Akorn, Inc. (NASDAQ:AKRX), a leading specialty generic pharmaceutical company, today announced that it has filed its Annual Report on Form 10-K for the fiscal year December 31, 2015 (“Form 10-K”). The Company is now up to date on filing its periodic reports with the Securities and Exchange Commission (the “SEC”). The Company also announced plans to hold its 2016 annual meeting of shareholders on July 1, 2016.
The Company’s comprehensive Form 10-K filed today contains the following:
- consolidated financial statements for the year ended December 31, 2015, and unaudited quarterly financial information for the quarters in 2015; and
- consolidated restated financial statements for the year ended December 31, 2014 and unaudited restated quarterly financial information for the quarters in 2014.
Raj Rai, Akorn’s Chief Executive Officer, said, “The completion of the restatement of 2014 financial statements and the audit of the 2015 financial statements are important milestones for our Company. This allows our Company to shift its focus on executing on the strategic objectives and growth opportunities. I would like to thank the Akorn team members under the leadership of Duane Portwood and Randy Pollard for their perseverance and hard work throughout this process.”
Duane Portwood, Akorn’s Chief Financial Officer, added, “We filed our Annual Report on Form 10-K for 2015 and have scheduled our annual shareholders meeting for July 1, 2016, for compliance with the Listing Rules exception granted by theNASDAQ Listing Panel. As we move forward in 2016, we look forward to completing the remediation of our internal control weaknesses while helping the Company execute on its strategic objectives and growth opportunities.”
Financial Restatement for the Year Ended December 31, 2014
As discussed in the Form 10-K, the Company identified accounting errors primarily associated with rebates and contractual allowances for 2014. Net revenue for 2014 as previously reported of $593 million was overstated by $38 million and is now restated to be $555 million. Income from continuing operations before income taxes for 2014 as previously reported of $59 million was overstated by $34 million and is now restated to be $25 million.
On May 7, 2016, the Audit Committee of the Board of Directors of Akorn, Inc., upon the recommendation of the Company’s management, concluded that the unaudited financial information for the quarterly period ended March 31, 2014 contained an error related to commitment fees incurred to consummate term loan debt. Specifically, the fees were incorrectly expensed in the quarter rather than amortized over the life of the term loan debt. Income from continuing operations before income taxes for the quarter ended March 31, 2014 as previously reported of $16 million is now restated to be $18 million. The unaudited restated quarterly financial information for the quarter ended March 31, 2014 was included in the Form 10-K.
Key Financial Highlights for the Year Ended December 31, 2015
Revenues. Consolidated revenue for 2015 was $985 million, an increase of 77% over 2014 revenue of $555 million (as restated).
Gross Margin. Consolidated gross margin for 2015 was 60.5%, compared to 47.1% (as restated) for 2014. Excluding $6.3 million in costs from amortization of inventory step up and other items, non-GAAP gross margin was 61.1%, up from 51.2% (as restated) in 2014.
EBITDA. Earnings before interest, taxes, depreciation and amortization was $370 million in 2015, compared to $119 million(as restated) in 2014. Adjusted EBITDA, which is a non-GAAP measure used by management to evaluate the continuing operations of the Akorn business, was $460 million in 2015, compared to $182 million (as restated) in 2014. A full reconciliation of adjusted EBITDA adjustments can be found at the end of this press release.
Net Income per Share. Fully diluted earnings per share (EPS) was $1.22 in 2015 compared to $0.13 (as restated) in 2014. Including a net adjustment of $100 million to net income for non-GAAP items, adjusted fully diluted EPS was $2.02 in 2015. Including a net adjustment of $64 million to net income, adjusted fully diluted EPS was $0.63 (as restated) for 2014. Adjustments to net income in 2015 and 2014 included a number of items detailed at the end of this press release. Please refer to this table for a full reconciliation of GAAP to non-GAAP items.
The Company plans to hold its 2016 annual meeting of shareholders on July 1, 2016, within the extension period throughJuly 5, 2016 granted by the Listing Qualifications Panel of The NASDAQ Stock Market to satisfy proxy solicitation and annual meeting requirements. Shareholders of record on May 11, 2016, the record date for the meeting, will be entitled to vote at the meeting. Qualified stockholder proposals (including proposals made pursuant to Rule 14a-18 under the Securities Exchange Act of 1934, as amended) to be presented at the Annual Meeting and included in the Company’s proxy statement and form of proxy relating to that meeting must be received by the Company at Company Headquarters, addressed to the corporate secretary, not later than the close of business on May 16, 2016. Such proposals must also comply with all applicable requirements, including applicable Louisiana law, the rules and regulations promulgated by the SEC, and the procedures set forth in the Company’s Amended and Restated Bylaws.
Earnings Guidance Affirmed for Full Year 2016
The Company is maintaining its full year 2016 financial guidance inclusive of net revenue of $1,060 – $1,080 million, GAAP diluted earnings per share of $1.56 – $1.66, and adjusted diluted earnings per share (non-GAAP) of $2.10 – $2.20.
Akorn’s guidance only contemplates launches of products approved by the U.S. Food and Drug Administration (“FDA”) as ofMay 10, 2016 along with the full year contribution of products launched in 2015. Products that are not yet approved by theFDA are not included in Akorn’s 2016 financial guidance. Other guidance assumptions are detailed in the Company’s March 22, 2016 press release. (Original Source)
Shares of Akorn are up over 12% to $25.48 in pre-market 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 $24.93 and its 200-day moving average is $28.22.
On the ratings front, Akorn has been the subject of a number of recent research reports. In a report released yesterday, RBC analyst Randall Stanicky maintained a Buy rating on AKRX, with a price target of $37, which implies an upside of 62.8% from current levels. Separately, on March 23, JMP’s Donald Ellis reiterated a Hold rating on the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Randall Stanicky and Donald Ellis have a total average return of -2.0% and 2.1% respectively. Stanicky has a success rate of 39.8% and is ranked #3027 out of 3828 analysts, while Ellis has a success rate of 25.0% and is ranked #2163.
Overall, 3 research analysts have assigned a Hold rating and 7 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $40.00 which is 76.0% above where the stock closed yesterday.