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That said, I will now turn the call over to Tim Crew. Tim?

Timothy C. Crew -- Chief Executive Officer

Thanks, Robert, and good afternoon, everyone. We are very pleased to report a solid financial performance for the fiscal 2019 third quarter. Both our top line and bottom line exceeded our expectations for the quarter. Total net sales were approximately $173 million and adjusted net income was approximately $27 million, which equates to $0.68 per diluted share. Our adjusted gross margin for the quarter was about 45%. And not to be snitty with any naysayers, but I am particularly pleased that our adjusted gross margin on our business excluding Levothyroxine, was a healthy 38.5%. Our cash balance on March 31st increased to about $205 million from approximately $164 million at the end of the previous quarter. Please note, the $205 million March 31st balance was after we purchased about $24 million of our term loans in open market transactions during the quarter. And as of today, our cash position remains just over $200 million.

With that brief overview of our financials, and Marty will have more in a moment, I'd like to focus my comments on how we see our business today. As most of you are aware, the third quarter concluded our sales of JSP-sourced Levothyroxine. What is perhaps less understood is a meaningful progression of the rest of our business. Thus far, in fiscal 2019, excluding Levothyroxine, we have reported sequential quarterly increases in our product sales. Net sales have progressed from approximately $101 million to $105 million to $118 million in the first, second and third quarters respectively, representing 17% growth from the first to the third quarter. This progress is the result of our success in the last year and a half to significantly ramp up the pace of our product launches while maintaining our base business. As I have frequently stated these past quarters, we have received a number of product approvals and considering our size, have acquired or in-license the substantial number of market ready or near market ready products. As a result we have added new cash flows, expanded our offering and diversified our revenue base.

Our plan going forward is straightforward. We intend to keep doing what we have been doing. We plan to maintain a strong pace of product launches that targets about $75 million of new revenues annually. And hopefully more in future years. We will do this by continuing to invest in our own product development complemented by in-licensing products from a network of strategic alliance partners that add their resources, capabilities and technologies to our efforts. We believe the strategy will yield a regularly replenishing pipeline of products in various stages of launch, readiness and development. While we've been launching products, we have also been lowering our costs. Virtually all key actions in our cost reduction program have been completed and the transition of Cody Labs will be finalized in the next couple of months. Thus, we are on track to realize the $33 million of net cost savings previously announced.

Turning to our capital structure. As I mentioned earlier, in March, we used a portion of our healthy cash balance to purchase approximately $24 million of our term loans in open market transactions. Since the beginning of December 2017, we have reduced our debt by approximately $146 million through voluntary and required payments. Today the prices of both the Term A and Term B loans have improved notably from this fiscal year earlier, which we believe is a strong market endorsement of our improved performance and outlook. Moving forward we will continue to evaluate how to further improve our capital structure.

Finally, I'd like to provide an update on some of the key products in our pipeline. Our partner's ANDA for an AB-rated Methylphenidate ER, or Generic Concerta has been approved and we expect to launch the product by the end of June. The market for this product remains sizable and for now we will also continue to sell our BX-rated product for those customers and patients that want to access this alternative.

Aspirin and Extend-Release Dipyridamole Capsules a more complex combination and extended release product from our internal development efforts has been approved and is expected to launch this summer.

Our Numbrino NDA continues to progress at the FDA. But on a related note, we will comply with a recent request from the FDA office of unapproved drugs and labeling compliance to cease distributing our C-Topical products unapproved in August of 2019. Through the first three quarters of fiscal 2019, sales of our unapproved C-Topical have averaged approximately $3 million a quarter. As such we do not believe the discontinuation will have a significant impact on our future operating results and in any event, we had anticipated the eventual withdrawal of this product. We plan to be back in that market subsequent to receiving an FDA approval of the NDA, hopefully around the end of the calendar year.

Regarding thalidomide. We shared on the last conference call that we received a complete response letter, primarily around the associated API supplier. While we continue to assess the situation, we now believe a launch will occur in calendar 2020, regarding our insulin glargine biosimilar project with HEC. Last quarter, we reported that a clinical trial application was filed with the South African authorities. We continue to make progress and have now received conditional ethics committee approval from the South African study site and anticipate South African regulatory approval to proceed in a few weeks.

Looking forward, we currently expect to complete the dosing of healthy adult males in a PK, PD study by September of this year. And of course, our business development and commercial teams continue to evaluate a pipeline of transactions to expand our portfolio. Our USA generic focus free of the burden of global fragmentation seen in some of our peers along with a solid end market product performances has made us a partner of choice for several firms. Since January of this year, we had completed several transactions for several products a couple of which have not yet been announced, pending clarification of operational readiness or other competitive reasoning.

To sum up, excluding Levothyroxine our product sales have been growing fueled by the launch of new products while maintaining our base business. While growing we have also completed virtually all key actions in our cost reduction program. We are on track to realize $33 million of net cost savings savings, which is starting to be reflected in our results.

Given our size, we have a significant pipeline of products that includes internally developed as well as in-licensed products. We plan to maintain a strong pace of product launches that targets about $75 million of new revenues annually so that we continue to grow. And finally, our $205 million of cash as of March 31st reflect to the balance after we purchased approximately $24 million of our term loans. More over in the past several quarters we have substantially lowered our debt levels through voluntary and required payments. And of course, we'll continue to assess other opportunities to even further improve our capital structure.

With all of that, I turn the call over to Marty. Marty?

Martin Galvan -- Vice President of Finance and Chief Financial Officer

Thank you, Tim, and good afternoon, everyone. As was mentioned earlier, I will be referring to non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP numbers can be found in today's press release. Our earnings release also includes a schedule of our net sales by medical indication.

Now for the financial results on the non-GAAP adjusted basis. For the fiscal 2019 third quarter, net sales were $172.8 million compared with $174.4 million for the third quarter of fiscal 2018. As many of you will recall, last year's third quarter included strong sales of Levothyroxine and another product due to supply shortages in the market. Last year's third quarter also included substantial volumes related to a new product launch.

Gross profit was $77.0 million, or 45% of net sales compared with $76.7 million, or 44% of net sales for the prior year third quarter. R&D expenses were $9.1 million. This compares with $2.7 million, which was unusually low, largely due to a credit we've recorded related to a canceled order for pre-launch inventory. SG&A expenses increased to $17.5 million from $14.1 million primarily due to higher incentive-based compensation. Operating income was $50.4 million compared with $59.8 million for the prior year third quarter. Interest expense was $17.0 million compared with $16.2 million for the third quarter of fiscal 2018. Net income was $26.6 million, or $0.68 per deluded share. compared with $30.5 million, or $0.80 per diluted share for the fiscal 2018 third quarter.

Turning to our balance sheet. At March 31, 2019, cash and cash equivalents increased to approximately $205 million from $164 million at the end of the previous quarter. As Tim indicated, during the quarter we purchased approximately $24 million of our term loans in open market transactions reducing our debt to approximately $823 million at March 31, 2019. Net debt at quarter end was $618 million. We continue to expect to be well within our financial covenants up to the maturity date of our Term A Loans.

Turning now to our guidance. For the fiscal 2019 full year on an adjusted basis we have raised our guidance. We currently expect net sales in the range of $640 million to $645 million, up from $615 million to $635 million. Gross margin as a percentage of net sales of approximately 44%, changed from 44% to 45%. R&D expense in the range of $35 million to $36 million, up from $33 million to $35 million. SG&A expense ranging from $70 million to $71 million, up from $66 million to $69 million. Interest and other in the range of $65 million to $66 million, down from $66 million to $68 million. The full year adjusted effective tax rate in the range of 23%, changed from 22% to 23%. And lastly, capital expenditures in fiscal 2019 to be approximately $28 million to $31 million, down from $30 million to $35 million. We expect fourth quarter net sales to be approximately $121 million. As a reminder, Q3 was the last quarter of Levothyroxine sales. This guidance includes sales of recently launched products, previously approved but not yet launched products, as well as other products that we reasonably assume will be approved and launched in the period.

I'd like now to briefly discuss our gross margin in the third quarter and fourth quarter. In Q3, our adjusted gross margin was approximately 44.5%, which included an approximate 57% gross margin on sales of Levothyroxine. The Levothyroxine gross margin in Q3 was lower than in previous quarters, due to certain provisions in our agreement with Amneal. Excluding Levothyroxine, our adjusted gross margin in Q3 was approximately 38.5%. We believe our fourth quarter adjusted gross margin will be in the low-40s. We will reach this by optimizing our product portfolio, achieving efficiencies resulting from the consolidation of our manufacturing, and realizing the benefits of our cost reduction initiatives.

With that overview, we would like now to address any questions you may have. Operator?

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from Greg Fraser with SunTrust. Greg, your line is open.

Gregory Fraser -- SunTrust -- Analyst

Thanks for taking my questions, and good afternoon, folks. It's Greg Fraser on for Gregg Gilbert. I met the year, I was wondering, if you could talk more specifically about how you're thinking about the potential sales contribution. And then I know that you've mentioned that you think that, that could be one of your more significant contributors in fiscal 2020? And can you also just comment on how the economics work for you one that product?

Timothy C. Crew -- Chief Executive Officer

Hi, Greg, it's Tim. Could you repeat the product you're asking there? You probably out there for a second.

Gregory Fraser -- SunTrust -- Analyst

The generic Concerta.

Timothy C. Crew -- Chief Executive Officer

So the question is about how -- what we're expecting for the product?

Gregory Fraser -- SunTrust -- Analyst

Yes. Sales potential and then how the economics work with your partner?

Timothy C. Crew -- Chief Executive Officer

Yeah. We don't disclose our underlying relationships with our partners. You know it's obviously we're sharing a portion of the margin of the results of our end market performance. There is several players on the market today, but it's still a very, very large product. We don't enter transactions that are de minimis, in terms of distribution margins I might know. I suspect our blended margin from our results in market will be a bit below our average for the company, but not materially so. And you know, we'll go into market and do our level best to get appropriate share based on the competitive environment.

Gregory Fraser -- SunTrust -- Analyst

Okay, On capital deployment, how are you prioritizing debt reduction versus additional deals to bolster the portfolio? And you've been doing a good job of working on the debt load, but with a more significant refinancing to extend maturities an option that you're considering?

Timothy C. Crew -- Chief Executive Officer

So it's a balance. A lot of constituencies out there. I'll start out with having backed away from our investments at Cody and shut down a manufacturing distribution side here in Philadelphia. There's quite a bit of additional cash flow that becomes available to us and is reflected if you think at our capital investments this year versus previous years. We are completely committed to capital investments a) that require or needed to maintain a cGMP. The company's got a great record in the space of compliance and we don't intend to do anything to besmirch that reputation. It's very important to our customers. The reliable supply of products, it's one of our strength. Beyond that there are always investments in new equipment and machinery that can create more efficiency and more throughput. You may note from earlier calls that while our overall capital expenditures are down our output through the Seymour plant is up 50%, 60% in the previous 12 months or so. So there's always plenty of things to do to improve the investment.

As it relates to other uses of cash, you're right there are a number of BD transactions that we're always considering. Sometimes, you can buy up some of the revenue in that relationship by spending more upfront, but to date we've been able to enter the lucrative transactions with virtually no upfronts knowing what the market looked like when we came into it. But that is subject to evaluation on a quarterly basis. And I think balancing again the debt against investment opportunities, against capital is something we do on a quarterly, daily, weekly basis. And so far we think we've threaded the right needle as we grow our business. Note, we are still sitting on a fair amount of cash and have not decided to further pay down debt at this time, as it relates to just those sorts of opportunities.

Gregory Fraser -- SunTrust -- Analyst

Got it. Thanks for taking the question.

Timothy C. Crew -- Chief Executive Officer

Thanks Greg.

Operator

And your next question comes from Gary Nachman with BMO Capital Markets. Gary, your line is open.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. Good afternoon. First, what were in the anti-psychosis and other line items? They were much higher than our estimates. I'm curious was there any stocking for new launches in those lines? A little bit more color on that would be helpful.

Martin Galvan -- Vice President of Finance and Chief Financial Officer

I'll start with the -- I'll start -- Hi, Gary. It's Marty. So I'll start with the answer. It's -- in that particular category, it's fluphenazine that which had a very strong third quarter. There were some shortages in the market with Mylan, we believe.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. Well, which fluphenazine? That's in the anti-psychosis, right?

Martin Galvan -- Vice President of Finance and Chief Financial Officer

Correct.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. So what about the other line? I mean, that jumped up a lot, too, I think, from last quarter.

Martin Galvan -- Vice President of Finance and Chief Financial Officer

In other, we have a multitude of products in the other line, so it's a list of other products. I'm looking at a list here, dicyclomine had a strong quarter. Buprenorphine was strong in the quarter, but the list goes on for more than 20-or-so -- 20, 30 products there. It's hard to pick out one. There wasn't one particular one.

Timothy C. Crew -- Chief Executive Officer

Yeah, I think generally the way to think about it is, the Company has been spending a lot of time improving its sort of operational responsiveness and ability to respond to in-market needs. There have been ongoing shortages in the marketplace. There's often some spot shortages and we stand ready with our supply to step in, in those cases. Some of the new product launches show up in that category as well, but it's not material. As Marty said, it's fairly well spread around from opportunities to improve our share or improve our yield on either a episodic or ongoing basis.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. And then, Tim, just regarding new launches, in general, how has it been executing on those? Are you achieving your initial targets, or has the market gotten more competitive and challenging like some of your peers have been complaining about? And I'm curious if your strategy has changed at all with any of these new launches?

Timothy C. Crew -- Chief Executive Officer

I don't recall a lot of years the generic industry has been pretty darn competitive. So setting that aside, we're pretty comfortable that we're getting where we want to go. Not every launch is success. We've had some products that we've backed away from for example, the opioid space with all the sort of issues and concerns and risks in that area. So I don't want to suggest that every single product is exactly what we might have hoped to start the year. But we're very comfortable that, that sort of basket of launches that we're bringing to market continues to achieve that target of about $75 million on a year-on-year basis and we don't see that changing anytime soon. Again the global fragmentation I referred to in my opening remarks is something that we see hitting our business line as an opportunity on a daily basis or near-daily basis to pick up and step in for a customer to provide some supply that's been otherwise a disruptive.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. And then, lastly, just also on these partnerships. As you keep striking these deals, are the economics changing at all, or have they been pretty consistent? I mean, you just mentioned with Methylphenidate that, that one is below the company average. And I'm sure it's very specific on a product-by-product basis. But generally speaking, as you execute better with these, do you think your economics will improve over time?

Timothy C. Crew -- Chief Executive Officer

Our partners are wise businessmen and women as well, so no one's giving away product or value for free. We haven't made any risk investments on these products. We basically bring to market in very late stage and do a great job great job with them. That success has to get more success with strategic partners coming back to us with more products as we performed ably. While we won't get involved into distribution deals, which puts us upside down in cash for a long period of time. We certainly are focused as much on gross profit as we are in a margin percentage right. We're very pleased with the margin percentage we have right here today and our underlying business without Levothyroxine, and that can drift up or drift down based on the products in our portfolio. But I'm finding that those partnerships are increasingly productive. We also want to drive our internal development opportunities where we capture full margin, but we also don't mind partnering where we're sharing the risk and then sharing some of the reward. I want to stress these are not distribution or authorized generic sort of relationships you might be thinking about. They're subsequent margin shares that the partners find the value we bring to them in our end market performance.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. Thank you.

Operator

Okay. And your next question comes from Elliot Wilbur with Raymond James. Elliot, your line is open.

Elliot Wilbur -- Raymond James -- Analyst

Thanks, good afternoon. First question just around gross margin trends in the quarter. Can you talk about that or to what extent any portfolio optimization moves may have played in terms of margin performance whether that be discontinuation of certain product lines or some evaluation moves just any commentary around any particular outsized impact from either those in the quarter. And then two financial questions for Marty. Just talk a little bit maybe about what sort of driving the uptick in, in SG&A, whether it's just a function of higher sales or maybe there's some strategic investments being made there that you called out in the prepared commentary. Also a balance sheet question just curious why with the transition in the Levothyroxine agreement, why we haven't seen a more significant down tick in the inventory levels looks like? Looks like they've been relatively steady over the past four or five quarters?

Timothy C. Crew -- Chief Executive Officer

All right Eliot. Thanks. There's a few questions there, if we missed one, please refresh our recollection of what we didn't quite get to. From a margin perspective as we indicated in the last quarter we've been making a lot of changes in our core business as we gear ourselves up for the timing. I find ourselves in, which is a wonderful period for us to grow our base businesses. We're not having the same level of pressure we had in the first couple of quarters of the year relative to some of those transitions, right. When you shut down a manufacturing plant of 40-plus years distribution center of many years, there are some costs which flow through P&L not excluded on our discontinued operation environment. So some of those pieces have had worked their way through. The team has done a great job responding to the ongoing opportunities in the marketplace where there are some sporadic disruption. When we transferred our products from Philadelphia to Seymour, we certainly increased our inventory holdings, I don't know that was APR finished dose that you're looking at in terms of what being picked up there, but we made some very conscious decisions to make sure that transition was handled smoothly without any sort of risk of supply. That benefited from us. And again the continuing sort of dislocation we see by many of the other larger players that are repointing their business into other areas as business opportunities to pick up a better mix of business at a better price point as we continue to again bring more valuable products into our portfolio either from our own launches or from our partner. So it's really quite a ganache (ph) of moving parts, but I also would suggest it's very much in line with what we've been saying recently and going forward of what we expect.

Martin Galvan -- Vice President of Finance and Chief Financial Officer

Okay. And Elliot the questions you had pointed my way. This is Marty. So first of all on the -- your question about portfolio optimization and its impact in our gross margins for the third and fourth quarter. So, yes, that portfolio optimization did have an effect on our third quarter as part of reason we improved than from our second quarter gross margin without Levothyroxine. And then again into our fourth quarter, it's also helping into our fourth quarter. The other driving factor that we don't see in our third quarter, but is in our fourth quarter is that we had strong efficiencies in our manufacturing site and see more manufacturing team as Tim mentioned in one of his comments earlier, the throughput to the facility has increased dramatically over the last year or two now. And we're kind of seeing now in our fourth quarter incrementally as opposed to the third quarter we're seeing some incremental impact from that throughput that increased input versus the prior quarter.

The other question you had on SG&A expense, yes, we ratcheted that up about $3 million at midpoint in our guidance versus previous guidance. And what's driving that primarily is some expenses related to a REMS program for the upcoming thalidomide product. And second of all, incentive-based on compensation as the organization achieves results according to plan. In some cases that was a reason to uptick that in our expectations, in our SG&A expense for fiscal 2019. And then the third point on the levo inventory, despite the fact that levo was a significant part of our business, the inventory levels were sort of kind of categorized as hand-to-mouth in many cases. We had a great working relationship with the Jerome Stevens company. And actually, at period ends, we did not have significant amounts of inventories that you would then expect to see decrease as you go into the post-levo period here at Lannett. And with that I think I covered your questions.

Timothy C. Crew -- Chief Executive Officer

Elliot, if I could make two points on that. right. So we keep talking about the mix. We mentioned like deletion and portfolio optimization. I'll give you an obvious example, one of our lowest margin products in our portfolio used to be Glycolax, which is coming off the market. And so we used to have four-ish or more million dollars of sales in a given quarter. That product it's now getting to be de minimis, right. So that helps the mix. We had some other products like metoprolol, which we have a smaller share position on that was also fairly low margin business. So it's always a mix of both things you're doing to cut your costs and launching more valuable products and de-emphasizing things that are maybe not as profitable, too that comes out in the wash.

The other piece on SG&A, I'd like to stress where we have had an increase in expenses. We would consider them as literally a prospective investment both in our people and in REMS around the thalidomide project which we think will generate on the behalf of the company both the people in that particular product value into the future. So this isn't a question at all of increasing our headcounts or squandering resources. This is very specific investments that we think we'll be driving in terms of compensation for our team, which was very low in the last fiscal year and investments in our product portfolio to drive our future results. Operator?

Operator

There are no questions at this time. I would like to turn it back over to the Lannett Company.

Timothy C. Crew -- Chief Executive Officer

Great. Well, thank you, everybody for joining us this now I guess basically early evening. It's Tim again here. We've concluded our call. Thank you again for joining us. As usual I'll close out with a shout-out of our appreciation to our employees and our customers and our partners that are so important to the success we just have described. We look forward to sharing our program (ph) next regularly scheduled conference call. Good evening.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Duration: 35 minutes

Call participants:

Robert Jaffe -- Investor Relations

Timothy C. Crew -- Chief Executive Officer

Martin Galvan -- Vice President of Finance and Chief Financial Officer

Gregory Fraser -- SunTrust -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

Elliot Wilbur -- Raymond James -- Analyst

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