Akorn, Inc. (AKRX) Provides First Quarter 2016 Results; Revenue Grew 18% Over Last Year’s Frst Quarter


Akorn, Inc. (NASDAQ:AKRX), a leading specialty generic pharmaceutical company, today provided first quarter 2016 financial results. Akorn also provided material updates on several other important business items.

Q1 2016 Operating Highlights:

  • Achieved first quarter consolidated revenue of $268 million, an increase of 18% over last year’s first quarter.
  • Generated net income of $42 million, or $0.34 per diluted share, and adjusted net income of $68 million, or $0.54 per diluted share, an increase of 20% over last year’s first quarter.
  • Received FDA approval on one new ANDA, Ropivacaine Hydrochloride Injection USP, 0.5% (5 mg/mL), 30 mL single-dose vials. According to IMS Health, the market size of Ropivacaine Injection in 30ml vials was approximately $17.7 million for the trailing twelve months ended March 31, 2016.

Raj Rai, Akorn’s Chief Executive Officer, commented, “We are off to a good start to 2016. In the first quarter, we realized a solid organic growth from our portfolio and since December, we have launched five new products. With the restatement behind us, we are now focused on accomplishing our critical objectives set forth for 2016 as well as increasing our product development efforts for enhancing future growth prospects.”

Summary Financial Results for the Quarter Ended March 31, 2016:

Revenue.  Consolidated revenue for the first quarter of 2016 was $268 million, an increase of $41 million or 18% over the first quarter 2015 consolidated revenue of $227 million. The increase in consolidated revenue was largely driven by organic growth.

Gross Margin.  Consolidated gross margin for the first quarter of 2016 was 60.7%, compared to 57.2% in the comparable prior year period. The increase in the Company’s consolidated gross margin was principally due to product mix shift.

SG&A Expenses. GAAP selling, general and administrative (SG&A) expense in the first quarter of 2016 was $49 million, compared to $30 million in the first quarter of 2015.

R&D Expense.  GAAP research and development (R&D) investment in the first quarter of 2016 was $9 million, compared to$9 million in the first quarter of 2015.

Non-Operating Expense. Consolidated adjusted interest and other expenses was $21 million in first quarter of 2016, compared to $15 million in the first quarter of 2015.

Tax Rate. The effective tax rate experienced by Akorn in the first quarter of 2016 was 37.1%, compared to 35.6% in the comparative prior year quarter.

GAAP Net Income. GAAP net income for the first quarter 2016 was $42 million, compared to $38 million in the first quarter of 2015.

EBITDA. Earnings before interest, taxes, depreciation and amortization was $100 million in the first quarter 2016, compared to $93 million in the first quarter 2015. Adjusted EBITDA, which is another non-GAAP measure used by management to evaluate the continuing operations of the Akorn business, was $124 million in the first quarter of 2016, compared to $104 million in the first quarter of 2015.

Shares Outstanding. 125.6 million average fully diluted shares were outstanding in the quarter ended March 31, 2016, compared to 125.4 million in the prior year quarter. The increase was due to options granted in the interim period.

Earnings Per Share.  GAAP fully diluted earnings per share (EPS) was $0.34 in the first quarter of 2016, compared to$0.31 in the first quarter of 2015. Including a net adjustment of $26 million to net income for non-GAAP items, adjusted fully diluted EPS was $0.54 in the first quarter of 2016. Including a net adjustment of $18 million to net income for non-GAAP items, adjusted fully diluted EPS was $0.45 in the first quarter of 2015.

Net Debt Ratio. As of the quarter ended March 31, 2016, Akorn had a trailing twelve months net debt to adjusted EBITDA ratio of approximately 1.5x. Akorn generated $9 million in cash from operations in the first quarter 2016.

Cash and Cash Equivalents: Cash and cash equivalents at March 31, 2016 was $141 million and reflected the voluntary prepayment in February 2016 of $200 million of principal to outstanding term loan facilities.

Debt Outstanding: Short- and long-term debt outstanding was $875 million, inclusive of approximately $43 million in convertible notes due June 2016 that will be settled in shares of Akorn common stock.

Akorn Reaffirms 2016 Guidance:

The Company reaffirms 2016 guidance as reported on March 22, 2016 including the net revenue range of $1,060 – $1,080 million, diluted GAAP earnings per share range of $1.56 – $1.66 and diluted adjusted non-GAAP earnings per share range of$2.10 – $2.20. Akorn expects its adjusted tax rate to be approximately 37.0% for the full year 2016.  Absent any significant business development transactions, Akorn expects to end 2016 with a net debt to adjusted EBITDA ratio of approximately 1.0x.

R&D Update:

At March 31, 2016, Akorn had 86 ANDAs pending at the FDA, representing approximately $9.2 billion in annual branded and generic market value according to IMS Health. Akorn has over 72 additional ANDAs in various stages of development, representing approximately $12.8 billion in annual branded and generic market value according to IMS Health. (Original Source)

Shares of Akorn are up 1.5% to $28.22 in after-hours trading. AKRX has a 1-year high of $48.53 and a 1-year low of $17.57. The stock’s 50-day moving average is $25.32 and its 200-day moving average is $28.26.

On the ratings front, Akorn has been the subject of a number of recent research reports. In a report issued on May 10, Jefferies Co. analyst David Steinberg reiterated a Buy rating on AKRX, with a price target of $35, which implies an upside of 25.9% from current levels. Separately, on May 9, RBC’s Randall Stanicky maintained a Buy rating on the stock and has a price target of $37.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Steinberg and Randall Stanicky have a total average return of -9.5% and -1.1% respectively. Steinberg has a success rate of 34.1% and is ranked #3660 out of 3833 analysts, while Stanicky has a success rate of 42.6% and is ranked #2744.

The street is mostly Bullish on AKRX stock. Out of 10 analysts who cover the stock, 7 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $40.00, which represents a potential upside of 43.8% from where the stock is currently trading.

Akorn, Inc. is a niche pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals as well as animal and consumer health products. It specializes in difficult-to-manufacture sterile and non-sterile dosage forms including: ophthalmics, injectables, oral liquids, otics, topicals, inhalants, and nasal sprays.