Lannett's C-topical story

C-topical represents the LCI's first foray into the brand market. LCI started a promotional launch with 10 in-house reps in Jan. '16.

Key Takeaways:
- C-topical has been currently sold as un-approved drug
- The downside will be FDA requires LCI to stop marketing this product
- LCI expect Phase III trial wrap up in mid-2016, which potentially solve this problem

#1) What is C-topical? 

C-topical is a cocaine hydrochloride solution. This product is an analgesic topical solution for use primarily by ear, nose and throat physicians during surgical procedures. 

#2) What's the problem? What's the current situation?

C-topical has currently been sold as an un-approved drug despite FDA's denial of grandfathered status, which management reiterated was the expected outcome of the citizen petition.

The Company strongly believes that C- Topical, once clinical trials are completed and the FDA has granted approval, will be an important contributor to total revenue, with higher than average profit margins as a result of vertical integration.

However, the risk would be that FDA stops exercising enforcement discretion (e.g., if it determined LCI wasn't following its commitment to complete the trial or if it perceived a public health risk) and requires LCI to stop marketing the product (~$30 million of FY16 revenue).

（Source: IMS)
From the above graph, we found C-topical's total prescription volume has deceased since mid-2014 and recently see a rally in late-2015.

#3) Timeline for resolution
LCI expects its clinical trial to wrap up around the middle of the year 2016 and is looking to update FDA's enforcement division near-term on its progress.

For now, I will use zero for C-topical's revenue projection to keep margin of safety.

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