Akorn, Inc. Reports Record Third Quarter and Nine Months Results.BUFFALO GROVE Buffalo Grove A village of northeast Illinois, a suburb of Chicago. Population: 43,300. , Ill.--(BUSINESS WIRE)--Oct. 20, 1998-- Third Quarter Sales Increase 37 Percent and Net Income Increases 58 Percent Before Charges for Purchased R&D and Withdrawal of Stock Offering Akorn, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AKRN) today announced record results for the third quarter ended September 30, 1998. For the third quarter ended September 30, 1998, Akorn reported sales of $15,138,000, up 37% compared to sales of $11,058,000 reported for the third quarter of 1997. Net income for the quarter before one-time charges was $1,301,000 or $0.07 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Reported net income for the quarter was $345,000, after charges of $1,298,000 for purchased R&D and $350,000 for offering costs, compared to $825,000 for the third quarter of 1997. This translates into diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of in 1998 of $0.02, compared to earnings per share of $0.05 in 1997. Diluted number of shares outstanding were 18,840,000 in 1998 and 17,031,000 in 1997. The R&D charges are related to the acquisition of Advanced Remedies, Inc. (ARI ARI Acute respiratory infection, see there ) in July 1998. The approximately $4.0 million purchase price included, in addition to capital equipment, all Abbreviated New Drug Applications abbreviated new drug application Pharmacology An application made in the US by a pharmaceutical company requesting authority to market a 'new' drug for which both its therapeutic indications and formulation were previously approved by the FDA in another similar (ANDAs) for any product previously approved for ARI or under review by the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. . The purchase price also included regulatory files for products under development by ARI but not yet filed with the FDA. The total purchase price was allocated among the acquired assets, and the price associated with products not yet approved by the FDA was designated purchased R&D and charged to expense. For the nine months ended September 30, 1998, sales were $41,177,000, up 37% compared to $30,102,000 reported for the nine months of 1997. Net income for the nine month period before one-time charges was $3,450,000, or $0.18 per diluted share. Reported net income for the nine month period was $2,494,000 or $0.13 per diluted share, compared to $989,000 or $0.06 per share in the 1997 nine month period. There were 18,820,000 diluted shares outstanding in the 1998 nine month period compared with 16,883,000 shares outstanding for the 1997 nine months. Analysis of Results For the 1998 third quarter compared to the 1997 third quarter, sales increased 37%; gross profits increased 66%; gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. increased to 52% from 43%; selling, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. increased 17%; operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before one-time charges rose 86%; and net income before one-time charges rose 58%. Research and development expenses increased 247% over the third quarter of 1997, reflecting increased development of proprietary, patented products. The Company is investing heavily in three NDA (Non Disclosure Agreement) An agreement signed between two parties that have to disclose confidential information to each other in order to do business. In general, the NDA states why the information is being divulged and stipulates that it cannot be used for any products in various stages of development. Two of these products, piroxicam and a combination miotic miotic /mi·ot·ic/ (mi-ot´ik) 1. pertaining to, characterized by, or producing miosis. 2. an agent that causes contraction of the pupil. mi·ot·ic n. , are being developed by the ophthalmic ophthalmic /oph·thal·mic/ (of-thal´mik) ocular (1). oph·thal·mic adj. Of or relating to the eye; ocular. Ophthalmic Pertaining to the eye. division, and a third, TP-1000 for migraine migraine (mī`grān), headache characterized by recurrent attacks of severe pain, usually on one side of the head. It may be preceded by flashes or spots before the eyes or a ringing in the ears, and accompanied by double vision, nausea, , is being developed by the injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. division. Increased gross profits have allowed the Company to devote substantial resources to developing patented products as part of its long-term growth strategy. For the first nine months of 1998 compared to the 1997 equivalent period, sales increased 37%; gross profits increased 61%; gross profit margins increased to 51% from 43%; selling, general and administrative costs increased 13%; operating income before one-time charges increased 102%; and net income before one-time charges increased 81%. Research and development expenses increased 194%, reflecting the additional development activities noted above. Dr. John N. Kapoor, Chairman and Chief Executive Officer of Akorn, attributed the strong improvement in performance across the board, especially in gross margins and higher profits, to a strategy of successful product acquisitions, a higher margin product mix, and greater manufacturing plant operating efficiencies. Dr. Kapoor added, "Our strategy of adding complementary products to our portfolio through acquisition or internal development is paying off both in increased sales to existing customers and in expansion of Akorn's customer base." Since the beginning of 1998, Akorn has announced the acquisitions of eight products and an exclusive licensing arrangement for an additional product. These acquisitions included ophthalmic products Paremyd, Fluress, Ful-Glo and Rose Bengal rose ben·gal n. A bluish-red dye used as a stain for bacteria, as a stain in the diagnosis of keratitis sicca, and in tests of liver function. from Allergan; Ocusert Pilo-20 and Pilo-40 from Alza and injectable products Sufenta and Alfenta from Janssen Pharmaceutica Janssen Pharmaceutica, is a pharmaceutical company based in Beerse, Belgium, was established in 1953 by Dr. Paul Janssen. It was created not as a subsidiary of a chemical factory but solely with the aim of conducting pharmacological research. . The Ocusert acquisition also included non-exclusive rights to the drug delivery technology for all ophthalmic applications. Akorn obtained exclusive distribution rights to Biolon, a high-viscosity viscoelastic Adj. 1. viscoelastic - having viscous as well as elastic properties natural philosophy, physics - the science of matter and energy and their interactions; "his favorite subject was physics" solution, from Bio-Technology General. R. Scott Zion, General Manager of the Ophthalmic Division, commented, "Ophthalmic Division sales increased 13% for the quarter and 17% year to date, reflecting our increased national accounts presence as well as strategic product acquisitions. Favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix has yielded gross margins of 54% for the quarter. The Division is actively continuing to evaluate both proprietary and multisource products for development or acquisition." Floyd Benjamin, President of Taylor Pharmaceuticals, Inc., Akorn's Injectable Division, commented, "Injectable sales increased 71% for the quarter and 67% year to date, reflecting strong sales in the base business as well as in acquired products. Favorable product mix has resulted in gross margins of 46% in the third quarter. The Division's product development and acquisition pipeline contains numerous multisource and proprietary products." Akorn, Inc. manufactures and markets sterile sterile /ster·ile/ (ster´il) 1. unable to produce offspring. 2. aseptic. ster·ile adj. 1. Not producing or incapable of producing offspring. 2. ophthalmic and injectable pharmaceuticals, and markets and distributes an extensive line of pharmaceuticals, ophthalmic surgical supplies and related products. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to the effects of federal, state and other government regulation of the Company's business; the Company's success in acquiring, developing, manufacturing and marketing new products; the effects of competition from generic pharmaceuticals and other pharmaceutical companies; and other risks and uncertainties identified in the Company's Securities and Exchange Commission Filings.
Akorn, Inc.
Consolidated Statement of Earnings
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Net sales:
Ophthalmic $ 7,392 $ 6,535 $ 21,206 $ 18,160
Injectable 7,746 4,523 19,971 11,942
-------- -------- -------- --------
Total sales 15,138 11,058 41,177 30,102
Cost of sales 7,270 6,313 20,046 17,013
-------- -------- -------- --------
Gross profit 7,868 4,745 21,131 13,089
Selling, general and
administrative 3,408 2,993 9,734 8,797
Amortization of intangibles 652 - 1,740 -
Research and development 1,187 342 3,143 1,071
Purchased R&D (1) 1,298 - 1,298 -
Relocation charges - - - 1,451
-------- -------- -------- --------
6,895 3,335 16,265 11,319
-------- -------- -------- --------
Operating income 1,323 1,410 5,216 1,770
Interest & other income
(expense), net (378) (101) (892) (200)
Offering costs (350) - (350) -
--------- -------- --------- --------
Pretax income 595 1,309 3,974 1,570
Income taxes 250 484 1,480 581
-------- -------- -------- --------
Net income $ 345 $ 825 $ 2,494 $ 989
======== ======== ======== ========
Per share:
Net income-basic $ 0.02 $ 0.05 $ 0.14 $ 0.06
======== ======== ======== ========
Net income-diluted $ 0.02 $ 0.05 $ 0.13 $ 0.06
======== ======== ======== ========
Weighted average shares
Basic 17,948 16,606 17,829 16,599
======== ======== ======== ========
Diluted 18,840 17,031 18,820 16,883
======== ======== ======== ========
(1) R&D charges related to the acquisition of Advanced Remedies, Inc.
(ARI) in July 1998.
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