Why Lannett Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of generic-drug maker Lannett Company (NYSEMKT: LCI) sank 11% today after announcing the pricing of an underwritten public offering.

So what: Management priced its offering of 5,869,566 shares at $18.00 per share, which is about 14% below yesterday's close of $20.93. Given that wide of a discount, as well as the sheer size of the offering -- roughly 20% of shares outstanding -- investors are obviously concerned about the sale's dilutive potential.

Now what: Lannett expects to receive net proceeds of roughly $71.5 million from the sale.

"The Company intends to use the net proceeds it receives from this offering for general corporate purposes, including, without limitation, research and development, general and administrative, manufacturing and marketing expenses, and for potential acquisitions of companies, products, ANDAs, technologies and assets that complement its business," Lannett said in a press release.

With Lannett shares up a whopping 370% over its 52-week lows and trading at a P/E of 40, it's tough to blame management for wanting to strike while its currency is hot.

These companies are revolutionizing cancer treatment
Waiting for stocks to pop and drop is one way to play health care stocks, but the best strategy  is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In The Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

The article Why Lannett Shares Plunged originally appeared on Fool.com.

Fool contributor Brian Pacampara owns no position in any of the companies 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story