Fentanyl is becoming the drug of choice for those highly addicted to pain killers and numerous people have died from overdoses. Lannet just got FDA approval to file for production of the transdermal version, which should produce higher sales.
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LCI - Lannet Company - Company Profile
Lannett Company, Inc. develops, manufactures, packages, markets, and distributes generic versions of branded pharmaceutical products in the United States. It offers solid oral, extended release, topical, nasal, and oral solution finished dosage forms of drugs that address a range of therapeutic areas, as well as ophthalmic, patch, foam, buccal, sublingual, soft gel, and injectable dosages. The company provides its products for various medical indications comprising glaucoma, muscle relaxant, migraine, anesthetic, congestive heart failure, thyroid deficiency, dryness of the mouth, gout, bronchospasms, hypertension, and gallstone. It also manufactures active pharmaceutical ingredients. Lannett Company, Inc. markets its products under the Diamox, Lioresal, Fioricet, Fiorinal, Fiorinal w/ Codeine #3, Lanoxin, Levoxyl/Synthroid, Salagen, Benemid, Brethine, Dyazide, and Actigall brands.
The company recently received FDA approval to market Paroxetine extended release tablets in various strengths. Sales of the branded drug in the U.S. last year were over $122 million. There is only one competitor in the market for this drug.
The big news came from the receipt of a FDA Acceptable Filing Letter for Fentanyl patches. The letter allows them to file for approval of the 12mcg/hour, 25mcg, 50mcg, 75mcg and 100mcg patches. This is the generic equivalent of Ortho McNeil's chronic pain treatment Duragesic. According to Lannet sales of the transdermal patches in the U.S. in 2015 were more than $650 million. Lannet partnered with Sparsha Pharma, a specialist in tramsdermal systems, to produce the patches.
Lannet is rapidly increasing its portfolio of generic drugs and sales are booming. This will be a short-term play because earnings are August 23rd. I am looking for a ramp into earnings and we will close the position ahead of that event.
The Sept $35 option is too far out of the money for a short-term position. I am recommending the slightly in the money $30 call. With LCI at $31.78 it is already $1.78 in the money.
Buy Sept $30 call, currently $2.60, stop loss $30.65.
That is a tight stop because of the ITM strike price.
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