Lannett Company Inc (LCI) 2011 Q3 法說會逐字稿

Welcome to the Lannett fiscal 2011 third-quarter financial results conference call. My name is John and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

I will now turn the call over to Mr. Robert Jaffe, Investor Relations for Lannett. Mr. Jaffe, you may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to our fiscal 2011 third-quarter financial results conference call. On the call today are Arthur Bedrosian, President and CEO, and Keith Ruck, Chief Financial Officer.

Please be advised that this conference call is being broadcast live on the Internet at www.Lannett.com. A playback of this call will be available for three months, and may be accessed on the Internet at Lannett's website. I would like to make the cautionary statement and remind everyone that all of the information discussed on the call today is covered under the Safe Harbor provisions of the litigation Reform Act.

The Company's discussion today will include forward-looking information reflecting management's current forecast of certain aspects of the Company's future, and our actual results could differ materially from those stated or implied. This afternoon, Arthur will review the Company's business highlights, then Keith will discuss the financial results for the quarter in more detail, followed by Arthur's concluding remarks. We'll then open the call for questions.

With that said, let me turn the call over to Arthur Bedrosian. Arthur?

Thank you, Robert, and good afternoon, everyone. As all of you saw on our third-quarter news release, a number of factors which were out of our control impacted our financial results. More specifically, our topline and margins were affected by price declines on certain key products; the temporary discontinuation of our Morphine Sulfate Oral Solution product; limited quota from the DEA for our oxycodone hydrochloride oral solution; and a lack of product approvals due to the FDA backlog.

Unfortunately, the lack of product approvals can and did undermine our sales of our existing products. This is because we were not able to exploit the sales of our new products to our existing customer base. Also, without newly approved products, our salespeople are largely left defending our existing market share rather than growing market share. New generics are the lifeblood of our industry, and they allow us to leverage our sales calls and be more efficient.

While we have no control over the FDA delay in approving our products, we continue to strengthen our operations, invest in R&D, and seek out branding opportunities that will enhance revenue. Looking ahead, our antibiotic supplemental application for methicillin resistant staphylococcal auareas has been filed with the FDA.

Our C-Topical 505(b)(2) application will not be filed this fall, as the FDA is requiring additional clinical work before the application can be approved. We have identified a currently marketed product for branding, and have begun discussions with two potential firms, both with a direct sales force, to market the product for us. This will be our first branded drug product.

Also, we have 17 product applications pending at the FDA, which is a large number of applications for a company of our size. Some of these product candidates present larger market opportunities than we previously filed for. Since we have no reason to believe otherwise, we continue to anticipate that several of our drug applications, including our New Drug Application for Morphine Sulfate Oral Solution, will soon be approved.

With that, I'd like to turn the call over to Keith for an overview of our financial results.

Thank you, Arthur, and good afternoon, everyone. For the fiscal 2011 third-quarter ended March 31, 2011, net sales were $25.9 million compared with $31.3 million for the third quarter of last year. Gross profit was $5.3 million compared with $10.4 million of the same period in the prior-year.

Research and development expenses decreased to $1.9 million from $3.4 million in the fiscal 2010 third-quarter. Sales, general and administrative expenses declined to $4.3 million from $4.4 million in the same quarter of the prior-year. Net loss attributable to Lannett was $362,000 or $0.01 per share, compared to net income attributable to Lannett of $2.1 million or $0.08 per diluted share for the prior-year third quarter.

Turning briefly to our results for the first nine months of fiscal 2011. Net sales were $81.3 million compared with $91.4 million for the comparable period of fiscal 2010. Gross profit was $19.6 million compared with $30.0 million for the same period in the prior-year. R&D expenses decreased to $5.6 million from $9.1 million in the first nine months of fiscal 2010. Sales, general and administrative expenses decreased to $11.8 million from $12.2 million in the same period of the prior-year. Net income attributable to Lannett was $1.6 million or $0.06 per diluted share, compared with $5 million or $0.20 per diluted share for the first nine months of the prior-year.

Turning to the balance sheet, as of March 31, 2011, cash, cash equivalents, and short-term investment securities were approximately $22.8 million. Long-term debt, including the [current] portion, decreased to approximately $3.0 million at March 31, 2011 from $7.7 million at June 30, 2010, after paying off the $4.5 million PIDC Torresdale Avenue facility charge in December.

We have negotiated a set of mortgages on our new Townsend Road facility, with both Wells Fargo and the Pennsylvania Industrial Development Authority. The Wells Fargo portion of the loan is for $3.1 million. There's a floating interest rate of the one-month LIBOR rate plus 2.95%, amortizes over a 15-year term, and matures in eight years. The PIDC -- PIDA portion of the loan is for $2 million, and is expected to bear a 3.75% interest rate, and mature in 15 years. Both loans are expected to close shortly.

Effective as of March 31, 2011, we renegotiated our existing line of credit as part of establishing the mortgage on the Townsend Road property. As part of this renegotiation, the line now expires on March 31, 2012, and is now only collateralized by the working capital assets of the Company.

With that brief financial overview, I'll now turn the call back over to Arthur. Arthur?

Thank you, Keith. In summary, we are weathering the delay in FDA approvals of our products. In the interim, we continue to manage our business and believe that, ultimately, a number of our current applications will be approved in short order.

With regard to our pain management business, we have used a portion of the proceeds of the stock offering completed in December to expand Cody Laboratories, by adding APIs and investing in infrastructure to increase capacity. Looking ahead, as I said earlier, we expect to receive FDA approval for our New Drug Application for Morphine Sulfate Oral Solution in the near-term, and relaunch the drug shortly thereafter.

Moreover, we continue to invest in product development. Currently, we have a large number of product applications pending at FDA, and an additional 60 product candidates in various stages of development.

With the time available, we would now like to address any questions you may have. Operator?

(Operator Instructions). Scott Henry, ROTH Capital.

I do have a couple of questions. For starters, during the quarter, I was hoping perhaps Keith could give me the revenues for kind of three of the important divisions -- pain management, heart failure, and the thyroid deficiency categories.

Sure. Hold on a second, Scott. All right, during the quarter -- I don't seem to have it handy.

If you want, I can go on to my next question, and then you can just (multiple speakers) --

Go on to your next question, but I will have it shortly here.

Okay. Sure. I guess, Arthur, I wanted to drill in a little bit to the gross margin, which continue to go down. The scripts look pretty good for Levothyroxine, at least the ones I look at, and Digoxin within expectations. How should we think about that current gross margin?

I imagine will Q4 be depressed as well? Is it really going to look this way until we get new products? Or could there be any rebound prior to new products?

I'd have to say it's going to look going forward. As you recall, the price decline on these products occurred in the first quarter and they remain depressed throughout this year. Without any new products, you continue to have existing products challenged by competitors trying to capture market share.

We're fortunate in one respect in not giving up the market; on the other hand, we're having to match the prices that they're offering to try to capture that market away from us. And it results in lower and lower gross profit margins.

The newer products where the higher profit margins lie -- certainly, the morphine sulfate as an example -- has gone through two price increases by our competitors. So when we relaunch the product, we benefit from that. And one of the other products that we weren't selling this quarter, oxycodone, has had a ten-fold price increase by our competitor. And in that case, we've been handicapped by a lack of quota.

We did receive some quota that would allow us to manufacture the product and maybe have a few months of shipments, but without that steady income and gross profit margins, you're ending up selling the products where you have the most competition, and now will have to sell the products we have the highest gross profit margin.

That all changes once the approvals are granted. I'm afraid I can't explain why the delay in getting these approvals continues, because there's nothing we know or nothing the FDA has asked for that we haven't provided. So we're at real losses to understand when that will be given to us. But each time we speak to them, they say shortly -- whatever that means to you and me. Every day we don't have those products, we suffer.

I have the figures now, Scott.

Okay, great.

For thyroid deficiency, it was $12.3 million for the quarter; heart failure was $3 million; and pain management was $2.7 million.

Okay. Then shifting gears, Arthur, so the FDA wants additional clinical data on the cocaine C-Topical. What is your intention here? I mean, do you plan to deliver that data? Or do you plan to just sell it as is until that's not allowed? I'm trying to get a sense on the future of that product.

No, no, we're heavily committed to complying with the FDA's request. It's unfortunate that it's taken the FDA so long to actually tell us all the clinical work that they wanted, but we've started that work already. This is an additional clinical study that they've requested, so that the work we were contemplating would be done over the summer, and the applications submitted in the fall, will now be delayed until we conduct the additional studies they requested.

They've also given us a hint as to how much of a patient population they want us to work with. So all of that is in the works at the moment, and some of that studies of work is already underway.

Okay. About how long should it take to complete the additional work?

I would say at the outside, we're probably looking at a year's delay in filing the application, but we will continue to market the product. And at the earliest possibly in January, we might be able to file. A lot depends on how quickly the studies can be concluded. Again, it's hard to push the physicians that are conducting these studies. But that would be the best guess, a January filing. Worse case, roughly the fall of next year.

Okay. Now, and this is a subjective question. But do you get the sense, as you go back and forth with the FDA on the C-Topical, that as long as you're moving forward with this process, that they're comfortable in leaving the product on the market?

Yes, we do. They seem to feel that there's a need for this product on the market, and then the research that we've done, we've also engaged some marketing firms.

We have some very good information that's coming to us that this product, C-Topical, really replaces two products that they're using currently when they're not using C-Topical. I think the product fell out of favor in the '70s and '80s, when the abuse of cocaine became so prevalent. But now that we're dealing with this from a medical standpoint, we find this to be a very valuable product. I suspect the FDA sees that as well. And the studies they're asking will really conclude that and allow us to make those additional claims. There's no question the C-Topical has a greater value in the marketplace than the current topical products for anesthesia.

Okay. And the final question, also somewhat subjective. Given your discussions with the FDA, I guess, specifically when was your last discussion with the FDA? And how comfortable are you that approvals are coming near-term? I'm try to get a sense, if you believe they're coming near-term because of the way discussions are going? Or simply by default, since you haven't heard anything to the contrary, you expect them near-term?

So, we did hear from the local; or the way this system works, you have an inspection. They did advise me at the close-out that they closed out the January 2010 inspection, which was the original reason for the delay in giving us our approvals. Then they wanted to do a preapproval inspection for the morphine sulfate, although that was conducted in the February 2011 inspection. That was concluded. We spoke to the local; they're comfortable with the inspection, and they concluded it. (technical difficulty)

(technical difficulty) -- R&D. Arthur, you expressed an indication that you're investing in R&D, but how does that stack up when we're looking at an R&D expenditure decline for nine months from $9.1 million previously -- previous nine months to $5.6 million. And through the latest quarter, there was about $1.8 million or so. I don't know how that stacks up versus the last previous quarter. But what can you tell us about -- you've got a decline here in R&D of some substance. Where is that going now and into the future?

Well, when we plan our R&D budgets, we usually plan on spending roughly 8% of our sales volume. In July, we started our annual operating plan, of course, and we suddenly incurred a reduction in gross profit margins, which would lead to a reduction in sales volume, because when you lower the price of a product, your sales decline with it.

Unfortunately, when that happened in July, we took a look at our planned spend and decided we needed to cut back some of that spend. We did where we could cut back. We postponed certain bioequivalency studies, for example; postponed purchasing some material, to try to reduce the outlay of cash.

You know our business depends on R&D and new product approvals, and it's frustrating when you keep spending the money and you never get the approval. There comes a point where everybody says, well, why keep spending the money? The problem is you have to pay attention to that. You can't keep spending without the revenue coming in. So what we try to do is adjust the spin to match the revenue coming in and take a look at what we're doing.

We're not trying to make a year profitable by not spending in R&D, but certainly, you have to manage your expenses. And that's one of our major expenses here. We did the same with our capital expenditures as well. We cut back in certain areas. But we continue to believe that the proper spend for us is roughly 8% of our sales volume, if we want to continue to grow the business. Once the product approvals come through, the sales volume will pick up, and that will allow us to go back and spend a little bit more. But we were being conservative this year.

So, basically, as you're looking at, for example, this quarter, would the R&D be up from that third quarter? Or would that show a further decline?

No, it will be up because while you're trying to manage your R&D expense, it's hard to actually manage it to a precision, because I have certain CROs that are ready to conduct bioequivalency studies. I made certain commitments to shareholders that I'd file another 505(b)(2) by June or July, so I needed to do that bioequivalency study to get that application in. So sometimes, you have to live up to your commitments and make sure that those applications get in.

Now, the 505(b)(2)'s tend to be quickly rewarding because they'll be approved generally within six months to 10 months. So, not spending that money wasn't wise. Nevertheless, expecting to have a sweet quarter, knowing we're not getting our products improved, the morphine sulfate is still pending, made us consider what to do here. We collectively believe the best course of action for Lannett is to ignore the impact on this year, go ahead and do that file clemency study, because that just gives me at least six months [in] next year profitable high-margin sales volume. And I really need to concern myself with the higher profit margin products right now.

Okay. All right. And then further on here, on the inventory level now, this shows the $24.7 million for the quarter. And that's up from $19 million in June. I'm not sure what it would be up from the end of December. Where is the increase? What represents the increase year-to-year over this nine-month period?

Well, some of that has to do with certain raw material. I will give you an example. There was one application at the Agency that we expected might get approved by the fall of this year. The raw material supplier decided was acquired by another big pharma, and decided to discontinue this product. So this would be the last year they would make that raw material.

So we had no choice but to go ahead and make a heavy commitment about a year ago to purchase that material in advance of our needs, and have that material delivered. That's one of the reasons. Some of the other reasons have to do with the raw material that we're bringing in for R&D purposes was quite expensive. If we didn't purchase the material, we couldn't even begin the research and development. Unfortunately, that material has come in as well.

Until we use that raw material for R&D, those APIs are on our inventory as a value. Once they're actually used in R&D, they're expensed. So that's the reason you've seen a jump in the R&D -- excuse me, in the inventory levels. We haven't had any increased material that we're not selling, for example, and haven't lost any major customers. It's really a combination of R&D expenditures there hitting our balance sheet.

Okay. And then a question on prepaid taxes, it shows $2.4 million in the quarter of prepaid versus zero previously for June 30 last year. Can you detail what that is?

I can briefly. We were making estimated payments during the year based on an expected level of taxable income. And towards the end of the year, we did some tax planning, including significant acceleration of tax depreciation on certain assets, which caused us to have less taxable income, and therefore, an overpayment, in effect, created by the quarterly estimated payments. So we expect that refund -- part of that number or most of that number to be refunded to us shortly.

I see. Okay, and then one on construction in progress. This shows nearly $5 million of construction in progress. It was $2.9 million back in June 30 a year ago.

Can you give us some color on where specifically that $4.9 million is going? How much is Cody? You mentioned about, Arthur, expanding some Cody operations. How much is represented by Cody in that total?

Cody is $3.7 million or almost $3.8 million alone of that number. It does include the start of their expansion -- from what Arthur talked about earlier about allocating some of the funds from the recent stock offering down to them. They are expanding, creating additional rooms, doing significant upgrades to HBAC and what-have-you to build out their facility.

Okay. All right. Thank you.

Thank you, George.

Marco Rodriquez, Stonegate.

Thanks for taking my questions. Don't know if I had a problem on my end or on your end, but I got disconnected. So I apologize if I ask any questions that you've already reviewed.

That's okay. Everybody got disconnected. Don't feel bad.

Okay. All right. I was wondering if you might be able to give us a sense in regard to the pending approvals that maybe you're expecting in the quarter? And what sort of impact that may have had on you?

Well, on the profit side, I believe all of them will be very profitable products for us. Certainly, the morphine sulfate because we'll be the second person on the market -- did he just get -- are you still there, Marco?

Yes.

Okay. I thought we got disconnected for a moment there. That's going to be -- we'll be the second person on the market. We did receive some quota from the Agency on our oxycodone. And again, we're the second one on the market for that product. That just had a ten-fold increase recently.

The other ANDA's that are pending at the Agency -- there's one case -- they're timely. One's an anti-obesity product. We expect to be the first to file on that, meaning we'll be the exclusive generic on that drug when it's approved. And the other one has got only about two competitors in the marketplace.

So all of the pending products -- and let me not leave out that shortage item, the item that's involved in a shortage -- because of the shortage, we will be the only one in the marketplace. So we see all of them being strong contributors to sales; strong contributors to gross profit margins, and will lift our gross profit margins up considerably. So all of these are good products to have.

And were those products -- the particular products you outlined, were you expecting those to be approved this last quarter?

Not this last quarter. We expected two of them for -- in the summer, so they're still on time; and one of them would have been approved later in the fall, the shortage item. That seems to be getting some attention, because there is nobody now currently on the market. The FDA has been criticized over a significant number of shortages. So it appears that that application was timely submitted by us and coincidental to this shortage. So that would be the fourth one we're expecting.

All of these we did expect by June. So certainly, we might have gotten them this quarter, but they wouldn't have made a contribution if we do get them. Now, of course, the quarter is nearly over, so even if we got them, it's still not going to help this fiscal year. But it's why I'm so confident next fiscal year, we'll be very strong.

These approvals -- there's no reason to believe they're not going to be approved -- are all coming in at a time when they'll be making a tremendous contribution to us in sales potential as well as gross profit margins being very high. Higher than usual, let's put it that way.

Right. And then so the expectation on the gross margin then -- it's kind of where I got cut off when you had the first caller asking questions in regard to the trends there into next quarter. It sounded like they will remain the same as your fiscal Q3. How are you kind of looking at your gross margins as you progress into fiscal '12?

Well, we're very disappointed in the gross profit margin decline. Unfortunately, the generic industry is fraught with price competition and this is one of the sad commentaries on our industry. Nevertheless, with new product approvals, you usually are overcoming that, because you're always getting some approvals. But when you're spending R&D dollars and not getting any approvals from the Agency, it's almost counterproductive to spend the money; because it certainly reduces your profit margins as a business when you expend all of that money, and you don't get any product approvals.

These approvals we never expected to suddenly dry up and not receive any at all. And this is one of the worst years for not getting approvals. We're not alone in making these observations and complaints; but because we're a smaller company, the impact on me is larger than it would someone that makes acquisitions as part of their business growth.

But nevertheless, while I expect the remainder of this year to remain like we said -- choppy, and we still expected it to be profitable. The profitability will depend on whether we get any approvals between now and June 30. If we don't, then it will probably be a weak quarter as this one was. But I'm still optimistic that it won't be as bad as our third quarter. But I really couldn't make any more than that kind of a prediction at this time.

Okay. And then how do you see it going into fiscal '12?

A very strong year for fiscal '12. I'm very optimistic that even with price declines calculated in our projections, I still see next year being a very strong year.

Okay. And I'm not sure if I caught this either -- in your prepared remarks and your press release, you're discussing the prize declines in Levo and Digoxin. I know that obviously there's constant pressure there. I'm just wondering if there's anything that was more aggressive in the quarter than normal?

Again, I did state that we really have not had competition on the thyroid since the first quarter, but we continue to have pressure on the heart failure products each of the last three quarters, including this one. We expect to file a 10-Q by Friday, and you will see in our roll forward of our gross to net, you will see a significant increase in the other category, which includes the shelf stock adjustments.

Okay. And then just real quick a couple of housekeeping items. We should expect to see the $5.1 million in mortgages on your June balance sheet?

Yes. Actually when we stated in our earnings release that they would close shortly, we're talking within days on one, on the Wells Fargo piece, and within two weeks for the IDA.

Okay. What was cash flow from operation in CapEx for the quarter and year-to-date period?

If you're going off the standard cash flow statement --

Correct.

-- we were a negative 4.6 for the year-to-date. I don't have quarterly; I do not disclose quarterly. And CapEx year-to-date is $5.7 million.

Great. Thanks a lot, guys.

Thank you, Marco.

Tom Harenburg, Carl M. Hennig, Inc.

You know, fellows, you're talking about a great 2012. Are you talking about fiscal 2012 or calendar 2012?

Fiscal. We're always talking about fiscal year.

Okay. And a year ago -- or excuse me, in the past quarter, you indicated that you expected to still be profitable for 2011. Is that still your feeling?

Well, I'm always the optimist here, but let's say my feeling is being challenged. I expected that some products certainly would be approved by May 1, and that delay now has gone further than May 1. If we don't receive the morphine at all in this month, then it'd be a challenge to be profitable in our fourth quarter. But it's still a possibility.

Okay. And Cody -- I assume Cody is still showing losses?

Yes, they are.

They are? Okay. Do you feel that Cody will be profitable in the next year?

If they get up and running and have full Morphine Sulfate production for the year and some oxycodone, I would think that they would be profitable, yes.

And is that plant being -- that's the Wal-Mart building -- is that being expanded within? Or are you expanding out to the outer side to that?

Mostly within.

Well, actually there's been some expansion outside the building. I just returned from Cody as the [T3 selium itself] as well. The facility is well on its way to doing all the things we said it would do, having the ability to make multiple products in different -- in multiple rooms, in the same room, as well as having dedicated rooms. And the facility and the investment there will be very rewarding to Lannett.

And what percentage of that building would you say you are using -- or you will be using once the expansion is completed?

My guess -- probably in the neighborhood of 65%.

Okay. With the offering funds, when you made that offering, it appeared apparent that you had some definite things in mind, possible acquisition of some additional drugs and so forth. Where do you stand on that? Because basically, the only monies you really used off that offering have been to expand Cody.

That store I believe -- we've had some discussions with some people. We are planning to establish a branding division. And we have engaged marketing firms to do some market research on the product we plan to market as a brand. And we've also engaged discussions with some partners with regards to the branding, the detailing of those brands.

And also, we're in the midst of finalizing an agreement for acquiring a license from another firm. That should be announced within the next couple of weeks, let's say. And that's also pending approval at the Agency and it's at the very final stages. So it was someone else's ANDA that's being transferred to us that's in the final stages of being approved, so there should be no delays on that approval.

So we have moved forward on some of those areas, but have not actually identified any particular acquisition. We've had some discussions with some companies. One in particular was in a biotech field that we explored because they had secondary capabilities for our industry as well, besides the biotech portion. But we continue to talk to people in that area.

Okay. The indication I felt that at the time you did the offering was that there was something imminent. Has that gone astray then?

No, not at all. The product acquisition is the one -- the contract has been reviewed, changed; we're in the midst of just finalizing it. That contract now is finalizing. There's one question left on the table. We entered into another supply agreement for one of our products as well. So no, that -- those things have occurred -- not an acquisition, but everything else we talked about is in some stage of being done, finalized, or soon to be announced.

Okay. Thank you, fellows. Good luck.

Okay. Thank you.

George Gaspar, private investor.

Yes. A little follow-up on Cody, Keith. About the expansion and -- first of all, can you highlight the actual loss that was represented at Cody and the overall operations for the quarter?

We don't disclose that number and I would be hesitant to give it out.

Okay (multiple speakers) --

You also have to remember that the Cody profit is dependent on our transfer pricing between the two companies. And although I won't call it fungible, the profitability can be changed by increasing or decreasing the transfer price of the products between the companies. So I would tell you it's just -- it's not disclosed. And I won't call it not meaningful, but I will just call it a loss for the three quarters ended March, and it is expected to be a loss for the full-year.

Okay. And then again on Cody, as you're looking forward to the completion that, Arthur, you highlighted that's going on there, can you give us a ballpark number as to what the revenue stream opportunity will be at Cody, versus, let's say, a year ago before you started the expansion program?

Not off the top of my head but I could get back to you on that question. I don't want to guess at a number make sure it's wrong. But I know they had a very aggressive sales projections for the year before they lost the marketing in the oxycodones. We're still not clear whether or not we can continually rely on receiving quota. That's been up in the air. So I'm afraid to say something when so much is dependent on what's going to happen with regards to quota there. They're quota-dependent, as you know.

Okay. And well, if I ask a follow-on question on your expansion there -- and I think you responded to Tom Harenburg about being at 65,000 square feet of utilization or planned at least with your expansion. In terms of productive square footage, where were you a year ago and where will you be when you complete what you're doing now, in terms of productive square footage there?

Well, that's a good question. I didn't ask that myself when I was there, in terms of the square footage. But if you were to allow me to guess that, I would say that out of the 73,000 square feet, I certainly said 65% of their capacity is suddenly being used. So that puts it around 40,000 square feet. My guess would be that they're probably close to about 55,000 square feet of production capability now.

And that would be at the conclusion of the current construction?

Yes.

55,000?

Right.

And that would be up from what then? Would that -- was that [40,000] or --?

Well, see, that's it. I don't know what the number was before, but my guess would be it was probably around 25,000 square feet.

25,000, I see.

Because I'm taking into consideration some of the backup systems that have installed out there. In our business, when you're making an API, you can't have a disruption in power. So there's -- some of the backup systems are installed on site but outside the building, and I'm trying to take into consideration that square footage as well.

But what I could do, George, is give you a call separately about this, because I'd rather not guess it. It's a good question, one I should be prepared to answer in case anyone else answers it. So I'll check with my staff out there and I'll find out what the exact square footage changes are.

Okay. And then just another one on Cody. You mentioned clean rooms, that part of this construction process is going to clean rooms. How many clean rooms in terms of on the manufacturing side, production side, are you going to have, relative to, say, where you were a year ago or 18 months ago?

Well, let me clarify -- clean room in the industry has a different meaning. It talks to bacteria and such. So I don't want to call these clean rooms. These would be what we call a CGMP -- a good manufacturing practice room, let's say, or room that meets CGMPs. I don't recall how many rooms either. I know they've increased the number of rooms. Well, we -- but I'd have to get back to you on that answer too, because I don't want to guess on an answer.

But just to try to explain it this way -- what they were doing in the past is they had rooms that were dedicated to a particular product. What we did now in the construction is make some of the rooms dedicated -- because we know we're going to have long-term use of them to make a particular item -- and some of the other rooms were versatile, so that I can keep moving product in and out of that room.

And the support for those rooms that was designed, was designed so that I could make different products, and at the same time, run rooms simultaneously as well, which was not the capability before. In the past, we'd have to make -- do the step of a process, and move to the next step, move to the next step with the staff.

Now, we'll have simultaneous rooms operating simultaneously with the same staff. So there will be more of an economic value to that operation and also more capability to make multiple products. They have very serious goals in front of them and they're already well on their way to meeting those goals.

But I can answer this question for you offline, because I think it's tied to your previous question.

Okay. All right. Thank you.

All right, thank you, George. You'll hear from me in a day or two. If you don't, call me, please.

We have no further questions at this time. Do you have any closing remarks?

Yes. I want to thank you all for joining us today. If anyone has any further questions, please do not hesitate to contact the Investor Relations team at Lannett. That concludes our call and thanks again for joining us today.