Akorn, Inc. (AMEX:AKN) today reported net sales of $12.5 million
for the second quarter 2006, a decrease of 1% vs. second quarter
2005 net sales of $12.6 million. Gross profit of $5.0 million or
39.7% of second quarter 2006 net sales, represents an increase of
2% vs. gross profit of $4.9 million or 38.6% of net sales for the
second quarter 2005. Net loss available to common stockholders for
the second quarter 2006 was $(2.2) million, or $(0.03) per diluted
share vs. a $(1.0) million net loss available to common
stockholders for the second quarter 2005, which included an
extraordinary gain of $1.2 million, or $(0.04) per diluted share.
During the second quarter of 2006, net loss available to common
stockholders was adversely impacted by stock option expense of $0.5
million, as compared to zero in the first quarter of 2005. For the
six months ended June 30, 2006, net sales were $42.2 million vs.
$22.8 million in the comparative prior year period, an increase of
85.4%. Gross profit was $16.7 million or 39.5% of net sales, vs.
$8.2 million or 36.0% of net sales. Net income available to common
shareholders was $0.6 million vs. a net loss of $(4.3) million. For
the first half of 2006, net income was adversely impacted by stock
option expense of $0.7 million, as compared to zero in the first
half of 2005, and a one-time non-recurring interest expense of $1.1
million due to the early retirement of convertible debt. Highlights
since the beginning of 2006 include: -- Four new business
development agreements were signed, two with Natco Pharma Limited,
one with Fidia Farmaceutici, S.p.A., and one with Cipla, Ltd.,
which add nine drugs to Akorn's product development pipeline. --
Two new contract manufacturing supply agreements were announced,
one with X-Gen Pharmaceuticals, Inc. and one with Advanced Vision
Research, Inc. We believe that these two agreements will increase
Contract Manufacturing sales by approximately 50% on an annualized
basis beginning in 2007. -- Seven product approvals were received
from the FDA: Brimonidine, Inapsine(R), Orphenadrine, Sufenta(R),
Alfenta(R), Amiodarone, and Dilitiazem. Of the seven, one product,
Inapsine(R), has already been launched. -- Eleven ANDA's have been
submitted to the FDA. Seven of these ANDA's are from Akorn-Strides,
LLC, Akorn's joint venture with Strides Arcolab Limited. -- $21.4
million in net sales were recognized from an order with the
Department of Health and Human Services for Ca-DTPA and Zn-DTPA,
two countermeasures for a radiological or nuclear incident. --
Validation efforts for the lyophilization facility are on schedule
to be completed in the third quarter 2006. -- For the first half of
2006, cash flow from operations was $2.0 million, $19.4 million in
new capital was raised, $10.6 million in outstanding debt was
retired, and the Series A 6.0% Participating Convertible Preferred
Stock was converted to common stock. Arthur S. Przybyl, President
and Chief Executive Officer stated, "We remain confident and on
track to achieve our objectives for 2006. With continued new
product introductions scheduled for the second half of the year
combined with increased production volumes, we remain on target to
increase year-over-year revenues by 50% while achieving a 40% gross
margin and positive net income. "Regulatory product filings and new
product approvals should achieve our corporate objectives of twenty
and ten, respectively. Our first lyophilized exhibit batch is
scheduled to occur on September 27, 2006 and will represent the
completion of our lyophilization validation efforts. We anticipate
continued investment in business development partnerships in the
second half of 2006 that will expand Akorn's product development
pipeline. In order to begin clinical development of AK-1015, an
ophthalmic product with an intended indication for ocular
anesthesia, we have engaged a contract research organization and
expect to file an NDA in 2007. "Lastly, our financial foundation
remains strong. As of today, our current cash balance is $20
million, we have access to a $10 million line of credit, and our
current asset to current liability ratio is 7:1." Akorn Reiterates
its 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. -- Debt-free Balance Sheet. -- Lyophilization
Manufacturing Facility Fully Operational. Conference Call Akorn
will host a conference call on Wednesday July 26, 2006, beginning
at 5:00 p.m. Eastern Time to discuss second quarter 2006 operating
results. Analysts, investors and other interested parties are
invited to participate by visiting the Company's website,
www.akorn.com, and clicking on the live webcast icon located on the
home page, or http://www.videonewswire.com/event.asp?id=34645.
Please plan to log on at least ten minutes prior to the designated
start time so management may begin promptly. 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. Materials in this press release
may contain information that includes or is based upon
forward-looking statements within the meaning of the Securities
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 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. 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 "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. -0- *T AKORN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS JUNE 30, DECEMBER 31, 2006 2005 -------------
------------- (UNAUDITED) (AUDITED) ------------- -------------
ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,781 $ 791
Trade accounts receivable (less allowance for doubtful accounts of
$3 and $13, respectively) 4,987 3,222 Inventories 10,970 10,279
Prepaid expenses and other current assets 1,780 1,402 -------------
------------- TOTAL CURRENT ASSETS 35,518 15,694 PROPERTY, PLANT
AND EQUIPMENT, NET 31,515 31,071 OTHER LONG-TERM ASSETS
Intangibles, net 9,509 10,210 Other 105 120 -------------
------------- TOTAL OTHER LONG-TERM ASSETS 9,614 10,330
------------- ------------- TOTAL ASSETS $ 76,647 $ 57,095
============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES Current installments of debt $ 380 $ 7,044
Trade accounts payable 2,732 3,046 Accrued compensation 1,168 1,519
Customer accrued liabilities 332 135 Accrued interest payable -
2,514 Accrued expenses and other liabilities 730 1,202
------------- ------------- TOTAL CURRENT LIABILITIES 5,342 15,460
LONG-TERM LIABILITIES Long-term debt, less current installments 408
602 Product warranty 1,159 - ------------- ------------- TOTAL
LONG-TERM LIABILITIES 1,567 602 ------------- ------------- TOTAL
LIABILITIES 6,909 16,062 ------------- ------------- SHAREHOLDERS'
EQUITY Common stock, no par value -- 150,000,000 shares authorized;
75,285,018 and 27,618,745 shares issued and outstanding at June 30,
2006 and December 31, 2005, respectively 124,907 67,339 Series A
Preferred Stock, $1.00 par value, 257,172 shares authorized and
issued, 241,122 shares outstanding at December 31, 2005 - 27,232
Series B Preferred Stock, $1.00 par value, 170,000 shares
authorized, 141,000 shares issued, 82,437 outstanding at June 30,
2006 and 106,600 outstanding at December 31, 2005 8,589 10,758
Warrants to acquire common stock 13,631 13,696 Accumulated deficit
(77,389) (77,992) ------------- ------------- TOTAL SHAREHOLDERS'
EQUITY 69,738 41,033 ------------- ------------- TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 76,647 $ 57,095 =============
============= AKORN, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS IN THOUSANDS, EXCEPT PER SHARE DATA (UNAUDITED) THREE
MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2006 2005 2006 2005
------------ ----------- ----------- ----------- Revenues $ 12,475
$ 12,578 $ 42,205 $ 22,759 Cost of sales 7,520 7,726 25,517 14,564
------------ ----------- ----------- ----------- GROSS PROFIT 4,955
4,852 16,688 8,195 Selling, general and administrative expenses
4,669 3,699 9,153 7,067 Amortization and write-down of intangibles
350 425 701 804 Research and development expenses 2,121 1,423 4,166
2,765 ------------ ----------- ----------- ----------- TOTAL
OPERATING EXPENSES 7,140 5,547 14,020 10,636 ------------
----------- ----------- ----------- OPERATING INCOME (LOSS) (2,185)
(695) 2,668 (2,441) Interest income/(expense) - net 234 (584)
(1,085) (1,110) Debt Retirement Gain/(Expense) - 1,212 (391) 1,212
Other Expense (12) - (29) - ------------ ----------- -----------
----------- INCOME/(LOSS) BEFORE INCOME TAXES (1,963) (67) 1,163
(2,339) Income tax provision - - 15 ------------ -----------
----------- ----------- NET INCOME/(LOSS) (1,963) (67) 1,163
(2,354) Preferred stock dividends and adjustments (234) (915) (560)
(1,976) ------------ ----------- ----------- ----------- NET
INCOME/(LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ (2,197) $ (982) $
603 $ (4,330) ============ =========== =========== =========== NET
INCOME/(LOSS) PER SHARE: BASIC $ (0.03) $ (0.04) $ 0.01 $ (0.17)
============ =========== =========== =========== DILUTED $ (0.03) $
(0.04) $ 0.01 $ (0.17) ============ =========== ===========
=========== SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE:
BASIC 74,853 25,961 68,321 25,601 ============ ===========
=========== =========== DILUTED 74,853 25,961 76,481 25,601
============ =========== =========== =========== AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(UNAUDITED) SIX MONTHS ENDED JUNE 30 --------------------- 2006
2005 ---------- ---------- OPERATING ACTIVITIES Net income (loss) $
1,163 $ (2,354) Adjustments to reconcile net income (loss) to net
cash used in operating activities: Depreciation and amortization
1,645 3,413 Amortization of debt discounts 1,059 553 Advances to
Strides Arcolab Limited - (1,500) Gain on Retirement of Debt -
(1,212) Non-cash stock compensation expense 978 150 Changes in
operating assets and liabilities: Trade accounts receivable (1,765)
849 Inventories (691) (227) Prepaid expenses and other current
assets (363) 365 Trade accounts payable (314) (2,382) Product
warranty 1,159 Accrued customer liability 197 - Accrued expenses
and other liabilities (1,039) 227 ---------- ---------- NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,029 (2,118) INVESTING
ACTIVITIES Purchases of property, plant and equipment (1,388) (357)
Purchase of intangible assets - (75) ---------- ---------- NET CASH
USED IN INVESTING ACTIVITIES (1,388) (432) FINANCING ACTIVITIES
Repayment of long-term debt (2,917) (167) Repayment of NeoPharm
Debt - (2,500) Net borrowings under lines of credit - 663 Proceeds
from common stock and warrant offering 18,078 - Proceeds from
warrants exercised 888 37 Proceeds under stock option and stock
purchase plans 300 444 ---------- ---------- NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 16,349 (1,523) INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 16,990 (4,073) Cash and cash
equivalents at beginning of period 791 4,110 ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,781 $ 37 ==========
========== Amount paid for interest (net of capitalized interest)
561 365 Amount paid/(refunded) for income taxes $ 2 $ 72 *T
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