Akorn Reports Fourth Quarter and Full Year 2007 Financial Results; Provides 2008 Outlook

Tuesday, March 11, 2008

BUFFALO GROVE, Ill.--(BUSINESS WIRE)--Akorn, Inc. (NASDAQ: AKRX) a specialty pharmaceutical company, today reported financial results for the fourth quarter and full year ended December 31, 2007.

Total revenue for the fourth quarter 2007 was $13.7 million, versus $14.6 million in the fourth quarter 2006. The year-over-year decline is principally due to the lack of DTPA revenue in this year’s fourth quarter results. During the fourth quarter 2007, Ophthalmic and Hospital Drugs and Injectables business segment revenues (excluding DTPA) increased by approximately 40% and 11% respectively, versus the prior year comparative period. The Company recorded DTPA product revenues of $3.6 million in the fourth quarter 2006 and negligible DTPA product revenue in the fourth quarter 2007. The Company also recorded Vaccine revenues of approximately $2.8 million in the fourth quarter 2007. Contract Services business segment revenues declined $1.9 million versus the comparative prior year quarter.

In the fourth quarter 2007, the Company announced the successful results of the FDA inspection for the Decatur, IL facility. The satisfactory resolution of past cGMP issues and a successful pre-approval inspection of the lyophilization facility are both significant events. Further, regulatory compliance in Decatur is anticipated to strengthen the Contract Services business segment in 2008.

Total revenue for 2007 was $52.9 million versus $71.3 million in 2006. Excluding DTPA product revenues, total revenues for 2007 increased approximately 11.6% versus 2006. Ophthalmic business segment revenues decreased by approximately 5%, due to deferred customer shipments resulting from the site transfer of IC-Green. Hospital Drugs and Injectables business segment revenues (excluding DTPA) increased by approximately 4%, led by greater hospital contract compliancy. Vaccine revenues totaled $7.5 million, beginning with our September 2007 launch of the Tetanus Diphtheria vaccine. Contract Services business segment revenues declined by approximately 20%, primarily due to customer concerns regarding regulatory compliance issues in our Decatur facility in 2007.

Gross profit for the fourth quarter 2007 was $3.1 million as compared to $4.2 million in the fourth quarter 2006. The aggregate decline in fourth quarter 2007 gross profit versus the comparative prior year period was due to product mix and the prior year DTPA order. Sequentially, fourth quarter 2007 gross margin improved to 22.3% versus the third quarter 2007 gross margin of 18.8%. Lower Contract Services business segment volumes resulted in under absorbed manufacturing costs at our Decatur, IL production facility. Consequently, the Company has completed a reorganization that will generate projected annual cost savings of approximately $2.0 million.

Selling, general and administrative expenses totaled $6.1 million in the fourth quarter 2007, an increase of $0.8 million over the comparative prior year period. This increase is due to the investment in our newly created Vaccine Sales Team of twenty sales representatives, bringing the total Field and Inside Sales Representatives at the Company to 50. Research and development expenses were $1.5 million in the fourth quarter 2007 versus $5.0 million in the comparative prior year period, and reflect lower milestone payments for product development efforts.

The net loss available to common stockholders for the fourth quarter 2007 was $5.0 million or $0.06 per fully diluted share vs. the net loss available to common stockholders of $6.2 million in the fourth quarter 2006 or $0.07 per fully diluted share. As of December 31, 2007, the Company had cash and cash equivalents equal to $7.9 million and $10.5 million of undrawn availability under our Credit Agreement.

The assets on our balance sheet have increased year over year, by approximately 6% in 2007, a reflection of multi-dose Tetanus Diphtheria vaccine and the corresponding inventory position. Today, Akorn is the only MDV supplier of Td-Vaccines in the marketplace with product dating greater than 12 months, and we look forward to servicing this important market through 2009. At that time, the supply of MDV will be exhausted in the marketplace and we will have transitioned our customers to the UDPF vaccine, primarily in the office-based physician market.

Company Highlights:

   -- February 21, 2008: Akorn announced the signing of a Specialty Distributor Agreement with CSL Biotherapies for Afluria(R) (Flu Vaccine).
   -- November 26, 2007: On behalf of our vaccine manufacturer, Akorn announced FDA approval for the unit dose preservative-free Tetanus Diphtheria vaccine.
   -- October 29, 2007: Akorn announced the signing of an exclusive Vaccine partnership agreement to commercialize four vaccine products for the U.S. market, and the sale of one million shares of common stock to Serum Institute of India, Ltd.

   -- January 30, 2008: Akorn announced FDA approval of Calcitriol Injection, 1 mcg/mL and 2 mcg/mL.
   -- December 5, 2007: Akorn announced the first ANDA submission for a generic anti-cancer injectable product as part of an exclusive drug development and distribution agreement for oncology and other Injectable products announced on October 15, 2004 with Serum Institute of India, Ltd.
   -- November 27, 2007: Akorn announced the signing of an exclusive manufacturing and supply agreement with Cipla, Ltd. for an inhalation drug product.
   -- October 11, 2007: Akorn announced the signing of an exclusive licensing, development and supply agreement with Sofgen Pharmaceuticals for an ANDA oral drug product for women's healthcare.

   -- February 14, 2008: Akorn announced the signing of a manufacturing and supply agreement at its Somerset, NJ facility for the contract manufacture of an ophthalmic solution.

   -- December 21, 2007: Akorn announced FDA inspection results of the Decatur, IL facility: satisfactory resolution of past cGMP issues and a successful pre-approval inspection of the lyophilization facility.
   -- October 25, 2007: Akorn announced the signing of a ten-year lease for a state-of-the art Center for Excellence, a centralized facility dedicated to new product development activities.

Arthur S. Przybyl, President and Chief Executive Officer stated, “In 2007, we advanced our specialty pharmaceutical business in several areas with significant emphasis in vaccines and even greater emphasis on events that will lead to increased revenues in 2008. Our four distinct business segments each have a significant catalyst and opportunity that can provide incremental revenue growth in 2008:

• In the Vaccine business segment, full year Tetanus Diphtheria revenues and the recent launch of Affluria® (flu vaccine).
• In the Hospital Drugs and Injectables business segment, the pending approval and launch of oral Vancomycin, and the potential forward deployment of DTPA with the Department of HHS.
• In the Ophthalmic business segment, the launch of our internally developed NDA drug product, Akten®.
• In the Contract Services business segment, our ability to expand our business into lyophilized contract pharmaceutical manufacturing.

These short term revenue opportunities are unique and diversified, and I am excited that our business franchise includes a significant number of opportunities to draw upon and execute against. I will further expand upon these opportunities in our conference call this afternoon."

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.