Akorn, Inc. Reports Year End 2005 Results and Provides Outlook for 2006.BUFFALO GROVE Buffalo Grove A village of northeast Illinois, a suburb of Chicago. Population: 43,300. , Ill. -- Akorn, Inc. (AMEX AMEX See: American Stock Exchange :AKN AKN King Salmon Airport (Alaska) AKN Altona-Kaltenkirchen-Neumünster (public transportation system in the north of Hamburg, Germany) AKN Net Cargo Ship (Auxiliary, Cargo, Net) ) today reported net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $44.5 million for the full year 2005, a decrease of 12% from 2004 net sales of $50.7 million. Gross profit of $14.9 million or 34% of 2005 net sales, represents a decrease of 18% from gross profit of $18.2 million for 2004. Net loss for 2005 was $8.6 million, vs. a $3.0 million net loss for 2004. Net cash provided by 2005 operating activities was approximately breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations . The year over year revenue and gross profit shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. is directly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to wholesaler inventory buying patterns as well as a lack of any significant new product introductions. The increase in the 2005 net loss is primarily due to increased research and development spending of $2.6 million, including $1.1 million for lyophilization lyophilization /ly·oph·i·li·za·tion/ (li-of?i-li-za´shun) the creation of a stable preparation of a biological substance by rapid freezing and dehydration of the frozen product under high vacuum. validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. efforts and the $3.3 million reduction in gross profit associated with lower revenues. Highlights for 2005 included the following: --Substantial compliance was achieved at the Decatur Decatur. 1 City (1990 pop. 48,761), seat of Morgan co., N Ala., on the Tennessee River; inc. 1826. It has shipyards, port traffic, and diverse industries, including steel manufacturing. , IL manufacturing facility. On December December: see month. 13, 2005, 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. reported satisfactory resolution of past compliance issues after a recent inspection of the Decatur facility, making Akorn eligible for new product approvals from this facility. --A $21.5 million contract award was received on December 30, 2005 from the Department of Health and Human Services Noun 1. Department of Health and Human Services - the United States federal department that administers all federal programs dealing with health and welfare; created in 1979 Health and Human Services, HHS . The contract award provides for the delivery of two countermeasures That form of military science that, by the employment of devices and/or techniques, has as its objective the impairment of the operational effectiveness of enemy activity. See also electronic warfare. (Ca-DTPA and Zn-DTPA) for a radiological radiological pertaining to radiology. radiological diagnosis see radiological diagnosis. mobile radiological apparatus x-ray machines that can be moved but are not portable because of their weight. or nuclear incident. --The Company signed eight new product development and supply partnership agreements, and now has established a robust external product development pipeline. Over ninety products are being developed for distribution and marketing by Akorn through twelve different partnerships. One of these partnerships, an exclusive licensing and supply agreement with Hameln Hameln (häm`əln), Eng. Hamelin, city (1994 pop. 59,210), Lower Saxony, N central Germany, a port on the Weser River. It is an industrial center and rail junction. Its manufactures include carpets, chemicals, machinery, and food products. Pharma, has already generated a significant contract award from the U.S. government that was eventually funded through Project Bioshield, totaling $21.5 million. --Validation efforts commenced and continue to progress on the new lyophilization facility. In 2005, the Company invested approximately $1.1 million for validation efforts and expects to begin commercial production in the third quarter, 2006. Akorn's Outlook for 2006: --50% Revenue growth generated from new product introductions, increased contract manufacturing business, and our exclusive license for Ca-DTPA and Zn-DTPA. --40% Gross Margin. --Positive Net Income. --Significant Improvement in Cash Flow from Operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . --Debt-free Balance Sheet. --Lyophilization Manufacturing Facility Fully Operational for Commercial Production. Arthur Arthur, king of Britain: see Arthurian legend. Arthur king and hero of Scotland, Wales, and England. [Arthurian Legend: Parrinder, 28] See : Heroism S. Przybyl, President and Chief Executive Officer stated, "In 2005, we accomplished our primary objectives: achieving FDA compliance at our Decatur, IL manufacturing facility and receiving a contract award for $21.5 million from the U.S. Government. Regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. compliance in Decatur is a significant long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , positive event for Akorn, providing us with the ability to receive new product approvals and generate new third party manufacturing contracts. For example, fifty percent of our new lyophilization manufacturing capacity is expected to be dedicated to third party contract manufacturing, and our internal product development pipeline is expected to contribute 13 ANDA ANDA abbr. abbreviated new drug application submissions and 10 ANDA approvals in 2006. "In 2005, we significantly strengthened our external product development pipeline with the addition of several new strategic partnerships. We believe these new partnerships will add value to Akorn, by developing products that we are unable to manufacture in our own facilities and presenting us with unique proprietary licensing and product development opportunities. All of these new, exclusive partnerships are designed to increase and complement our existing product lines in both our 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. and hospital injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. business segments. For example, our licensing relationship for the two specialty pharmaceutical 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 orphan drug orphan drug, drug developed under the U.S. Orphan Drug Act (1983) to treat a disease that affects fewer than 200,000 people in the United States. The orphan drug law offers tax breaks and a seven-year monopoly on drug sales to induce companies to undertake the products (Ca-DTPA and Zn-DTPA) with Hameln Pharma will provide us with a significant revenue contribution in 2006 and is complementary to our existing antidote antidote Remedy to counteract the effects of a poison or toxin. Administered by mouth, intravenously, or sometimes on the skin, it may work by directly neutralizing the poison; causing an opposite effect in the body; binding to the poison to prevent its absorption, injectable products. "Akorn provides an excellent partnering opportunity for an international pharmaceutical company seeking to enter the U.S. market with finished dosage form A dosage form is the physical form of a dose of medication, such as a capsule or injection. The route of administration is dependent on the dosage form of a given drug. drug products and we remain committed to both external and internal product development opportunities. In meeting our 2005 objectives, we have provided our company with the ability to accomplish our 2006 stated objectives and to position us well for future long term growth. Finally, we are pleased with our recent $19.4 million capital raise, and I want to again welcome our new institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. to Akorn." About Akorn, Inc. 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. specialty pharmaceuticals. Akorn has manufacturing facilities located in Decatur, Illinois
Materials in this press release may contain information that includes or is based upon 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 Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act of 1995. Forward-looking statements give our expectations or forecasts of future events. 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. In particular, these include statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future steps we may take, prospective products, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. such as legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , and financial results. Any or all of our forward-looking statements here or in other publications may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual results may vary materially, and there are not guarantees about the performance of our stock. Any forward-looking statements represent our expectations or forecasts only as of the date they were made and should not be relied upon as representing our expectations or forecasts as of any subsequent date. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise, even if our expectations or forecasts change. 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 en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Cautionary Statement Regarding Forward-Looking Statements" in our most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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.
AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $791 $4,110
Trade accounts receivable (less allowance
for doubtful accounts of $12 and $435
respectively) 3,222 6,582
Inventories 10,279 10,421
Prepaid expenses and other current assets 1,402 1,280
------------ ------------
TOTAL CURRENT ASSETS 15,694 22,393
PROPERTY, PLANT AND EQUIPMENT, NET 31,071 31,893
OTHER LONG-TERM ASSETS
Intangibles, net 10,210 11,618
Other 120 1,018
------------ ------------
TOTAL OTHER LONG-TERM ASSETS 10,330 12,636
------------ ------------
TOTAL ASSETS $57,095 $66,922
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of debt and debt in
default $7,044 $3,590
Trade accounts payable 3,046 5,397
Accrued compensation 1,519 499
Accrued expenses and other liabilities 3,851 1,674
------------ ------------
TOTAL CURRENT LIABILITIES 15,460 11,160
LONG-TERM LIABILITIES
Long-term debt, less current installments 602 6,790
Other -- 1,646
------------ ------------
TOTAL LONG-TERM LIABILITIES 602 8,436
------------ ------------
TOTAL LIABILITIES 16,062 19,596
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, no par value --
150,000,000 shares authorized;
27,618,745 and 25,132,684 shares issued
and outstanding at December 31, 2005
and December 31, 2004, respectively 67,339 59,571
Series A Preferred Stock, $1.00 par
value, 257,172 shares authorized and
issued, 241,122 shares outstanding at
December 31, 2005 and 242,172 shares
outstanding at December 31, 2004 27,232 25,787
Series B Preferred Stock, $1.00 par
value, 170,000 shares authorized,
141,000 shares issued, 106,600
outstanding at December 31, 2005 and
138,500 outstanding at December 31, 2004 10,758 13,109
Warrants to acquire common stock 13,696 14,160
Accumulated deficit (77,992) (65,301)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 41,033 47,326
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $57,095 $66,922
============ ============
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
--------- -------- --------- ---------
Revenues $10,740 $12,584 $44,484 $50,708
Cost of sales 7,659 8,494 29,540 32,506
--------- -------- --------- ---------
GROSS PROFIT 3,081 4,090 14,944 18,202
Selling, general and
administrative expenses 5,444 3,082 16,405 13,300
Amortization and write-down of
intangibles 351 538 1,508 3,409
Research and development
expenses 307 711 4,510 1,861
--------- -------- --------- ---------
TOTAL OPERATING EXPENSES 6,102 4,331 22,423 18,570
--------- -------- --------- ---------
OPERATING INCOME (LOSS) (3,021) (241) (7,479) (368)
Interest expense (620) (509) (2,325) (4,218)
Gain related to dispute
settlements -- (20) -- 1,562
Gain on Retirement of Debt -- -- 1,212 --
Other Income -- 6 -- 6
--------- -------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES (3,641) (764) (8,592) (3,018)
Income tax provision (benefit) -- 50 17 8
--------- -------- --------- ---------
NET INCOME (LOSS) (3,641) (814) (8,609) (3,026)
Preferred stock dividends and
adjustments (1,091) (1,118) (4,082) (34,436)
--------- -------- --------- ---------
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS $(4,732) $(1,932) $(12,691) $(37,462)
========= ======== ========= =========
NET LOSS PER SHARE:
BASIC AND DILUTED $(0.18) $(0.09) $(0.49) $(1.80)
========= ======== ========= =========
SHARES USED IN COMPUTING
NET LOSS PER SHARE:
BASIC AND DILUTED 26,960 22,563 26,095 20,817
========= ======== ========= =========
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)
TWELVE MONTHS
ENDED
DECEMBER 31,
2005 2004
-------- --------
OPERATING ACTIVITIES
Net loss $(8,609) $(3,026)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 5,239 4,075
Amortization of deferred financing costs 74 1,208
Amortization of debt discounts 1,237 945
Write-down of long lived assets -- 2,037
Gain related to dispute settlements -- (1,562)
Prepayments to Strides Arcolab Limited (250) --
Gain on Retirement of Debt (1,212) --
Gain on sale of long-lived asset -- (6)
Non-cash expenses related to preferred stock -- 1,064
Non-cash stock compensation expense 407 --
Changes in operating assets and liabilities:
Trade accounts receivable 3,360 (4,956)
Inventories 142 (2,614)
Prepaid expenses and other current assets (198) (1,234)
Trade accounts payable (2,351) (14)
Accrued expenses and other liabilities 2,013 622
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (148) (3,461)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,782) (689)
Purchase of intangible assets (75) (2,155)
Proceeds from the sale of investment -- 2,000
Proceeds from the sale of long-lived assets -- 6
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,857) (838)
FINANCING ACTIVITIES
Repayment of long-term debt (370) (6,730)
Repayment of NeoPharm Debt (2,500) --
Net borrowings (payments) under lines of credit -- (1,500)
Net proceeds from Series B offering -- 13,044
Proceeds from Warrants 188 2,036
Proceeds under stock option and stock purchase plans 1,368 1,341
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,314) 8,191
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,319) 3,892
Cash and cash equivalents at beginning of period 4,110 218
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $791 $4,110
======== ========
Amount paid for interest (net of capitalized
interest) $419 $434
Amount paid/(refunded) for income taxes 72 2
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