Why Lannett Company Shares Are Soaring 15% Higher Today

Source: Lannett Company

What: After announcing that it will acquire Kremers Urban Pharmaceuticals for $1.23 billion, shares in the generic drug makerLannett Company jumped by 15% earlier today.

So what: Kremers Urban Pharmaceuticals markets 18 products generating $800 million in trailing 12-month revenue through the end of the second quarter. Importantly, Kremers is a highly profitable company that expands Lannett's exposure to specialty drugs and is expected to increase earnings by mid to high single digits in fiscal 2016 and by 20% to 25% in fiscal 2017.

Kremers also boosts Lannett's manufacturing and research capacity and adds 11 pending ANDA's and 17 product candidates to Lannett's drug pipeline.

Given Lannett reported sales of $99 million and EPS of $0.91 last quarter, leading to the company issuing guidance for sales of at least $425 million in fiscal 2016, this deal has a chance to significantly increase Lannett's financial results.

Now what: Lannett's bottom line is expected to improve as the company cuts up to $40 million in annual costs over time and recognizes a tax benefit of $100 million associated with the transaction -- and that means that industry watchers are likely to bump up, rather than cut, their EPS outlooks for next year.

If so, then Lannett, which is already attractive to investors because of its 23% year-over-year sales growth last quarter and 14.2 forward P/E ratio, could be worth buying -- especially if shares give back a little of today's gain.

The article Why Lannett Company Shares Are Soaring 15% Higher Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.