Akorn, Inc. (NASDAQ: AKRX) is a specialty generic pharmaceutical company engaged in the development, manufacture, and marketing of multisource and branded pharmaceuticals. Akorn has manufacturing facilities located in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland and Paonta Sahib, India that manufacture ophthalmic, injectable and specialty sterile and non-sterile pharmaceuticals.

 

On Oct 18th, the company announced that it had filed a notice of appeal to the Supreme Court of the State of Delaware from the recent decision of the Delaware Court of Chancery rejecting Akorn’s claims.  Akorn has also filed a motion seeking expedited proceedings in its appeal.

 

The management reported that Akorn disagrees with the opinion issued October 1 by the Court of Chancery. Despite misleading allegations made by Fresenius throughout the trial regarding Akorn’s regulatory compliance practices and activities, Akorn takes data integrity and other U.S. Food and Drug Administration (“FDA”) compliance issues very seriously.  Akorn is focused on working collaboratively with the FDA as Akorn continues to evaluate and improve its practices and procedures to ensure compliance with FDA regulations.

 

On October 10, Akorn announced it received a new Abbreviated New Drug Application (ANDA) approval from the FDA for Bimatoprost Ophthalmic Solution, 0.03%, which is indicated to treat hypotrichosis of the eyelashes by increasing their growth including length, thickness, and darkness.

 

Notwithstanding this temporary setback, analysts tracking the stock believes that the company business profile is marked by significant revenue potential & the company’ strong fundamentals are well poised for value creation. Per www.marketbeat.com, Their average twelve-month price target is $14.60, suggesting that the stock has a possible upside of 107.68%. The high price target for AKRX is $34.00, and the low-price target for AKRX is $6.00. There are currently three hold ratings, and 3 buy ratings for the stock, resulting in a consensus rating of “Buy.”

 

Below are the excerpts of recent analyst rating on the script:

As per www.marketbeat.com

 

About the company: Akorn, Inc., together with its wholly-owned subsidiaries, is a specialty generic pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals, branded as well as private-label over-the-counter consumer health products and animal health pharmaceuticals. The company is an industry leader in the development, manufacturing, and marketing of specialized generic pharmaceutical products in alternative dosage forms. Akorn focuses on difficult-to-manufacture sterile and non-sterile dosage forms including, but not limited to, ophthalmics, injectables, oral liquids, otics, topicals, inhalants, and nasal sprays.

 

Manufacturing facilities:

• Somerset, New Jersey — sterile ophthalmic solutions, ointments, and gels
• Decatur, Illinois — sterile liquid and lyophilized injectables and sterile ophthalmic solutions
• Amityville, New York — sterile ophthalmic and otic solutions, sterile gels, and non-sterile nasal sprays, topical ointments and creams, oral liquids, and liquid unit dose cups
• Hettlingen, Switzerland — sterile ophthalmic solutions, suspensions, gels and ointments
• Paonta Sahib, Himachal Pradesh, India — sterile liquid injectables including cephalosporins, carbapenems, hormones, and general injectables, as well as oral cephalosporins

 

Four of AKRX’ five manufacturing facilities are Food and Drug Administration (“FDA”) approved.

 

Competitive strength and unique differentiating factors:

• Research and development expertise in alternative dosage forms
• Alternative dosage form manufacturing expertise. The company’ manufacturing network specializes in alternative dosage form products.
• Established portfolio of generic, branded, OTC and animal health products.
• The company markets a diverse portfolio of generic prescription pharmaceutical products, branded prescription pharmaceutical products, OTC brands, various formulations of private-label OTC pharmaceutical products and a number of prescription animal health products.

 

Exhaustive Product range: The company’ major products are listed alphabetically below.

• AK-FLUOR® (fluorescein injection, USP). AKRX market its branded fluorescein injection as AK-FLUOR® 10% (100 mg/mL) and 25% (250 mg/mL)
• Atropine Sulfate Ophthalmic Solution. The company received approval of NDA for Atropine Sulfate Ophthalmic Solution, USP, 1% in July 2014.
• Clobetasol Propionate Cream. AKRX acquired Clobetasol Propionate Cream through the Hi-Tech Acquisition. In the acquisition, the Company also acquired other dosage forms of Clobetasol Propionate, including a gel, emollient cream, ointment, and a topical solution.
• Dehydrated Alcohol Injection. Dehydrated Alcohol Injection is not an FDA approved product, and to date, this product has not been found by the FDA to be safe and effective.
• Ephedrine Sulfate Injection. AKRX originally began marketing Ephedrine Sulfate Injection, USP, 50 mg/mL in 1 mL single-dose ampules in 1997 as an unapproved product. In March 2017, it received FDA approval of its NDA for Ephedrine Sulfate Injection.
• Myorisan™ (isotretinoin capsules, USP). AKRX acquired Myorisan™ isotretinoin capsules, USP, in 10 mg, 20 mg, and 40 mg strengths through the VersaPharm Acquisition. It subsequently received approval for the 30-mg strength in 2015.
• Nembutal® Sodium Solution (pentobarbital sodium injection, USP). The company markets its pentobarbital sodium injection as Nembutal® Sodium Solution. Nembutal® is a DEA Schedule II controlled drug.
• Phenylephrine Hydrochloride Ophthalmic Solution. AKRX began marketing Phenylephrine Hydrochloride Ophthalmic Solution, USP, 2.5% shortly after FDA approval of its NDA in January 2015.
• TheraTears® Dry Eye Therapy Lubricant Eye Drops. TheraTears® is an over-the-counter eye drop that is used as a lubricant to relieve dryness of the eye. TheraTears® unique hypotonic and electrolyte balanced formula replicates healthy tears.

 

Acquisitions made in the past: The company continues to strengthen and diversify its overall market and operational risk profile through successful acquisitions.

 

Second Quarter 2018 Highlights (in thousands):

• Revenue: Net revenue was $190.9 million for the three-month period ended June 30, 2018, representing a decrease of $8.2 million, or 4.1%, as compared to net revenue of $199.1 million for the three-month period ended June 30, 2017. The decrease in net revenue in the period was primarily due to a $12.2 million decline in organic revenue that was partially offset by $5.9 million net revenue increase in new products and product relaunches

 

• Profitability: Consolidated gross profit for the quarter ended June 30, 2018, was $81.3 million, or 42.6% of net revenue, compared to $102.8 million, or 51.6% of net revenue, in the corresponding prior year quarter. The decline in the gross profit percentage was principally due to unfavorable product mix shifts are primarily driven by the effect of competition on Ephedrine Sulfate Injection and Nembutal, as well as increased operating costs at the company’ manufacturing facilities.

 

The Company reported a net loss of $88.0 million for the three-month period ended June 30, 2018, or 46.1% of net revenue, compared to net income of $2.5 million for the three-month period ended June 30, 2017, or 1.3% of net revenue.

 

• Liquidity: As of June 30, 2018, Akorn had cash and cash equivalents of $296.8 million, which was $71.3 million less than its cash and cash equivalents balance of $368.1 million as of December 31, 2017. This decrease in cash and cash equivalents was driven by net investing cash outflows of $35.9 million, net operating cash outflows of $31.3 million, and net financing cash outflows of $4.5 million. AKRX’ net working capital was $524.5 million at June 30, 2018, compared to $559.1 million at December 31, 2017, a decrease of $34.5 million.

 

Key risk factors and potential stock drivers:

• Successful completion of the upcoming milestones would lead future direction for the company. Any adversities about the same might adversely impact the overall investor sentiments.
• Company’ ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain a critical challenge for the company.
• Risk related to the concentration of revenue: On a combined basis, three wholesale drug distributors accounted for approximately 80.2% of the total gross sales and 63.5% of the net revenue in the year ended December 31, 2017, and 86.0% of gross accounts receivable as of December 31, 2017.
• The company depends on a small number of wholesalers to distribute its products, the loss of any of which could have a material adverse effect on the company’ business.
• The sourcing, marketing, and manufacturing of pharmaceutical products are highly competitive, with many established manufacturers, suppliers and distributors actively engaged in all phases of the business. Therefore, the growth of the company depends on its ability to timely and efficiently develop and successfully launch and market new pharmaceutical products.
• Pharmaceutical manufacturers and distributors are subject to extensive regulation by government agencies, including the FDA, the Drug Enforcement Administration (“DEA”), the FTC and other federal, state and local agencies.

 

 

Stock Performance

Comments:

• On Friday, Oct 19th, 2018, AKRX closed at $7.03, with an average volume of 3.67 million shares exchanging hands. Market capitalization is $881.921 million. The current RSI is 31.16.
• In the past 52 weeks, shares of AKRX have traded as low as $5.25 and as high as $33.63
• At $7.03, shares of AKRX are trading below its 50-day moving average (MA) at $12.57 and below its 200-day moving average (MA) at $18.34

The present support and resistance levels for the stock are at $6.72 & $7.32 respectively

 

 

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