Alfenta

BUFFALO GROVE, 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: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 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 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) in July 1998. The approximately $4.0 million purchase price included, in addition to capital equipment, all Abbreviated New Drug Applications (ANDAs) for any product previously approved for ARI or under review by the FDA. 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 increased to 52% from 43%; selling, general and administrative costs increased 17%; operating income 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 products in various stages of development. Two of these products, piroxicam and a combination miotic, are being developed by the ophthalmic division, and a third, TP-1000 for migraine, is being developed by the injectable 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 from Allergan; Ocusert Pilo-20 and Pilo-40 from Alza and injectable products Sufenta and Alfenta from Janssen Pharmaceutica.

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 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 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 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 within the meaning of the Private Securities Litigation Reform Act 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.

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