LCI Lannett Company Inc

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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Check the appropriate box:

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LANNETT COMPANY, INC.

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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Payment of Filing Fee (Check the appropriate box):

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December [  ], 2022

Dear Lannett Company, Inc. Stockholders:

It is my pleasure to invite you to the 2023 Annual Meeting of Stockholders of Lannett Company, Inc. which will be held on January [  ], 2023 at 9:00 a.m. Eastern Time, at the Company’s headquarters at 1150 Northbrook Drive, Trevose, PA 19053.

The purpose of the meeting is to (i) elect five members of our Board of Directors, (ii) vote to ratify the selection of Grant Thornton, LLP as our independent auditors, (iii) obtain an advisory vote on the compensation of the Company’s executive officers, (iv) approve a proposed amendment to our Certificate of Incorporation to effect the Reverse Stock Split as described further in this proxy statement, (v) approve one or more adjournments of the Annual Meeting to a later date or dates if necessary, and (v) transact such other business as may properly come before the Annual Meeting.

Your vote is important. Whether you plan to attend the meeting or not, we encourage you to read this Proxy Statement, in its entirety, and vote your shares. Please sign, date and return the enclosed proxy card as soon as possible in the postage-paid envelope provided.

We look forward to your participation should you be able to attend our annual meeting.

Thank you.

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LANNETT COMPANY, INC.

1150 Northbrook Drive, Suite 155

Trevose, Pennsylvania 19053

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LANNETT COMPANY, INC.

PROXY STATEMENT FOR

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY [ ], 2023

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ATTENDANCE AND VOTING MATTERS

DATE, TIME, AND PLACE OF MEETING

This Proxy Statement is provided to you by the Board of Directors (the “Board”) of Lannett Company, Inc. (“Lannett” or the “Company”) in connection with the 2023 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held on January [  ], 2023 at 9:00 a.m. Eastern Time, at the Company’s headquarters at 1150 Northbrook Drive, Trevose, PA 19053, or at any adjournments or postponements of the Annual Meeting for the purposes set forth in the accompanying Notice of Annual Meeting. We intend to mail this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders on or about December [  ], 2022 to all stockholders of the Company entitled to vote at the Annual Meeting.

VOTING METHODS

You may vote on matters to come before the Annual Meeting in three ways:

If you attend the Annual Meeting to cast your vote in person and you are holding your stock in a brokerage account (“street name”), you will need to provide a legal proxy obtained from your broker.

You are entitled to cast one vote for each share of Lannett common stock owned on the record date, November 28, 2022. As of the record date, there were [  ] shares of Lannett common stock outstanding. Stockholders are not entitled to cumulative voting in the election of Directors.

QUORUM

A quorum of stockholders is necessary to hold a valid meeting for the transaction of business. If the holders of a majority of Lannett common stock are present at the meeting, in person or by proxy, a quorum will exist. Abstentions and “broker non-votes” are counted as present for purposes of establishing a quorum.

VOTE NECESSARY FOR ACTION

Directors are elected by a plurality vote of shares present by remote communication or by proxy at the Annual Meeting. Each other action to be considered by the stockholders will be approved by the affirmative vote of at least a majority of the shares present in person or by proxy at the meeting and entitled to vote on the matter, except that the Reverse Stock Split will be approved by the affirmative vote of at least a majority of the shares entitled to vote on the matter. For any proposal, an abstention will have the same effect as a vote against the proposal. Broker non-votes will not be voted for or against any of these proposals and will have no effect on any of these proposals. Approval of the Reverse Stock Split is considered a routine matter on which a broker or other nominee has discretionary authority to vote.

SOLICITATION OF PROXIES

The Company is soliciting your proxy in conjunction with the matters to be voted upon at the Annual Meeting. The Company will bear the cost of soliciting proxies from you. The solicitation of proxies may be by mail and direct communication with certain stockholders or their representatives by our officers, directors, and employees, who will receive no additional compensation therefor. We have engaged Georgeson LLC to assist with the solicitation of proxies for an estimated fee of $13 thousand plus reasonable out-of-pocket expenses. Refer to Appendix I of this proxy statement for a toll-free number where Georgeson LLC services can be reached.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements. Any statements made in this Proxy Statement that are not statements of historical fact or that refer to estimated or anticipated future events are forward-looking statements. We have based our forward-looking statements on management’s beliefs and assumptions based on information available to them at this time. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” or “pursue,” or the negative other variations thereof or comparable terminology, are intended to identify forward-looking statements. Such forward-looking statements reflect our current perspective of our business, future performance, existing trends and information as of the date of this filing. These include, but are not limited to our beliefs about future revenue and expense levels, growth rates, prospects related to our strategic initiatives and business strategies, express or implied assumptions about government regulatory action or inaction, anticipated product approvals and launches, business initiatives and product development activities, assessments related to clinical trial results, product performance and competitive environment, and anticipated financial performance. The statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. We caution the reader that certain important factors may affect our actual operating results and could cause such results to differ materially from those expressed or implied by forward-looking statements. Lannett is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise and other events or factors, many of which are beyond our control, including those resulting from events, or the prospect of such events, such as public health issues including health epidemics or pandemics, such as the outbreak of the novel coronavirus (“COVID-19”), whether occurring in the United States or elsewhere, which could disrupt our operations, disrupt the operations of our suppliers and business development or other strategic partners, disrupt the global financial markets or result in political or economic instability. We believe the risks and uncertainties discussed under “Item 1A - Risk Factors” contained in the Company’s Annual Report on Form 10-K and from time to time in our SEC filings may affect our actual results.

We disclaim any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. We also may make additional disclosures in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and in other filings that we may make from time to time with the SEC. Other factors besides those listed here could also adversely affect us.

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BOARD OF DIRECTORS

The Role of the Board in Setting Purpose, Values and Strategy

The Board of Directors sets foundational values and strategies for the Company and relies on management to implement policies that support those values and achieve corporate goals.  

The Chief Executive Officer, who is the only employee member of the Board of Directors, serves as a vital communication link between the Board and the executive team by providing regular strategic overviews that describe the most significant issues, risks and opportunities facing the Company. Business and functional leaders also provide regular updates so that the Board can review and discuss the risks and opportunities associated with the Company’s financial forecasts, business plan and operations.

Director Nominee Profile

The Company is focused on nominating a Board of Directors with a balance of functional expertise, leadership experience, high moral character, critical thinking, and a diversity of backgrounds and tenure necessary to effectively oversee the Company’s business. The Governance and Nominating Committee is responsible for developing the criteria and qualifications required for director nominations and used the Board Nominee Skills Matrix below in its nomination process. The Governance and Nominating Committee believes these six skills listed are the some of the most salient Board member qualifications for the next year – and for several years into the future. The table below displays the Board’s balance given the current nominees.  

Annually, the Governance and Nominating Committee reviews the size of the Board and ensures that qualified candidates are included in the pool from which the Board nominees are chosen. The Committee also ensures that the pool of candidates includes diversity in regard to gender, ethnicity, tenure, skills and experience. In each new director search, the Governance and Nominating Committee instructs any search firm engaged to include candidates that identify as female and minority candidates.

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The Governance and Nominating Committee considers several metrics related to Board composition when reviewing the size of the Board and qualifications of the nominees annually. This year, the director nominees maintain a balanced tenure position with four nominees having served five years or less in their positions and one nominee having served for over 10 years. The average tenure of the nominees is approximately six years. The average age of the Board nominees is 61 years old. The graphics below highlight additional key metrics reviewed by the Governance and Nominating Committee.

After many years of valuable service, Mr. Jeffrey Farber, will not be standing for re-election to the Board for 2023. In recognition of his vital contribution over many years as a board member and prior service as Chairman, the Board of Directors has appointed Mr. Farber as the Chair Emeritus. In that role, Mr. Farber will continue to provide guidance and expertise to the Board.

Three committees, including the Audit Committee, Compensation Committee and the Governance and Nominating Committee, will remain 100% independent if all nominees are re-elected at the stockholders meeting. The ESG Committee will be 75% independent.

Risk Management

Assessing and managing risk is the responsibility of management; however, the Board, through the Audit Committee, provides oversight and reviews various details regarding the Company’s risk mitigation efforts (i.e., Enterprise Risk Management or “ERM”). Through the Board’s committees, the Board maintains broad oversight over various functions within the Company. The Audit Committee, under its charter, reviews and discusses risk exposures and the steps management has taken to monitor and mitigate each risk. The Board is engaged in the Company’s strategic planning efforts, which include evaluating the objectives and risks associated with these initiatives.

The Company’s ERM is a fluid process that identifies, assesses, and mitigates actual and potential risks that may affect the Company’s ability to achieve its strategic objectives. Risk and strategy issues are used to develop annual, cross-functional risk mitigation and management plans. The plans are updated by the management leadership team on an ongoing basis with a particular focus on the high-risk areas. Management updates the Audit Committee on its ERM processes at the quarterly scheduled Board meetings. The plans are approved annually by the Board of Directors after input from a multidisciplinary group of executives and various committees, including the ESG Committee.

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Sustainability

The ESG Committee is responsible for providing oversight of the Company’s ESG activities. The Board is ultimately responsible for ESG activities and provides strategic direction based on input from management, the Board’s ESG Committee, and outside stakeholders.  

The ESG Committee’s review of ESG activities may include, but is not limited to:

Human Capital

The Company believes that an inclusive and diverse workforce is essential to the success of our employees in reaching their highest potential and the Company in reaching our short-term and long-term goals. Employment is based upon personal capabilities and qualifications without discrimination because of gender, race, national origin, ancestry, religion, age, color, physical or mental disability, sexual orientation, gender identity, transgender status, marital status, creed, arrest record, conviction record, citizenship status, veteran status, predisposing genetic characteristics, reproductive health decisions or any other characteristic protected by law. Below is a snapshot of key inclusion and diversity metrics related to the Company’s workforce as of June 30, 2022.

Board Diversity, Equity, & Inclusion

We believe that a Board comprised of Directors from diverse backgrounds promotes the inclusion of different perspective and ideas, makes good business sense, and makes for better corporate governance. When assessing Board composition or identifying suitable candidates for appointment or reelection to the Board, the Committee will consider candidates based on merit against objective criteria having due regard to the benefits of diversity and the needs of the Board. The list of candidates will include individuals with a variety of business experiences, from different geographies and of various ages, genders, and ethnicities. Annually, the Governance and Nominating Committee will review this policy and assess its effectiveness in promoting a diverse Board.

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Corporate Governance

The Board is responsible for overall corporate governance, which includes, but is not limited to, providing oversight of the direction of the Company and management’s implementation of the Company’s strategic plan. The corporate governance guidelines are available at www.lannett.com. The Board and various committees of the Board meet regularly to discuss operating and financial reports presented by the Company, including but not limited to the Chief Executive Officer, Chief Financial Officer, and other members of management.

Code of Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”). The Code of Conduct applies to all employees including the Company’s Board of Directors, Chief Executive Officer, Chief Financial Officer, Corporate Controller, and other key employees. The Code of Conduct is publicly available on our website at www.lannett.com. If the Company makes any substantive amendments to the Code of Conduct or grants any waiver, including any implicit waiver, from a provision of the Code of Conduct to our Chief Executive Officer, Chief Financial Officer, or Corporate Controller, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

Our Code of Conduct is a guide to build on our legacy. It is designed to guide members of the Lannett family to navigate ethical situations, interact ethically, make good decisions and handle workplace situations with integrity.

All employees at Lannett and its subsidiaries, including corporate officers and members of our Board of Directors, are required to read, understand and follow our Code of Conduct. Our employees undergo periodic training on the Company’s policies and procedures and, in addition to completing a required number of annual outside training credits, the Board undergoes annual compliance training by a compliance professional. Business partners, such as vendors, consultants and temporary employees who serve as an extension of the Company are expected to follow our lead in how we conduct business.

Anti-Hedging and Anti-Pledging Policy

The Board has established effective anti-hedging and anti-pledging policies. We have an insider trading policy which among other restrictions prohibits employees, officers and Directors, including Named Executive Officers (“NEOs”), from entering into short sales, calls or any other hedging transaction involving Lannett securities. In addition, the Board has a policy that prohibits Directors and NEOs from pledging Lannett stock. None of our Directors or NEOs have pledged Lannett stock as collateral for personal loans or other obligations.

Board Attendance

The members of the Board are expected to attend all Board meetings whether in person or via teleconference. Additionally, members of the Board are expected to attend the Annual Meeting.

The Board met six times during the fiscal year ended June 30, 2022 (“Fiscal 2022”). In addition to meetings of the Board, Directors attended meetings of individual Board committees. Each of the Directors attended at least 75% of the Board meetings and meetings of Board committees of which they were a member during Fiscal 2022. All Directors were present at the 2022 Annual Meeting.

Board Leadership Structure

The Company’s Corporate Governance Guidelines provide that a majority of our Directors should meet New York Stock Exchange (“NYSE”) independence requirements. A director will not be considered independent unless the Board determines that the director meets the NYSE independence requirements and has no relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director.

Our Board leadership structure is one under which Patrick G. LePore serves as the non-executive, independent Chairman of the Board. We currently have five other Directors, including Timothy C. Crew, Chief Executive Officer. Four of the six Directors currently serving on the Board of Directors are “independent” as defined by the NYSE. In addition, the non-management members of the Board of Directors meet regularly without management Directors or management personnel present.

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The Board believes that the role of Chairman of the Board and Chief Executive Officer should be separate, and that the Chairman should not be an employee of the Company. The Board believes that this separation benefits the stockholders in the form of increased oversight. As further oversight, the independent Board members also meet throughout the year in executive sessions where neither management personnel nor other non-independent Directors are present. In the Company’s case, this excluded Jeffrey Farber and Timothy C. Crew, Chief Executive Officer.

Overall, we believe that the separation of the Chairmanship and Chief Executive Officer positions, our strong committee system, and regular non-management director and independent director meetings allow for effective Board oversight of management.

Communicating with the Board of Directors

Interested persons may contact the non-management Directors by sending written comments to 1150 Northbrook Drive, Suite 155, Trevose, Pennsylvania 19053 Attn: Board of Directors. The original communication as addressed, or a summary of the submissions will be forwarded to the Directors for discussion in the next Directors meeting. If a summary of the communication is provided, the original communication will be maintained on file and available for the Directors’ review upon request.

The Audit Committee has responsibility for overseeing the Company’s financial reporting process on behalf of the Board. In addition, Audit Committee responsibilities include, but are not limited to, selection of the Company’s independent auditors, conferring with the independent auditors regarding their audit of the Company’s Consolidated Financial Statements, pre-approving and reviewing the independent auditors’ fees and considering whether non-audit services are compatible with maintaining their independence, and considering the adequacy of internal financial controls. The Company has outsourced its annual Sarbanes-Oxley compliance testing and evaluation to Pricewaterhouse Coopers, LLP (“PwC”) and will engage PwC for other risk mitigation services from time to time as needed. The Audit Committee operates pursuant to a written charter adopted by the Board, which is available on the Company’s website at www.lannett.com. The charter describes the nature and scope of the Audit Committee’s responsibilities. All members of the Audit Committee are independent Directors as defined by the rules of the NYSE. See “Report of the Audit Committee.”

Financial expert on Audit Committee The Board has determined that John C. Chapman, current director and Chairman of the Audit Committee, is the Audit Committee financial expert as defined in section 3(a)(58) of the Exchange Act and the related rules of the Commission.

Information Security Experience on the Audit Committee The Audit Committee is responsible for overseeing management’s controls over information security. The Audit Committee meets at least quarterly with the Company’s IT management and performs a review of our cybersecurity controls to ensure routine metrics, monitoring reports, and annual internal and external assessments are included. Additionally, the Audit Committee meets with the Company’s independent auditors regarding their annual audit procedures, which include information security. John Chapman has information security experience. Pursuant to the Audit Committee charter, the Audit Committee is briefed periodically on the status of the Company’s systems and processes to ensure that the Company’s electronic information is not compromised. There have not been any breaches of Company information systems in the last three years and the Company, which maintains a cyber security insurance policy, has not paid any expenses or penalties related to any information breaches.

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The Compensation Committee establishes and regularly reviews the Company’s compensation philosophy, strategy, objectives and ethics and determines the compensation of the executive officers of the Company. For a discussion on the Compensation Committee’s process and factors used in determining executive compensation refer to “Compensation Discussion and Analysis” starting on page 16. The Compensation Committee also administers the Company’s equity compensation plans. The Compensation Committee operates pursuant to a written charter adopted by the Board, which is available on the Company’s website at www.lannett.com. All members of the Compensation Committee are independent Directors as defined by the rules of the NYSE.

Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee during Fiscal 2022 or as of the date of this Proxy Statement is or has been an officer or employee of the Company and no executive officer of the Company served on the compensation committee or Board of any company that employed any member of the Company’s Compensation Committee or Board.

The Governance and Nominating Committee is responsible for identifying and evaluating individuals qualified to become Board members and for recommending such individuals for nomination. All candidates must possess an unquestionable commitment to high ethical standards and have a demonstrated reputation for integrity. Other factors considered in identifying and evaluating candidates include an individual’s business experience, education, civic and community activities, knowledge and experience with respect to the issues impacting the pharmaceutical industry and public companies, as well as the ability of the individual to devote the necessary time to service as a director.

Once a person has been identified by the Governance and Nominating Committee as a potential candidate, the Governance and Nominating Committee performs a robust review, which includes collection of outside information, to include publicly available information and all other relevant information available to determine if the person should be considered further. Once this determination has been made the person is contacted. If the person expresses a willingness and interest to be considered to serve on the Board, the Governance and Nominating Committee will request further information from the candidate including resumes, references and other relevant information. A formal interview process is then held. The Governance and Nominating Committee will then consider all information, qualifications, and accomplishments, including comparisons to other potential candidates before making its final decision.

The Governance and Nominating Committee will also consider candidates recommended by stockholders. All nominees will be evaluated in the same manner, regardless of whether they were recommended by the Governance and Nominating Committee or recommended by a stockholder. To have a candidate considered by the Governance and Nominating Committee, a stockholder must submit the recommendation in writing and must include the following information:

The stockholder recommendation and information described above must be sent to the Company at 1150 Northbrook Drive, Suite 155, Trevose, Pennsylvania 19053, and must be received not less than 90 days prior to the anniversary date of the Company’s most recent Annual Meeting.

The Governance and Nominating Committee is responsible for overseeing the leadership development plans for succession of the CEO and other executive officers (or the “Succession Plan”). Annually, the CEO shall report to the Committee on this topic and shall provide such committee with recommendations and evaluations of potential successors. The CEO shall recommend who should assume the position of interim CEO in the event of an emergency. The Committee shall review the Succession Plan periodically, develop and evaluate potential candidates for CEO and other executive officer positions and recommend to the Board any changes to and any candidates for succession under the Succession Plan.

The Governance and Nominating Committee conducts an annual evaluation of the Board and its Committees. In the past, the Board has employed the National Association of Corporate Directors (the “NACD”) to assist with evaluations and to provide a template for best practices in Board evaluations, which the Committee currently uses. The Committee also requires that Board members complete a certain number of hours of continuing education training annually. Lastly, the Governance and Nominating Committee maintains a comprehensive, new director orientation program, which includes meetings with senior executives and other relevant personnel.

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The Governance and Nominating Committee operates pursuant to a written charter adopted by the Board, which is available on the Company’s website at www.lannett.com. All members of the Governance and Nominating Committee are independent Directors as defined by the rules of the NYSE.

The ESG Committee is responsible for providing oversight of the Company’s ESG activities and evaluation of risks that may arise from these activities. The members of the ESG Committee are Timothy Crew, John Chapman, David Drabik, and Melissa Rewolinski. Timothy Crew currently serves as the Chairman of the ESG Committee. Refer to the discussion starting on page 6 for further details on the responsibilities of the ESG Committee.

The ESG Committee operates pursuant to a written charter adopted by the Board, which is available on the Company’s website at www.lannett.com.

Executive Sessions of Independent Directors

In accordance with the rules and regulations of the NYSE, non-management independent Directors meet at regularly scheduled executive sessions without management participation. At least once a year, an executive session is held with only independent Directors. Executive sessions are chaired by the non-executive, independent, Chairman of the Board.

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*   Percent of class calculation is based on 43,002,613 outstanding shares of common stock at October 31, 2022.

** Assumes that all options exercisable within sixty days of October 31, 2022 have been exercised.

As of October 31, 2022, there are no other shareholders known to the Company to be beneficial owners of more than five (5%) percent of the Company’s common stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors, officers and persons who own more than 10% of a registered class of the Company’s equity securities to file with the SEC reports of ownership and changes in ownership of common stock and other equity securities of the Company. Officers, Directors and greater-than-10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on review of the copies of such reports furnished to the Company or written representations that no other reports were required, the Company believes that, during Fiscal 2022, all filing requirements applicable to its officers, Directors and greater-than-10% beneficial owners under Section 16(a) of the Exchange Act were complied with in a timely manner.

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Patrick G. LePore — See “Proposal No. 1 - Election of Directors” for information pertaining to Mr. LePore.

John C. Chapman — See “Proposal No. 1 - Election of Directors” for information pertaining to Mr. Chapman.

Timothy C. Crew — See “Proposal No. 1 - Election of Directors” for information pertaining to Mr. Crew.

David Drabik — See “Proposal No. 1 - Election of Directors” for information pertaining to Mr. Drabik.

Jeffrey Farber was appointed a Director of the Company in May 2006 and was appointed Chairman of the Board of Directors in July 2012. In July 2018, Patrick LePore succeeded Jeffrey Farber as the Chairman of the Board. Jeffrey Farber joined the Company in August 2003 as Secretary. Since 1994, Mr. Farber has been President and the owner of Auburn Pharmaceutical (“Auburn”), a national generic pharmaceutical distributor. Prior to starting Auburn, Mr. Farber served in various positions at Major Pharmaceutical (“Major”), where he was employed for over 15 years. At Major, Mr. Farber was involved in sales, purchasing and eventually served as President of the Midwest division. Mr. Farber also spent time working at Major’s manufacturing division, Vitarine Pharmaceuticals, where he served on its Board of Directors. Mr. Farber graduated from Western Michigan University with a Bachelor of Science Degree in Business Administration and participated in the Pharmacy Management Graduate Program at Long Island University. Mr. Farber will not be standing for re-election to the Board for 2023.

Melissa Rewolinski — See “Proposal No. 1 - Election of Directors” for information pertaining to Dr. Rewolinski.

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John Kozlowski joined the Company in 2009 and was promoted in 2010 to Corporate Controller. In 2016, Mr. Kozlowski was promoted to Vice President Financial Operations & Corporate Controller. In October 2017, Mr. Kozlowski was promoted to Chief Operating Officer. In April 2018, Mr. Kozlowski was promoted to Chief of Staff and Strategy Officer. Mr. Kozlowski was appointed as the Vice President of Finance and Chief Financial Officer in August 2019. In July 2020, Mr. Kozlowski was also appointed the Principal Accounting Officer. Prior to joining the Company, Mr. Kozlowski served in senior finance and accounting roles for Optium Corporation and Finisar Australia. He earned a Bachelor of Arts degree in finance from James Madison University and a Masters of Business Administration degree from Rider University.

John M. Abt joined the Company in March 2015 as Vice President of Quality and was promoted to Vice President and Chief Quality and Operations Officer in April 2018. In December 2021, Mr. Abt was also appointed Chief IT Officer. Prior to joining the Company, Mr. Abt held senior level positions in both quality and operations and has extensive knowledge in pharmaceutical manufacturing, quality, strategy, business improvement and site transformation. Prior to joining the Company, he most recently served as Teva Pharmaceuticals’ Vice President Global Quality Strategy, overseeing the development and implementation of strategy and associated initiatives for the global quality organization. Before that, he held a number of leadership positions of increasing responsibility in operations, continuous improvement, quality systems and compliance. He earned his Doctorate in Business Administration from Temple University, Masters of Administrative Science in Business Management from Johns Hopkins University and a Bachelor of Science in Biochemistry from Niagara University.

Maureen M. Cavanaugh joined the Company in May 2018 as Senior Vice President and Chief Commercial Operations Officer. Prior to joining the Company, Ms. Cavanaugh spent 11 years at Teva, most recently as Senior Vice President, Chief Commercial Officer, North American Generics. Earlier at Teva, Ms. Cavanaugh served as Senior Vice President and General Manager, U.S. Generics and before that held a variety of positions in sales, marketing and customer operations. Ms. Cavanaugh also previously served as Senior Director of Marketing at PAR Pharmaceuticals, as Director, Product Management and Marketing Research at Sandoz Inc., and held a number of finance, sales and marketing operations positions at Bristol Myers-Squibb. Ms. Cavanaugh earned a Bachelor of Science in Business Administration degree from LaSalle University and a Masters of Business Administration degree from Rider University.

Samuel H. Israel joined the Company in July 2017 as General Counsel and Chief Legal Officer. Prior to joining Lannett, Mr. Israel was a partner with Fox Rothschild LLP, a national, full-service law firm, with 29 offices that provide services in more than 70 practice areas, since 1998. He served as chair of the firm’s Pharmaceutical and Biotechnology Practice and handled a variety of commercial litigation matters. Mr. Israel earned a Bachelor of Science degree in Chemical Engineering from the University of Pennsylvania and a Juris Doctor degree with honors from Rutgers University School of Law.

To the best of the Company’s knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions that are material to the evaluation of the ability or integrity of any director, executive officer, or significant employee during the past ten years.

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Executive Summary

Business Highlights

Fiscal 2022 was another year of significant challenges as well as strategic accomplishments that we believe will position the Company for future growth and value creation. Our financial results and in-line and new product launches were adversely impacted by ongoing competitive pressures within the generic pharmaceuticals industry, organizational and portfolio restructuring actions, and, to a lesser extent, supply chain and inflationary pressures. We did not achieve budgeted financial goals, with year over year declines in net sales and profitability, which excludes certain impairment charges. As a result of a significant decline in our stock price, we received notice that we are no longer in compliance with the NYSE continued listing requirements. The NYSE has accepted our plan to regain compliance within an 18-month cure period and we plan to maintain regular contact with the exchange during that period. Despite these challenges, we continued to maintain and streamline our operations, rationalize our product portfolio and mix, and provide safe, high quality medications to customers and patients. We continued to successfully execute on our strategy of enhancing our core business, building our R&D pipeline, expanding strategic alliances, and reducing costs. We launched a total of five new products during Fiscal 2022, down considerably from double-digit annual launches in prior years due to refocusing our portfolio away from lower expected value of certain products, market and financial pressures, and our focus on advancing our longer-term durable product pipeline. During Fiscal 2022, we also fully implemented a new restructuring plan with expected annual savings of approximately $20 million, which included the sale of our liquid drug manufacturing plant in Carmel, NY and the transfer of key products at that facility to our Seymour, IN facility. Under the restructuring plan, we also discontinued two high-volume, lower-margin products in our portfolio, which, combined with the above-referenced macroeconomic challenges, adversely impacted near-term net sales but is expected to improve the longer-term profitability of the Company. These activities, combined with prior refinancing and restructuring actions in Fiscal 2021, strengthened our financial flexibility and ability to make ongoing investments in our business and product pipeline. We continue to execute on a number of key strategic initiatives as discussed below. We believe these actions will better position the Company for long-term profitable growth and stockholder value creation.

In addition, we continued to make important advances in product in-licensing and development. As of June 30, 2022, we had about 100 products available to the market, with additional launches planned in Fiscal 2023 and beyond. We also continue to capitalize on our strategic partnerships, both domestically and internationally. Since January 2018, we acquired or in-licensed over 75 ANDA products and entered into several new strategic alliance agreements which diversified and enhanced our revenue streams. In Fiscal 2020 and 2021, we entered into commercialization agreements with several leading pharmaceutical companies that have the potential to significantly increase our future annual revenues. Included among these is a revised and expanded agreement with our strategic alliance partner, HEC Group, for insulin glargine, an insulin-based product, with significant market potential to treat type 1 and type 2 diabetes, which impacts approximately 34 million Americans, as well as a new agreement for a fast-acting, biosimilar insulin aspart product candidate with significant market potential. We initiated a pivotal clinical trial for our biosimilar insulin glargine candidate in March 2022 and later finished subject dosing, which, if successful, could lead to potential FDA approval and product launch in the first half of calendar 2024. We also entered into agreements with Respirent for additional inhalation products and continued to communicate with the FDA throughout Fiscal 2022 to discuss requirements for respiratory related ANDA filings. We continue to make progress advancing these and other product candidates towards potential commercial launches over the next several years.

As noted above, our financial performance in Fiscal 2022 was adversely impacted by ongoing competitive pressures across generic pharmaceutical industry and the broader market. Despite these challenges, our executive leadership and other employees made significant progress in executing our strategic plan and positioning the Company for future growth. The impact of these events and developments is reflected in our compensation decisions for Fiscal 2022, consistent with our pay for performance philosophy. For the second consecutive year, salary increases for NEOs were delayed (until October 2021 for Fiscal 2022), with no increase for Mr. Crew. Short-term incentive (annual bonus) payouts to NEOs for Fiscal 2022 were well below target, with no awards earned for components tied to corporate financial goals (representing 60% of total target award opportunities) due to below-threshold performance results, and partial achievement of awards tied to product development and regulatory milestones and certain other strategic objectives. Based on overall performance results, short-term incentive payouts for NEOs for Fiscal 2022 were earned at approximately 25% of total target award opportunities. Additionally, performance shares tied to three-year relative TSR cycles ending in September 2020, July 2021, and July 2022 were forfeited since our TSR results relative to comparator companies in the S&P Pharmaceuticals Select Industry Index were below the threshold level. We believe these actions demonstrate our commitment to aligning executive pay with performance. All outstanding stock options held by our NEOs are currently “underwater” and the value of all other outstanding equity awards are below grant date target values. Based on our interim relative TSR results through June 30, 2022, performance shares granted in Fiscal 2021 and the portion of 2022 grants tied to relative TSR are tracking below threshold levels which, if sustained over the applicable three-year performance periods, would result in no awards being earned by NEOs.

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Key financial performance highlights, as reported in accordance with GAAP requirements, are shown below. GAAP-based results for Fiscal 2021 and Fiscal 2022 reflect asset impairments and certain other non-cash and/or non-recurring expenses that are excluded from adjusted profitability metrics. Year over year declines in net sales and negative profitability results reflect continued challenging market conditions within the generic pharmaceuticals industry, and for comparisons vs. Fiscal 2019 results, the non-renewal of the former distribution agreement with Jerome Stevens Pharmaceuticals (JSP), which expired in March 2019 and had significantly contributed to our prior net sales and profitability. See the section of our Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details and discussion of Company performance.

†Peer Group average pertains to the Fiscal 2022 peer group.

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Comparison of Disclosed Versus Realizable CEO Pay for Mr. Crew (Based on Summary Compensation Table)

Compared with values reported in the Summary Compensation Table for Mr. Crew, current realizable values are 73% lower for Fiscal 2021 and 68% lower for Fiscal 2022. Mr. Crew’s reported compensation for Fiscal 2021 includes actual base salary plus STI earned plus grant date accounting values for target equity grants for Fiscal 2021. Fiscal 2022 reported compensation includes actual base salary plus STI earned plus grant date accounting values for target equity grants for Fiscal 2022. Realizable pay reflects current intrinsic values for equity grants based on our stock price as of June 30, 2022, with assumed performance share award funding at 0% of target for the Fiscal 2021 grant and the portion of the Fiscal 2022 grant tied to relative TSR, based on interim relative TSR results from date of grant through June 30, 2022, and at 40% of target level, based on current estimates which are subject to change, for the portion of the Fiscal 2022 grant tied to strategic portfolio goals (to be achieved by the end of the three-year performance period). Disclosed and realizable values for Fiscal 2022 exclude the Cash LTIP component, which is reported in the Grants of Plan-Based Awards table but will not be reported in the Summary Compensation table until the end of the three-year performance period in Fiscal 2024, to the extent earned.

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Until guidelines are met, executive officers must retain 50% of net after-tax shares received from equity grants, including net after-tax shares received from stock option exercise or vesting of restricted stock and performance shares, until they are in compliance. If guidelines are not met within the five-year compliance period, the holding requirement increases to 100% of net after-tax shares from equity grants until achieved. Shares owned outright by executive officers or their spouse, as well as shares held in retirement plans and unvested time-based restricted stock count towards ownership requirements. Unearned performance shares and outstanding stock options do not count towards ownership. Non-employee Directors are also subject to stock ownership and holding requirements, as described in the “Compensation of Directors” section of this proxy statement.

Overview of the Executive Compensation Program

Our Philosophy

A fundamental objective of our Executive Compensation Program is to focus our executives on creating long-term stockholder value — all aspects of our program are rooted in this goal and designed around the following guiding principles:

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To support these guiding principles, our program includes the following compensation elements:

Target Compensation Mix

The charts below show that most of our NEO’s target compensation for Fiscal 2022 is variable (82% for our CEO and an average of 70% for our other current NEOs). Variable pay includes the target value of short-term cash incentives (“STI”), performance shares, Cash LTIP, and restricted stock.

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Based upon Fiscal 2022 compensation as reported in the Summary Compensation Table on page 34 of this proxy statement plus pro-forma realizable values for Cash LTIP as of June 30, 2022, variable pay represents approximately 78% of total pay for our CEO and 63% of average total pay for our other current NEOs. The Cash LTIP is not included in the Summary Compensation table; however, it is included in the variable pay below for comparative purposes versus the target pay mix. This mix reflects below-target short-term incentives earned at an average of 25% of target award levels in Fiscal 2022 under the Annual Bonus Plan (shown as STI), below-target Cash LTIP (tracking at approximately 12% of target based on our closing stock price at June 30, 2022), and the grant date accounting fair value of target performance share and restricted stock grants in Fiscal 2022.

How Compensation Decisions Are Made

The Committee has authority and responsibility to establish and periodically review our Executive Compensation Program and compensation philosophy. Importantly, the Committee also has the sole responsibility for approving the corporate performance goals upon which compensation for the CEO is based, evaluating the CEO’s performance and determining and approving the CEO’s compensation, including equity-based compensation, based on the achievement of his goals. The Committee also reviews and approves compensation levels for other NEOs, taking into consideration recommendations from the CEO.

In making its determinations, the Committee considers market data and advice from its independent compensation consultants, as well as budgets, reports, performance assessments and other information provided by management. It also considers other factors, such as the experience, skill sets, and contributions of each NEO towards our overall success. However, the Committee is ultimately responsible for all compensation-related decisions for the NEOs and may exercise its own business judgment when evaluating performance results and making compensation decisions.

Timing of Committee Meetings and Grants; Option and Share Pricing

The Committee meets as necessary to fulfill its responsibilities, and the timing of these meetings is established during the year. The Committee holds special meetings from time to time as its workload requires. Annual equity grants occur after finalizing fiscal year end performance results, typically within the July/August time frame. Individual grants (for example, associated with the timing of a new NEO or promotion to an NEO position) and special recognition awards may occur at any time of year. The exercise price of each stock option and fair value of restricted stock awarded to our NEOs is the closing price of our common stock on the date of grant.

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In Fiscal 2021, Pearl Meyer was retained by the Committee, as its independent consultant, to review the competitiveness of the Executive Compensation Program. Pearl Meyer provided the Committee with compensation data with respect to similarly sized biopharmaceutical and life sciences companies and consulted with the Committee about a variety of issues related to competitive compensation practices and incentive plan designs. Pearl Meyer was also retained by the Committee in Fiscal 2022 to provide ongoing advice relating to the Fiscal 2022 Executive Compensation Program. During Fiscal 2022, WTW was retained by the Committee to review NEO pay competitiveness and to assist in the design of the Fiscal 2023 Executive Compensation Program. Pearl Meyer was not involved in the design of the Fiscal 2023 Executive Compensation Program.  The Committee assessed the independence of Pearl Meyer and WTW pursuant to the SEC rules and concluded that no conflict of interest exists that would prevent Pearl Meyer and WTW from independently advising the Committee.

Peer Group & Benchmarking

The Committee evaluates industry-specific and general market compensation practices and trends to ensure the Executive Compensation Program is appropriately competitive. When making decisions about the program for Fiscal 2022, the Committee considered publicly available data, as well as a market study conducted by Pearl Meyer in May 2021. The Pearl Meyer study developed market values using a blend of peer group proxy pay data for the companies shown below as well as published survey data for the broader life sciences industry. Using this information, the Committee compared our program to the compensation practices of other companies which the Committee believes are comparable to the Company in terms of size, scope and business complexity (the “peer group”). As shown below, the Company ranked near the 50th percentile (and in the upper half when the study was conducted in Fiscal 2021) in terms of employee headcount and net sales and below the 25th percentile for enterprise value as of fiscal year end.

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The Committee uses external market data as a reference point to ensure the Company’s executive compensation program is sufficiently competitive to attract, retain, and motivate highly experienced and talented NEOs. The Committee generally seeks to position target total direct compensation for NEOs at or near 50th percentile market values for comparable positions but does not utilize a purely formulaic benchmarking approach. Based on the May 2021 Pearl Meyer study, target total direct compensation, including the sum of base salary plus target short-term and long-term incentives, was within the competitive range (defined as +/- 15%) of 50th percentile market values for all NEOs other than Mr. Abt, who was above the range, and equal to 97% of the 50th percentile in the aggregate. Actual total direct compensation, which included Fiscal 2021 annualized base salaries and short-term incentives earned well-below target, and grant date values for Fiscal 2021 equity grants (with performance shares valued at target based on the grant date closing price), was below a competitive range of 50th percentile market values for Ms. Cavanaugh and Messrs. Kozlowski and Israel, within a competitive range and below the 50th percentile for Mr. Crew, and above the range for Mr. Abt, and equal to 87% of the 50th percentile in the aggregate. As  previously noted, when evaluating our executive compensation program, the Committee considers a variety of other factors in addition to external market data, such as Company and individual performance, and each NEO’s qualifications, skill sets, and past and expected future contributions towards our success.

2022 Executive Compensation Program Decisions

Base Salary

We attribute much of our success to our highly experienced executive management team, and the strength of their leadership has been clearly demonstrated by our exceptional long-term performance results and strategic accomplishments. In order to remain competitive among our industry peers, the Committee believes it should set compensation at market-competitive levels that reflect the executive’s experience, role and responsibilities. Based on Pearl Meyer’s 2021 study, Fiscal 2021 salaries were below 50th percentile market values for three of our five NEOs and within a competitive range (+/- 10%) of the 50th percentile for all incumbents other than Mr. Kozlowski, who was slightly below the range. The Committee approved a market adjustment equal to 10% of base salary for Mr. Kozlowski, to position him closer to the 50th percentile, and merit increases equal to 3% of base salary for all of our other NEOs for Fiscal 2022 except for Mr. Crew, who did not receive an increase. Mr. Abt also received an additional salary adjustment of 13% to align him more closely with other NEOs and recognize his role in leading certain restructuring activities.  Due to ongoing challenging market conditions within the generic pharmaceuticals sector, the effective date of salary increases was delayed to October 2021 for all incumbents (excluding Mr. Crew who as noted above did not receive an increase), with no retroactive adjustments provided.  The following table summarizes annualized salaries for Fiscal 2021 and 2022 for our NEOs. Annualized salaries differ from actual values received as reported in the Summary Compensation Table due to the timing of effective dates.

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Short-Term Incentives (Annual Bonus)

The Company’s NEOs participate in an annual bonus program, which is designed to reinforce the annual business plan and budgeted goals and to recognize yearly performance achievements focused primarily on financial and operating results as well as various key strategic objectives. Actual payouts can range from 0% (below threshold) to 200% (superior performance) of target awards for metrics (other than a newly-added deferred strategic goals component where awards are capped at the target level and payable upon achievement) and are paid in cash. The Committee sets each NEO’s threshold, target and superior bonus opportunity as a percentage of base salary, as follows:

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Expressed as percentages of salary, Fiscal 2022 target total award opportunities were the same as those established in Fiscal 2021 for all NEOs, while combined threshold award funding was reduced to 40% of target and combined superior (maximum) award funding was reduced to 180% of target (vs. 50% at threshold and 200% at superior in Fiscal 2021).

Performance metrics and weightings for the Fiscal 2022 annual bonus plan are shown in the following table:

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Adjusted Operating Income and Adjusted EPS are defined as GAAP Operating Income and diluted EPS, respectively, excluding bonus and stock-based compensation expense, as further adjusted for certain unusual or non-recurring items.

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2022 Short-Term Incentives (Annual Bonus): Results and Payouts

Actual Fiscal 2022 performance results were below the Threshold goal level for all three Corporate financial metrics, impacted by even more challenging market conditions within the generic pharmaceuticals sector than originally anticipated, use of stretch goals, inflationary and supply chain pressures, and the ongoing COVID-19 pandemic. Actual Adjusted Operating Loss for Fiscal 2022 excluded pre-tax items totaling approximately $160.8 million, including restructuring expenses, impairments, and other unusual or non-recurring items. Actual Adjusted EPS excluded the same $160.8 million in pre-tax items plus $5.5 million primarily related to non-cash interest expense as well as the related tax effects for all of these items. For Fiscal 2022, the Net Sales result was the same as the GAAP-reported value, with no adjustments applied.