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Akorn Reports 2010 Fourth Quarter and Year-End Financial Results

^{Published on 2011-03-01 19:41:55 - Market Wire}
 

LAKE FOREST, Ill.--([ BUSINESS WIRE ])--Akorn, Inc. (NASDAQ: AKRX), a niche generic pharmaceutical company, today reported financial results for the fourth quarter and year ended December 31, 2010.

Raj Rai, Chief Executive Officer commented, aWe had another great quarter and ended the year on a positive note. The year 2010 was a very successful year as in a relatively short period of time we have strengthened the foundation of our company. Going forward, we plan to accelerate growth by investing in R&D, making opportunistic and strategic acquisitions and finally, increasing capital expenditures to expand capacity and enhance the productivity of our plants.a

2010 Key Highlights and Accomplishments

• Core business revenue growth of 60% over the prior year quarter and annual 2010 core revenue growth of 81% over the prior year. Akorna™s core business consists of the ophthalmic, hospital drugs & injectables and contract services segments.
• Sustained gross margins of 53% for the fourth quarter of 2010, consistent with third quarter 2010 results.
• Sale of the Akorn-Strides, LLC joint venture product portfolio to Pfizer for $63.2 million. Akorn Inc. owns 50% of the joint venture and received $35 million in proceeds from the sale.
• Prepaid high-cost subordinated debt of approximately $5.8 million during the fourth quarter of 2010. The Company is now debt free and will realize annual interest expense savings of approximately $0.9 million.
• Initiated R&D strategy and completed the development of 16 new products.
• Filed 5 new internally developed ANDAs with a combined market value of $400 million.
• In-licensed four filed partner ANDAs with a combined market value of $900 million during the year, of which two having a combined market value of $170 million were in-licensed during the fourth quarter.
• Launched Erythromycin ophthalmic ointment and injectable Hydromorphone.

Consolidated revenue for the fourth quarter of 2010 was $24.0 million, up 32% over the prior year quarter consolidated revenue of $18.2 million. Fourth quarter 2010 core business revenue was $24.0 million, up 60% over the prior year quarter core revenue of $15.0 million. The increase in core business revenue was the result of the continued growth of products launched in 2010, record high contract services revenue, and an increase in antidote product sales consistent with the expiration of previously sold lots.

Consolidated revenue for the year 2010 was $86.4 million, up 14% over the prior year consolidated revenue of $75.9 million. Core business revenue for the year 2010 was $81.2 million, up 81% over the prior year core revenue of $44.8 million.

Consolidated gross margin for the fourth quarter of 2010 was 53% compared to 33% in the comparable prior year period. Fourth quarter core business gross margin was 53% compared to 37% in the comparable prior year period. Sustained improvements in gross margin are the result of favorable product mix, selected price increases, higher utilization of plant capacities and the launch of new, higher margin products in 2010.

Net income for the fourth quarter of 2010 was $23.7 million, and earnings per share were $0.23 per diluted share compared to a net loss of $(2.6) million and a loss per share of $(0.03) in the prior year quarter. Fourth quarter 2010 net income included $21.6 million in gain related to the sale of the joint venturea™s product portfolio. The Company accounts for its investment in the joint venture under the equity method of accounting. The Company will recognize its share of the remaining gain from the sale in the second quarter of 2011. Fourth quarter 2010 net income also included $1.8 million in expense related to the prepayment of $5.8 million in subordinated debt. The expense included a $0.6 million cash prepayment fee and $1.2 million in non-cash expense for the write-off of deferred financing costs. The Company also incurred approximately $0.6 million in selling, general and administrative expenses in the fourth quarter 2010 related to a legal settlement with the prior CEO of the Company.

The Company generated $5.2 million in positive cash flow from operating activities in the fourth quarter of 2010 and ended the year with $42 million in cash and cash equivalents.

2011 Outlook

• The Company projects 2011 revenue in the range of $90.0 million to $94.0 million. This represents a 15% to 20% increase over 2010 core business revenue, excluding revenue from sales and services provided to the Akorn-Strides, LLC joint venture in both years.
• The Companya™s 2011 gross margin is projected to be between 52% and 54%.
• The Company projects 2011 adjusted EBITDA of approximately $20.0 million to $24.0 million. This represents a 27% to 51% increase over 2010 adjusted EBITDA excluding the impact of the Companya™s share of the Akorn-Strides, LLC joint venture in both years as well as the impact of the Companya™s 2010 vaccine sales.
• In 2011, the Company expects to spend approximately $15 million to $20 million in capital expenditures to increase plant capacities and improve efficiencies.
• The Company is projecting 2011 R&D expenses of approximately $10.0 million compared to approximately $7.0 million in 2010.
• The Companya™s 2011 outlook excludes the impact of any new approvals, new product launches or acquisitions after February 28, 2011.

Akorna™s R&D Pipeline

The Company has 17 ANDAs filed with the FDA with a combined annual market size of approximately $2.7 billion. The Company has completed development work on 12 additional products with a combined annual market size of approximately $1.1 billion and expects to file these products with the FDA shortly.

Fourth Quarter 2010 Conference Call

The Company will host a conference call at 10:00 a.m. Eastern Time on Tuesday, March 1, 2011, to discuss fourth quarter 2010 results followed by a Q&A session. The domestic call-in number is (800) 341-3130 and the international call-in number is (913) 981-5510. The confirmation code for all callers is 9993111. The URL for the webcast is [ http://www.videonewswire.com/event.asp?id=76449 ].

About Akorn, Inc.

Akorn, Inc. is a niche pharmaceutical company engaged in the development, manufacture and marketing of multisource and branded pharmaceuticals. Akorn has manufacturing facilities located in Decatur, Illinois and Somerset, New Jersey where the Company manufactures ophthalmic and injectable pharmaceuticals. Additional information is available on the Companya™s website at [ www.akorn.com ].

Forward Looking Statement

This press release includes statements that may constitute "forward-looking statements", including projections of certain measures of Akorn's results of operations, projections of certain charges and expenses, and other statements regarding Akorn's goals, regulatory approvals and strategy. Akorn cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Factors that could cause or contribute to such differences include, but are not limited to: statements relating to future steps we may take, prospective products, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. These cautionary statements should be considered in connection with any subsequent written or oral forward-looking statements that may be made by the company or by persons acting on its behalf and in conjunction with its periodic SEC filings. You are advised, however, to consult any further disclosures we make on related subjects in our reports filed with the SEC. In particular, you should read the discussion in the section entitled "Cautionary Statement Regarding Forward-Looking Statements" in our most recent Annual Report on Form 10-K, as it may be updated in subsequent reports filed with the SEC. That discussion covers certain risks, uncertainties and possibly inaccurate assumptions that could cause our actual results to differ materially from expected and historical results. Other factors besides those listed there could also adversely affect our results.

Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with generally accepted accounting principles (GAAP), Akorn is also reporting Adjusted EBITDA, which is a non-GAAP financial measure. Since Adjusted EBITDA is not a GAAP financial measure, it should not be used in isolation or as a substitute for consolidated statements of operations and cash flow data prepared in accordance with GAAP. In addition, Akorna™s definition of Adjusted EBITDA may not be comparable to similarly titled non-GAAP financial measures reported by other companies. For a full reconciliation of Adjusted EBITDA to net income (loss), please see the attachments to this earnings release.

Adjusted EBITDA, as defined by the company, is calculated as follows:

Net income (loss), plus:

• Interest income (expense), net
• Provision for income taxes
• Depreciation and amortization
• Non-cash expenses, such as share-based compensation expense and changes in the fair value of warrants
• Other adjustments, such as supply agreement termination expenses and equity in earnings of unconsolidated joint venture related to the sale of the joint venture's assets

The Company believes that Adjusted EBITDA is a meaningful indicator, to both Company management and investors, of the past and expected ongoing operating performance of the Company. EBITDA is a commonly used and widely accepted measure of financial performance. Adjusted EBITDA is deemed by the Company to be a useful performance indicator because it includes an add back of non-cash expenses and various other infrequently occurring items which typically have little to no bearing on cash flows and may be subject to uncontrollable factors not reflective of the Companya™s true operational performance (i.e. fair value adjustments to the carrying value of stock warrants liability).

While the Company uses Adjusted EBITDA in managing and analyzing its business and financial condition and believes it to be useful to investors in their evaluating the Companya™s performance, Adjusted EBITDA has certain shortcomings. Specifically, Adjusted EBITDA does not take into account the impact of capital expenditures on the liquidity or GAAP financial performance of the company and likewise omits share-based compensation expenses, which may vary over time and may represent a material portion of overall compensation expense. Accordingly, the Companya™s management utilizes comparable GAAP financial measures to evaluate the business in conjunction with Adjusted EBITDA and encourages investors to do likewise.