SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
May 7, 1996
Date of Report (Date of earliest event reported)
AKORN, INC.
(Exact name of Registrant as specified in its charter)
LOUISIANA 0-13976 72-0717400
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
100 Akorn Drive
Abita Springs, Louisiana 70420
(Address of principal executive offices) (Zip Code)
(504) 893-9300
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On May 7, 1996, Akorn, Inc., ("Akorn") entered into a
definitive agreement to acquire Pasadena Research Labs, Inc.
("PRL"), a specialized distributor of injectables based in
southern California. Subject to further due diligence, the
acquisition is expected to occur on or before June 30, 1996.
Akorn will issue 1.4 million shares of its common stock, in
exchange for all of the oustanding shares of PRL, in a transaction
expected to be accounted for as a pooling-of-interest transaction.
The acquisition and third-quarter 1996 financial results are
described in the press release filed herewith as Exhibit 99.1.
Item 7. Financial Statements and Exhibits.
(a) No financial statements are filed with this report.
(b) Exhibits.
99.1 Press release issued by Akorn, Inc. on May 7, 1996
announcing the definitive agreement to acquire
Pasadena Research Labs, Inc. and third quarter
financial results.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
By: /s/ Eric M. Wingerter
_______________________
Eric M. Wingerter
Chief Financial Officer
Dated: May 7, 1996
AT AKORN: AT FRB:
Barry LeBlanc Eric Wingerter Jack Queeney Kathy Brunson
President & CEO VP-Finance General Information Analyst
Contact
(504) 893-9300 (312) 640-6726 (312) 640-6696
FOR IMMEDIATE RELEASE
TUESDAY, MAY 7, 1996
AKORN ACQUIRES INJECTABLE DISTRIBUTOR;
REORGANIZES INTO TWO DIVISIONS;
ANNOUNCES THIRD-QUARTER RESULTS
ABITA SPRINGS, LA, May 7, 1996 -- Akorn, Inc. (Nasdaq: AKRN)
today announced that it has signed a definitive agreement to
acquire Pasadena Research Labs, Inc. ("PRL"), a specialized
distributor of injectables based in southern California. Akorn
will issue 1.4 million shares of its common stock, in exchange
for all of the outstanding shares of PRL, in a pooling-of-
interest transaction.
Akorn also announced that it will reorganize its operations
into two distinct divisions. John N. Kapoor, current chairman of
Akorn, will assume the title of chief executive officer. Barry
D. LeBlanc, current president and chief executive officer of the
company, will become president of the Ophthalmic Division, will
have the title of executive vice president of the company, and
will continue on the Board. Floyd Benjamin, current president
and chief executive officer of PRL, will become president of the
Injectable Division, will be an executive vice president of
Akorn, and will be appointed to the Board of Directors.
Commenting on the acquisition and the reorganization, Kapoor
said, "The acquisition of Pasadena Research Labs will form the
cornerstone of Akorn's strategy to expand its presence in the
injectable market. This, together with Akorn's current
involvement in the contract manufacture of injectables, primarily
for multi-national pharmaceutical companies, will presently give
us a $13-$14 million injectable division."
LeBlanc added, "The formation of an ophthalmic division will
allow Akorn to better concentrate on its historical core business
of supplying office practice products, which includes
diagnostics, therapeutics, OTCs and surgical products to
ophthalmologists and optometrists and further expand its generic
pharmaceutical line. Prime growth strategies in this area will
continue to involve product development and licensing activities
in an effort to leverage Akorn's 20,000_strong customer base of
practitioners."
The PRL product line comprises approximately 20-25 products.
A significant number are distributed under the PRL label,
generating approximately $5 million in annual sales. This
operation is currently profitable.
Commenting on the acquisition, Floyd Benjamin stated, "The
combination of Pasadena's product line and pipeline of products
in development_with Akorn's capabilities in the areas of sterile
manufacturing, distribution and R&D_should result in a very
competitive business in the $4 billion generic sterile injectable
arena. In addition, the strategic plan for the two operations
complement each other exceptionally well."
Third-Quarter Results
Net income for the third quarter of fiscal 1996 was $355,000, or
2 cents per share, on sales of $7.6 million compared with net
income of $228,000, or 1 cent per share, on sales of $7.5 million
in the year-ago period. Akorn recognized net income of $1.3
million, or 8 cents per share, on revenues of $22.9 million for
the first nine months of fiscal 1996. In the comparable period
for fiscal 1995, Akorn reported net income of $1.6 million, or 10
cents per share, on revenues of $24.4 million.
"These results were slightly below our expectations
primarily due to weak sales of our generic products in the retail
sector. This was partially due to the effect of harsh weather
throughout the second and third fiscal quarters resulting in
higher than expected inventory levels at several wholesalers,"
said LeBlanc. "However, sales of office practice products to
ophthalmologists and optometrists, our core ophthalmic business,
continue to increase at double-digit rates over prior-year
results."
Review Of Results
Net sales for the quarter ended March 31, 1996, were $7.6
million, up 2 percent from last year's $7.5 million. In addition
to the effects of wholesaler overstocking noted above, temporary
shortages on certain distributed products also affected company
sales for the quarter. Gross profit declined 3 percent from $2.7
million to $2.6 million. Gross margins declined 150 basis
points, primarily due to a larger percentage of wholesaler
chargebacks to sales.
Operating expenses declined 5 percent during the quarter,
while research and development expenditures remained relatively
stable at approximately 3 percent of sales. The company's
effective tax rate was 37 percent for the quarter compared to 30
percent for the comparable period in the prior year.
Net sales for the nine months ended March 31, 1996, were
$22.9 million or 6 percent lower than the year-ago's $24.4
million. This decline was primarily associated with the loss in
sales of AK-Con-A, Akorn's highest-margin product at nearly 75
percent, beginning in the third quarter of fiscal 1995. While
the over-the-counter version of this product has been approved
and licensed to Pfizer, the royalty stream from Pfizer only began
in the latter part of the current quarter. Gross profit declined
16 percent from $9.9 million to $8.3 million. Gross margins
declined 430 basis points primarily due to the loss of AK-Con-A.
Operating expenses declined 14 percent during the nine-month
period ended March 31, 1996, as compared to the same period in
the previous year, while research and development expenditures
increased 23 percent.
Outlook
Commenting on these results, LeBlanc said, "While increased price
competition in the generic market is expected to continue to
affect sales and margins of Akorn's ophthalmic generic products,
the introduction of in-house manufactured generic products should
partially compensate for the decline in that segment of our
business. In addition, with continued emphasis on sales to
ophthalmologists and optometrists, continued successes in
business development efforts, and the royalty stream from our NDA
product licensed to Pfizer, the ophthalmic division is expected
to show improved results beginning in the fourth quarter."
LeBlanc continued, "While results from our injectable
contract manufacturing business for the current quarter are
slightly ahead of last year, the company continues to experience
weakness due to a recent shift by several contract customers to
evaluate the economics surrounding their injectable products.
With the acquisition of PRL and other recent efforts the company
is well positioned for growth in the injectable division."
Akorn Inc. manufactures, markets and distributes sterile
ophthalmic and injectable pharmaceuticals, and markets and
distributes an extensive line of ophthalmic products.
The information contained in this news release, other than
historical information, consists of forward-looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from those described in such
statements. Such statements regarding the timing of acquiring
and developing new products, of bringing them on line and of
deriving revenues and profits from them, as well as the effects
of those revenues and profits on the company's margins and
financial position, is uncertain because many of the factors
affecting the timing of those items are beyond the company's
control.
For additional information about Akorn, Inc. free of charge via
fax,
dial 1-800-PRO-INFO and enter "AKRN."
CONSOLIDATED STATEMENT OF EARNINGS
In thousands, except per share amounts
Three months ended March 31, Nine months ended March 31,
1996 1995 %Chg 1996 1995 %Chg
______ ______ ______ _______ _______ ______
Net sales $7,625 $7,502 1.6% $22,901 $24,428 -6.3%
Cost of sales 4,983 4,791 4.0% 14,562 14,484 0.5%
_______ ______ _______ ______
Gross profit 2,642 2,711 -2.5% 8,339 9,944 -16.1%
Selling, general and
administrative 1,842 1,936 -4.9% 5,743 6,654 -13.7%
Research and development 226 211 7.1% 689 562 22.6%
______ ______ ______ _____
Operating income 574 564 1.8% 1,907 2,728 -30.1%
Interes & Other Income
(expense), net (10) (238) -95.8% 87 (186)-146.8%
______ ______ _____ _____
Pretax income 564 326 73.0% 1,994 2,542 -21.6%
Income taxes 209 98 113.3% 738 922 -20.0%
______ ______ _____ ______
Net income $355 $228 55.7% $1,256 $1,620 -22.5%
====== ====== ===== ======
Per share:
Net income $0.02 $0.01 100.0% $0.08 $0.10 -20.0%
======= ====== ====== ======
Weighted average share 15,416 15,520 -0.7% 15,326 15,447 -0.8%
======= ====== ====== ======
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, June 30,
1996 1995
___________ _________
Assets
Cash and investments $2,076 $2,336
Accounts receivable, net 5,219 4,919
Other current assets 9,031 7,048
___________ __________
Total current assets 16,326 14,303
Property, plant and equipment, net 11,522 10,996
Other assets 1,031 957
___________ ___________
Total assets $28,879 $26,256
=========== ===========
Liabilities and shareholders' equity
Short-term borrowings $550 $ -
Current portion of long-term debt and
capital leases 814 642
Trade accounts payable 2,115 1,719
Income taxes payable 707 782
Accrued reorganization costs 384 727
Deferred royalty 917
Other accrued expenses 2,739 2,531
____________ __________
Total current liabilities 8,226 6,401
Long-term debt and capital leases 3,730 3,900
Other long-term liabilities 609 957
Shareholders' equity 16,314 14,998
___________ __________
Total liabilities and
shareholders' equity $28,879 $26,256
=========== ==========
