to broker-dealers that, in turn may sell the shares of common
stock.
To our knowledge, there are currently no plans, arrangements or understandings
between or among any selling security holders and any underwriter, broker-dealer
or agent regarding the sale of the shares of common stock by the selling
security holders. There can be no assurance that any selling security holders
will sell any or all of the shares of common stock offered by them pursuant to
this prospectus. Any shares of common stock covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A, rather than pursuant to this prospectus. In
addition, we cannot assure you that any such selling security holder will not
transfer, distribute, devise or gift the shares of common stock by other means
not described in this prospectus.
Our shares of common stock trade on the American Stock Exchange under the symbol
"LCI".
The selling security holders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling security
holders and any other such person. In addition, Regulation M of the Exchange Act
may restrict the ability of any person engaged in the distribution of the shares
of common stock to engage in market-making activities with respect to the shares
of common stock being distributed for a period of up to five business days prior
to the commencement of such distribution. This may adversely affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the shares of common stock to the public
other than commissions, fees and discounts of any underwriters, brokers, dealers
and agents.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are a Delaware corporation authorized to issue up to 50,000,000
shares of common stock, par value $0.001 per share. As of May 5, 2004,
24,074,335 shares of our common stock were issued and outstanding.
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Holders of our common stock are entitled to one vote per share on all
matters to be voted upon (or consented to) by our stockholders, including the
election of our directors. Our certificate of incorporation does not provide for
cumulative voting in the election of directors. As of May 5, 2004, we had 265
holders of record of our common stock.
Holders of our common stock are entitled to receive such dividends
when, as and if declared by our board of directors out of funds legally
available therefor. The declaration of any future dividends will be subject to
our earnings, financial condition, capital requirements, contractual
restrictions and other relevant factors. We have never paid any dividends.
In the event of our liquidation, dissolution or winding-up, holders of
our common stock are entitled to share ratably in any assets remaining after
payment of our liabilities and after satisfaction of the liquidation preferences
of any then outstanding shares of preferred stock. Holders of our common stock
have no preemptive, conversion or redemption rights and are not subject to
assessment by us. All of the currently outstanding shares of our common stock
are fully paid and nonassessable. Our business is managed by our board of
directors, which presently has four members.
STOCK OPTION PLANS
As of June 30, 2003, we had 1,125,000 shares of common stock reserved
for issuance under our stock option plans. As of May 5, 2004, options to
purchase an aggregate of 589,359 shares had been granted and are currently
outstanding. This includes 332,474 shares granted under our 1993 Stock Option
Plans that expired in February 2003. For a description of our 2003 Stock Option
Plan and the stock options granted pursuant thereto, see our proxy statement on
Form 14A filed with the SEC on January 23, 2003 and incorporated herein by
reference.
LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS
In accordance with the Delaware General Corporation Law, or the DGCL,
our certificate of incorporation expressly provides that our directors are not
liable to us or to our stockholders for monetary damages for breach(es) of
fiduciary duty as a director except to the extent otherwise provided by
applicable law. Under the DGCL, a director's liability may not be eliminated:
- for any breach(es) of the director's duty of loyalty to us or
to our stockholders;
- for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
- for certain unlawful dividend payments or stock redemptions or
repurchases; and
- for any transaction from which the director derives an
improper personal benefit.
Additionally, under recent Delaware court decisions, a director's
liability may not be limited or eliminated for a "conscious disregard of a known
risk" that calls into question whether the director had acted in good faith.
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The effect of the provisions of our certificate of incorporation is
generally to eliminate our right and the rights of our stockholders to recover
monetary damages against a director for his breach of the fiduciary duty of care
as a director (including breaches resulting from negligent or grossly negligent
conduct). These provisions do not limit or eliminate our right or the right of
any stockholder to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of a director's duty of care.
Our certificate of incorporation and bylaws also provide that we will
indemnify our directors and officers to the fullest extent permitted by the
DGCL.
INCORPORATION BY REFERENCE
We are "incorporating by reference" in this prospectus certain
information that we have filed and will file with the SEC, which means that we
are disclosing important information to you by referring you to those documents.
The information incorporated by reference is deemed to be part of this
prospectus, except for any information superseded by information expressly
contained in this prospectus. This prospectus incorporates by reference the
following documents, each of which we have previously filed with the SEC and
contains important information about us and our operations and financial
condition:
- Our Annual Report on Form 10-KSB for the fiscal years ended
June 30, 2003 and 2002, including all materials incorporated
by reference therein;
- Our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003;
- Our Quarterly Report on Form 10-Q for the quarter ended
December 31, 2003;
- Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2004;
- Our Proxy Statement on Form 14A relating to our 2004 annual
meeting of stockholders and filed with the SEC on November 6,
2003; and
o Our Current Reports on Form 8-K that we filed with the SEC on
August 26, 2003, October 29, 2003, December 2, 2003, January
20, 2004, February 17, 2004, April 28, 2004 and May 5, 2004.
All reports that we file with the SEC pursuant to Sections 13(a), 13(c)
or 14 of the Exchange Act from the date of this prospectus until the completion
of the offering of the shares of common stock shall also deemed to be
incorporated herein by reference.
Any statement made in this prospectus or in a document incorporated or
deemed to be incorporated by reference in this prospectus will be deemed to be
supplemented, modified or superseded for purposes of this prospectus to the
extent that a statement contained in any subsequently filed document that is
also incorporated or is deemed to be incorporated by reference in this
prospectus supplements, modifies or supersedes such statement. Any such
statement so modified or superseded will be deemed not, except as so modified or
superseded, to constitute a part of this prospectus.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address or telephone number:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
(215) 333-9000
Exhibits to the filings, however, will not be sent unless those
exhibits have specifically been incorporated by reference in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission, or SEC. You may read and copy any document that we file at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. You can
obtain copies of these documents by writing to the SEC and paying a fee for the
copying costs. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference room. Our SEC filings are also available
to the public at the SEC's web site at "http://www.sec.gov".
This prospectus is only part of a Registration Statement on Form S-3
that we have filed with the SEC under the Securities Act of 1933, as amended,
and, therefore, omits information that was contained in such Registration
Statement. We have also filed exhibits and schedules with the Registration
Statement that are excluded from this prospectus, and you should refer to the
applicable exhibit or schedule for a complete description of any statement
referring to any contract or other document. You may:
- inspect a copy of the Registration Statement, including the
exhibits and schedules, without charge, at the SEC's Public
Reference Room,
- obtain a copy from the SEC, upon payment of the fees
prescribed by the SEC, or
- review a copy on, or obtain a copy from, the SEC's web site.
In addition, we maintain our own internet site (www.lannett.com), which
contains other information about us.
LEGAL MATTERS
The validity of the shares of our common stock being restricted
hereunder will be passed upon for us by Fox Rothschild LLP, Philadelphia, PA.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Lannett Company, Inc. as of and for the years ended June
30, 2003 and 2002, incorporated in
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this prospectus by reference, have been audited by Grant Thornton LLP,
independent auditors, as stated in their report which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY PHARMACEUTICAL RESOURCES, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
CORRECT AT ANY TIME AFTER THE DATE HEREOF.
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PROSPECTUS
LANNETT COMPANY, INC.
4,000,000 SHARES OF COMMON STOCK
MAY 21, 2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by Lanett Company,
Inc. in connection with the distribution of our securities being registered
hereby. All amounts are estimated except the SEC registration fee:
EXPENSES AMOUNT
-------- ------
SEC Registration Fee $ 8,184.82
Printing Expenses $ 4,000.00
Legal Fees and Expenses $20,000.00
Accounting Fees and Expenses $ 2,500.00
American Stock Exchange Listing Fee $45,000.00
Miscellaneous Expenses $ 315.18
==========
Total $80,000.00
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation and bylaws provide for indemnification
of our officers and directors to the fullest extent permitted by Delaware law.
Pursuant to section 145 of the Delaware General Corporation Law (the
"DGCL") and subject to the procedures and limitations stated therein, our
certificate of incorporation and bylaws provide that we indemnify our directors,
officers, employees and agents against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement reasonably incurred, including
liabilities under the Securities Act, provided they act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of our
company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In the case of
proceedings brought by or on behalf of our company, indemnification is limited
to expenses and is not permitted if the individual is adjudged liable to us for
negligence or misconduct, unless the court determines otherwise. The DGCL
provides that indemnification pursuant to its provisions is not exclusive of
other rights of indemnification to which a person may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Our bylaws provide that a determination to indemnify (unless ordered by a court)
shall be made by a majority of the Board of Directors, by independent legal
counsel directed by disinterested directors or by the stockholders of our
Company.
If we fail to pay in full a claim for indemnification within thirty days, then
the person claiming an indemnification right may bring suit to enforce the
indemnification claim. We must prove the
person claiming indemnification has failed to meet the standards of conduct that
make it permissible under the DGCL for us to indemnify such person.
ITEM 16. EXHIBITS
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
5 Opinion of Fox Rothschild LLP.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Fox Rothschild LLP (contained in Exhibit No. 5).
24 Power of Attorney (included on page II-4).
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the provisions described in
Item 15 above or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
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(c) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that subparagraphs (a) and (b) above do not apply if
the information required to be included in a post-effective amendment
by these subparagraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Philadelphia, Pennsylvania, on the 19th day of May, 2004.
LANNETT COMPANY, INC.
By: /s/ William Farber
---------------------------
William Farber
Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William Farber and Larry Dalesandro, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the registration statement and to file
the same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
the following persons in the capacities and on the dates indicated have signed
this registration statement below.
/s/ William Farber May 19, 2004
------------------------------------------------
William Farber,
Chairman of the Board of Directors
And Chief Executive Officer
/s/ Larry Dalesandro May 19, 2004
------------------------------------------------
Larry Dalesandro,
Chief Financial Officer
/s/ Arthur Bedrosian May 19, 2004
------------------------------------------------
Arthur Bedrosian,
President
/s/ Marvin Novick May 19, 2004
------------------------------------------------
Marvin Novick,
Director
/s/ Ronald West May 19, 2004
------------------------------------------------
Ronald West,
Director
/s/ Myron Winkelman May 19, 2004
------------------------------------------------
Myron Winkelman,
Director
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
5 Opinion of Fox Rothschild LLP.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Fox Rothschild LLP (contained in Exhibit No. 5).
24 Power of Attorney (included on page II-4).
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