Akorn, Inc. (NASDAQ:AKRX) a specialty pharmaceutical company, today
reported financial results for the second quarter ended June 30, 2009.
Total revenue for the second quarter 2009 was $16.3 million, versus
$21.2 million in the second quarter 2008, representing a decrease of
approximately 23%. The revenue decrease was across all segments with the
exception of contract manufacturing. Td vaccine revenue decreased $2.2
million or 22% and ophthalmics and hospital drugs & injectables revenue
decreased $2.8 million or 31% compared with the prior year period. The
year-over-year decrease in ophthalmics is primarily due to a $1.1
million adjustment in the product returns reserve. The hospital drugs &
injectables decrease is a result of lower hospital antidote sales
compared with the prior year period. In particular, the 2008 recall of
Becton Dickinson syringes used in our cyanide antidote kit has resulted
in an additional $242,000 in product returns reserve in the second
quarter 2009 as well as a temporary downturn in our cyanide antidote kit
sales cycle which we expect to reverse in the second half of 2009.
Gross profit for the second quarter 2009 was $1.7 million compared to
$4.8 million in the second quarter 2008, a decrease of 65%. The decrease
in second quarter 2009 gross profit over the prior year period is
primarily due to the $1.3 million increase in our product returns
reserve, lower sales of our more profitable antidote products and a
higher concentration of low margin contract manufacturing products.
Gross margin for the second quarter 2009 was 10.2% versus 22.7% for the
second quarter 2008.
During the second quarter 2009, the Company recognized equity earnings
totaling $128,000 from its investment in the Akorn-Strides, LLC joint
venture and marketing fee revenue of $140,000 for its commission on
sales of joint venture products. The joint venture recognized net sales
of approximately $1.9 million during second quarter 2009. Joint venture
sales increased $1.0 million over first quarter 2009 as a result of our
second quarter 2009 launch of two new injectable drugs: Vancomycin and
Tobramycin.
The Company’s net loss was approximately $7.0 million in the second
quarter 2009 compared to a net loss of $2.8 million in the second
quarter 2008. This reflects the revenue and gross profit decreases
discussed above as well as a $0.5 million increase in research and
development, mainly due to additional product development fees. The
second quarter 2009 net loss also includes $0.6 million in severance
charges and legal fees related to the renegotiated MBL supply agreement.
Second quarter cash flow from operating activities was a use of $3.1
million. The revolving line of credit balance remained unchanged at $5.5
million compared to the quarter ended March 31, 2009, while the cash
balance ended at $1.0 million on June 30, 2009 compared with $4.7
million on March 31, 2009. Strong first and second quarter Td vaccine
sales and corresponding cash collections resulted in improvements to the
balance sheet with a $3.6 million reduction in trade accounts
receivable, a $5.1 million reduction in inventory and a decrease of $7.5
million in trade accounts payable over the quarter ended March 31, 2009.
The Company is finalizing amendments to the existing revolving line of
credit with EJ Funds and subordinated debt with The John N. Kapoor
Trust, the terms of which will be more fully described in the Company’s
Form 10-Q, which will be filed by August 17th.
Raj Rai, Interim Chief Executive Officer stated, “We have continued to
make progress in the second quarter on various fronts while we
re-position the Company for growth. A summary of actions taken so far in
order to address the operational challenges that the Company has faced
include:
-
Reduced the company workforce by approximately 7% and implemented
additional cost reduction strategies throughout the organization to
realize approximately $6 million in annualized cost savings;
-
Negotiated additional funding from EJ Funds for growth initiatives;
-
Re-aligned the sales force to focus on the ophthalmics and hospital
drugs & injectables with incentives to grow high margin products;
-
Implemented strategies and operational plans to optimize plant
productivity and supply chain inventory levels;
-
Re-launched Akten®;
-
Strengthened the management team.
Rai further added, “These measures were required to stabilize the
Company’s operations. While we continue to look for additional
operational efficiencies and cost saving opportunities, we will shift
our focus in the second half of 2009 towards increasing the pull-through
demand from our hospital clients, increasing direct sales in
Ophthalmology and launching three new products: Capastat, Ciprofloxacin
and Apraclonidine, as well as implementing new contract manufacturing
accounts. With the steps taken in the second quarter and the new
business initiatives, we believe the Company can achieve positive cash
flow by the end of 2009.”
|
|
|
Revenue and Gross Profit by Segment
|
|
in Thousands (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTH ENDED
JUNE 30,
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
|
Difference
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
Ophthalmic
|
|
$2,984
|
|
$4,288
|
|
|
|
|
($1,304)
|
|
Hospital Drugs & Injectables
|
|
3,306
|
|
4,851
|
|
|
|
|
(1,545)
|
|
Biologics & Vaccines
|
|
7,831
|
|
10,002
|
|
|
|
|
(2,171)
|
|
Contract Services
|
|
2,179
|
|
2,088
|
|
|
|
|
91
|
|
Total Revenues
|
|
$16,300
|
|
$21,229
|
|
|
|
|
($4,929)
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
|
|
|
|
Ophthalmic
|
|
($458)
|
|
$968
|
|
|
|
|
($1,426)
|
|
Hospital Drugs & Injectables
|
|
226
|
|
1,328
|
|
|
|
|
(1,102)
|
|
Biologics & Vaccines
|
|
1,661
|
|
1,786
|
|
|
|
|
(125)
|
|
Contract Services
|
|
237
|
|
745
|
|
|
|
|
(508)
|
|
Total Gross Profit
|
|
$1,666
|
|
$4,827
|
|
|
|
|
($3,161)
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
|
|
|
|
|
|
|
|
|
Ophthalmic
|
|
-15.3%
|
|
22.6%
|
|
|
|
|
|
|
Hospital Drugs & Injectables
|
|
6.8%
|
|
27.4%
|
|
|
|
|
|
|
Biologics & Vaccines
|
|
21.2%
|
|
17.9%
|
|
|
|
|
|
|
Contract Services
|
|
10.9%
|
|
35.7%
|
|
|
|
|
|
|
Total Gross Margin
|
|
10.2%
|
|
22.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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About Akorn, Inc.
Akorn, Inc. manufactures and markets sterile specialty pharmaceuticals.
Akorn has manufacturing facilities located in Decatur, Illinois and
Somerset, New Jersey and markets and distributes an extensive line of
hospital and ophthalmic pharmaceuticals. Additional information is
available at the Company’s website at www.akorn.com.
This press release includes statements that may constitute
"forward-looking statements", including with regard to the company's
future operations and its earnings expectations. 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.
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|
AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
|
|
|
|
|
|
|
|
|
|
JUNE 30,
2009
|
|
DECEMBER 31,
2008
|
|
|
|
(UNAUDITED)
|
|
(AUDITED)
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,019
|
|
|
$
|
1,063
|
|
|
Trade accounts receivable (less allowance for doubtful accounts
of $18 and $22, respectively)
|
|
|
9,044
|
|
|
|
6,529
|
|
|
Other receivable
|
|
|
—
|
|
|
|
1,221
|
|
|
Inventories
|
|
|
24,607
|
|
|
|
30,163
|
|
|
Prepaid expenses and other current assets
|
|
|
986
|
|
|
|
1,770
|
|
|
TOTAL CURRENT ASSETS
|
|
|
35,656
|
|
|
|
40,746
|
|
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
32,839
|
|
|
|
34,223
|
|
|
OTHER LONG-TERM ASSETS
|
|
|
|
|
|
Intangibles, net
|
|
|
5,353
|
|
|
|
6,017
|
|
|
Deferred financing costs
|
|
|
1,391
|
|
|
|
272
|
|
|
Other
|
|
|
1,561
|
|
|
|
1,071
|
|
|
TOTAL OTHER LONG-TERM ASSETS
|
|
|
8,305
|
|
|
|
7,360
|
|
|
TOTAL ASSETS
|
|
$
|
76,800
|
|
|
$
|
82,329
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
5,239
|
|
|
$
|
8,795
|
|
|
Accrued compensation
|
|
|
1,158
|
|
|
|
1,070
|
|
|
Accrued expenses and other liabilities
|
|
|
3,077
|
|
|
|
2,906
|
|
|
Short term subordinated debt – related party
|
|
|
5,742
|
|
|
|
5,332
|
|
|
Revolving line of credit – related party
|
|
|
5,509
|
|
|
|
—
|
|
|
Warrants liability
|
|
|
2,719
|
|
|
|
—
|
|
|
Supply agreement termination costs
|
|
|
4,750
|
|
|
|
—
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
28,194
|
|
|
|
18,103
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
Lease incentive obligation
|
|
|
1,394
|
|
|
|
1,484
|
|
|
Product warranty liability
|
|
|
1,299
|
|
|
|
1,299
|
|
|
Other long-term liabilities
|
|
|
825
|
|
|
|
—
|
|
|
TOTAL LONG-TERM LIABILITIES
|
|
|
3,518
|
|
|
|
2,783
|
|
|
TOTAL LIABILITIES
|
|
|
31,712
|
|
|
|
20,886
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
Common stock, no par value — 150,000,000 shares authorized;
90,244,618 and 90,072,662 shares issued and outstanding at June 30,
2009 and December 31, 2008, respectively
|
|
|
171,903
|
|
|
|
170,617
|
|
|
Warrants to acquire common stock
|
|
|
2,731
|
|
|
|
2,731
|
|
|
Accumulated deficit
|
|
|
(129,546
|
)
|
|
|
(111,905
|
)
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
|
|
45,088
|
|
|
|
61,443
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
76,800
|
|
|
$
|
82,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Revenues
|
|
$
|
16,300
|
|
|
$
|
21,229
|
|
|
$
|
38,340
|
|
|
$
|
35,688
|
|
|
Cost of sales
|
|
|
14,634
|
|
|
|
16,402
|
|
|
|
31,311
|
|
|
|
27,114
|
|
|
GROSS PROFIT
|
|
|
1,666
|
|
|
|
4,827
|
|
|
|
7,029
|
|
|
|
8,574
|
|
|
Selling, general and administrative expenses
|
|
|
5,833
|
|
|
|
5,914
|
|
|
|
12,829
|
|
|
|
12,171
|
|
|
Supply agreement termination expenses
|
|
|
99
|
|
|
|
—
|
|
|
|
5,929
|
|
|
|
—
|
|
|
Amortization of intangibles
|
|
|
338
|
|
|
|
338
|
|
|
|
914
|
|
|
|
677
|
|
|
Research and development expenses
|
|
|
1,690
|
|
|
|
1,225
|
|
|
|
2,668
|
|
|
|
3,601
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
7,960
|
|
|
|
7,477
|
|
|
|
22,340
|
|
|
|
16,449
|
|
|
OPERATING LOSS
|
|
|
(6,294
|
)
|
|
|
(2,650
|
)
|
|
|
(15,311
|
)
|
|
|
(7,875
|
)
|
|
Write-off of deferred financing costs
|
|
|
(98
|
)
|
|
|
—
|
|
|
|
(1,552
|
)
|
|
|
—
|
|
|
Interest expense, net
|
|
|
(376
|
)
|
|
|
(169
|
)
|
|
|
(654
|
)
|
|
|
(284
|
)
|
|
Equity in earnings of unconsolidated joint venture
|
|
|
128
|
|
|
|
—
|
|
|
|
188
|
|
|
|
—
|
|
|
Change in warrants liability value
|
|
|
(310
|
)
|
|
|
—
|
|
|
|
(310
|
)
|
|
|
—
|
|
|
Other expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(201
|
)
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(6,950
|
)
|
|
|
(2,819
|
)
|
|
|
(17,639
|
)
|
|
|
(8,360
|
)
|
|
Income tax provision
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
3
|
|
|
NET LOSS
|
|
$
|
(6,950
|
)
|
|
$
|
(2,819
|
)
|
|
$
|
(17,641
|
)
|
|
$
|
(8,363
|
)
|
|
NET LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
$
|
(0.08
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.09
|
)
|
|
DILUTED
|
|
$
|
(0.08
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.09
|
)
|
|
SHARES USED IN COMPUTING NET LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
90,218
|
|
|
|
89,204
|
|
|
|
90,161
|
|
|
|
89,129
|
|
|
DILUTED
|
|
|
90,218
|
|
|
|
89,204
|
|
|
|
90,161
|
|
|
|
89,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
|
|
|
|
SIX MONTHS
ENDED JUNE 30
|
|
|
|
2009
|
|
2008
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net loss
|
|
$
|
(17,641
|
)
|
|
$
|
(8,363
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,848
|
|
|
|
2,222
|
|
|
Amortization of deferred financing fees
|
|
|
1,552
|
|
|
|
—
|
|
|
Non-cash stock compensation expense
|
|
|
1,243
|
|
|
|
1,249
|
|
|
Non-cash supply agreement termination expense
|
|
|
1,051
|
|
|
|
—
|
|
|
Non-cash change in warrants liability value
|
|
|
310
|
|
|
|
—
|
|
|
Equity in earnings of unconsolidated joint venture
|
|
|
(188
|
)
|
|
|
—
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(2,515
|
)
|
|
|
(5,989
|
)
|
|
Inventories
|
|
|
5,556
|
|
|
|
5,720
|
|
|
Prepaid expenses and other current assets
|
|
|
574
|
|
|
|
140
|
|
|
Other long-term assets
|
|
|
—
|
|
|
|
1,246
|
|
|
Supply agreement termination liabilities
|
|
|
4,750
|
|
|
|
—
|
|
|
Trade accounts payable
|
|
|
(3,556
|
)
|
|
|
(9,639
|
)
|
|
Other long-term liabilities
|
|
|
825
|
|
|
|
—
|
|
|
Accrued expenses and other liabilities
|
|
|
579
|
|
|
|
362
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(4,612
|
)
|
|
|
(13,052
|
)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(642
|
)
|
|
|
(1,420
|
)
|
|
Purchase of product licensing rights
|
|
|
(250
|
)
|
|
|
—
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(892
|
)
|
|
|
(1,420
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
—
|
|
|
|
(208
|
)
|
|
Restricted cash for revolving credit agreement
|
|
|
—
|
|
|
|
(2,050
|
)
|
|
Loan origination fees – new revolving line of credit
|
|
|
(1,313
|
)
|
|
|
—
|
|
|
Proceeds from line of credit
|
|
|
5,509
|
|
|
|
9,658
|
|
|
Proceeds from exercise of stock warrants
|
|
|
—
|
|
|
|
37
|
|
|
Proceeds under stock option and stock purchase plans
|
|
|
1,264
|
|
|
|
456
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
5,460
|
|
|
|
7,893
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(44
|
)
|
|
|
(6,579
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,063
|
|
|
|
7,948
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
1,019
|
|
|
$
|
1,369
|
|
|
SUPPLEMENTAL DISCLOSURES
|
|
|
|
|
|
Amount paid for interest
|
|
$
|
227
|
|
|
$
|
366
|
|
|
Amount paid for income taxes
|
|
$
|
3
|
|
|
$
|
3
|
|
|
|
|
|
|
|
Akorn, Inc.
Tim Dick, Chief Financial Officer, 847-279-6150
