Lannett Company has announced that, following a review of its operations including the recently acquired Kremers Urban Pharmaceuticals Inc. (KU), it expects to achieve approximately $40 million of cost reductions during the first 12 months following the close of the acquisition, with additional savings in later years.
"We are confident that the KU acquisition will create significant value for our shareholders over time," said Arthur Bedrosian, chief executive officer of Lannett. "We are moving quickly to reduce overhead and streamline our organization, having identified cost reduction measures that will be implemented far sooner and are greater in total than our initial estimates. Last week, we announced the closing of the KU corporate headquarters in Princeton, New Jersey. Our plans also include the elimination of duplicative administrative functions, rationalization of our product development program and optimization of our manufacturing, distribution and research and development operations. Combined, we expect these actions to generate substantial savings over the near and longer term."
As Lannett previously disclosed, a key customer of KU recently took steps to transition its purchases of certain KU product lines. For the twelve months ended June 30, 2015, these product lines represented approximately $87 million in revenues and $45 million of EBITDA. Lannett management has since met with certain customers and received commitments that replace a portion of the lost revenues and EBITDA. Management plans to meet with other customers in an effort to recover even more business.