Akorn Reports Second Quarter 2009 Financial Results
Tuesday, August 11, 2009
LAKE FOREST, Ill.--(BUSINESS WIRE)--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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
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
|
|
|
|
|
|
|
|
Contacts:
Akorn, Inc.
Tim Dick, Chief Financial Officer
(847) 279-6150
|
