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Loss of major contract could hurt Lannett's credit rating, Moody's says

Credit rating agency Moody's flagged Lannett Co. Inc. for a possible downgrade following a review that began last year.

While Moody's affirmed the generic drug maker's B3 corporate family rating, it noted it was changing its outlook to negative — signifying a possible downgrade. The credit rating agency began its review after Jerome Stevens Pharmaceuticals Inc. said it would not renew its distribution agreement with Lannett once it expires on March 23.

The contract, Lannett's single largest, entailed the distribution of several of Jerome's products including levothyroxine sodium which accounts for about 35% of Lannett's total revenue.

With the impending loss of revenue, Lannett's credit metrics would weaken given uncertainty surrounding the company's ability to mitigate the impact from the lost sales, Moody's noted. The development also increases Lannett's refinancing risk given approaching debt maturities in less than two years.

In October 2018, the company said it is seeking help from its existing advisers to evaluate its options in addressing its debt and capital structure.