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EXHIBIT 99.1
AKORN, INC. REPORTS THIRD QUARTER RESULTS;
DISCUSSES Q4 2000 AND 2001 OUTLOOK
------
BUFFALO GROVE, ILLINOIS, OCTOBER 26, 2000--AKORN, INC. (NASDAQ: AKRN)
today announced results for the third quarter ended September 30, 2000. For the
quarter, the company reported net income of $415,000 or $0.02 per basic and
diluted share, a 76 percent decrease from $1.7 million or $0.09 per basic and
diluted share reported for the comparable 1999 quarter. Sales for the quarter
were $16.9 million, up 0.5% from sales of $16.8 million reported for the quarter
ended September 30, 1999. Gross margins were 42 percent, down 11 percent from
the year ago quarter.
Net income for the nine months ended September 30 was $4.4 million or
$0.23 per basic and $0.22 per diluted share, a 9 percent decrease from $4.8
million or $0.26 per basic and diluted share for the comparable 1999 period.
Sales for the nine months totaled $51.8 million, a 9 percent increase over sales
of $47.6 million reported for the nine months ended September 30, 1999. There
were 19.8 million diluted shares outstanding in the 2000 nine-month period as
compared with 18.7 million shares outstanding for the 1999 nine months.
Commenting on these results, Floyd Benjamin, President and Chief
Executive Officer, said, "Over the last few weeks, we have been analyzing every
aspect of our business to determine exactly what caused revenues and earnings to
decline in the quarter and what we can do to remedy this situation. For the
first half of 2000, strong injectable sales, particularly in anesthesia and
antidote products, were offset by slow sales in the ophthalmology line. In the
third quarter, the trends continued in ophthalmic sales resulting in a flat
quarter compared to the previous period. However, sales of anesthesia and
antidote products were much lower than in the previous quarter. These particular
products carry higher gross margins, therefore, the impact of lower sales was
also to reduce gross margins. Since these products are sold almost entirely
through wholesalers who tend to place the majority of their orders at or near
the end of the quarter, the change in sales was not apparent until after the
close of the quarter. Total units ordered by wholesalers were consistent with
earlier quarters but the mix was substantially different. We had no advance
warning of this situation since our monitoring of end user purchases through
wholesalers did not reflect any material changes from prior quarters."
OUTLOOK
Benjamin continued, "In addition to the change in wholesaler ordering
patterns and significant slowdown in sales growth which impacted the third
quarter, we have seen a number of trends that have changed our business
strategy. Over the past several years, Akorn has fueled its growth primarily
through acquisitions and the launch of new generic products. Unfortunately,
acquisition activity has slowed appreciably due to changes in market conditions
and we have been unable to acquire attractive products at reasonable prices. At
the same time, product
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approvals in our generic pipeline have been taking longer than anticipated.
Products that have been approved, including midazolam, have not performed to
expectations due to eroding pricing in a competitive environment. The end result
has been difficulty in sustaining growth in the base business during 2000."
"In view of the disappointing sales, we are resetting our top line
growth targets and assuming the absence of any significant new product
introductions or acquisitions for the remainder of 2000 and 2001. We anticipate
sales growth to be in the 5-7% range for 2000 and calendar year 2001. Given
these assumptions about sales growth and mix, and the ongoing research and
development expenditures required to support our proprietary NDA pipeline, we
expect earnings per share to be in the range of $0.25 - $0.26 for 2000 and $0.28
- $0.30 for 2001."
"We will continue to aggressively pursue product acquisitions to
support additional growth to the base business and apply intense scrutiny to all
facets of the operation with the intent of identifying opportunities for
efficiencies and savings, " concluded Benjamin.
REVIEW OF RESULTS
Net sales for the quarter ended September 30, 2000 were $16.9 million,
up 0.5 percent over last year's $16.8 million. Gross profit decreased 21 percent
to $7.1 million from $8.9 million. Gross margins decreased to 42 percent from 53
percent. Selling, general and administrative expenses decreased 9 percent while
amortization of intangibles increased 7 percent. Research and development
expenses increased 78 percent over the same period in 1999, reflecting patient
enrollment for piroxicam clinical trials and costs associated with beginning
stage development of the company's age-related macular degeneration product.
Operating income for the quarter was $1.4 million, down 58 percent from last
year's $3.3 million. Interest and other expense increased 45 percent over 1999,
due to higher interest rates on higher average outstanding debt balances, though
the increase has been partially offset by capitalized interest related to
current major capital projects. Pretax income of $670,000 was 76 percent lower
than the $2.8 million reported for the same period in 1999. Weighted average
diluted shares outstanding of 20.0 million increased 6 percent over 18.9 million
in 1999, reflecting stock option exercises as well as an increase in the average
market value of the Company's stock over the prior year.
Net sales for the nine months ended September 30, 2000 were $51.8
million, up 9 percent over last year's $47.6 million. Gross profit increased 2
percent to $25.3 million from $24.7 million. Gross margins decreased to 49
percent from 52 percent. Selling, general and administrative expenses decreased
4 percent while amortization of intangibles decreased 26 percent due to a patent
expiration in the second quarter of 1999. Research and development expenses
increased 65 percent over the same period in 1999, reflecting patient enrollment
for piroxicam clinical trials and costs associated with beginning stage
development of the company's age-related macular degeneration product. Operating
income for the nine months was $8.9 million, up 4 percent over last year's $8.5
million. Interest and other expense increased 93 percent over 1999, due to
higher interest rates on higher average outstanding debt balances as well as the
inclusion of approximately $300,000 in non-recurring other income in the first
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quarter of 1999. The increase has been partially offset by capitalized interest
related to major capital projects in 2000. Pretax income of $7.1 million was 7
percent lower than the $7.6 million reported for the same period in 1999.
Weighted average diluted shares outstanding of 19.8 million increased 6 percent
over 18.7 million in 1999, reflecting stock option exercises as well as an
increase in the average market value of outstanding shares.
CASH FLOW
For the third quarter, cash provided by operations was $2.5 million,
primarily due to increases in accounts payable. Investing activities used $3.1
million for purchases of property, plant and equipment and product related
intangible assets. Financing activities provided approximately $600,000,
principally through the exercise of stock options. Cash and equivalents
increased approximately $22,000 over the previous quarter.
For 2000 to date, operations used cash of approximately $400,000
primarily for investment in accounts receivable and inventory. Investments in
property, plant and equipment and patents and other intangible assets used $10.9
million in cash. Financing activities provided $11.7 million, primarily from
draws on the company's revolving credit line as well as $3.0 million from the
exercise of stock options.
Akorn, Inc. manufactures and markets sterile specialty pharmaceuticals,
and markets and distributes an extensive line of pharmaceuticals and ophthalmic
surgical supplies and related 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.
The company's conference call will also be broadcast live today at 4:30
p.m. EST on the company's website at www.akorn.com, under the corporate
overview, investor relations subsection. A dial-up recording of the conference
will be available from 6:30 p.m. EST Thursday October 26, 2000 until 6:30 p.m.
EDT Tuesday October 31, 2000. U.S. callers should dial 1-800-642-1687,
international callers 1-706-645-9291. The access code is 873697.
CONTACT: Rita McConville, Chief Financial Officer
(847) 279-6151
Lisa Carlton-Wilson, Ins-Site Communications
(212) 759-3929
FINANCIAL TABLES FOLLOW...
-more-
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AKORN, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
-------- --------- -------- --------
Net sales:
Ophthalmic $ 7,188 $ 8,162 $ 21,656 $ 23,900
Injectable 9,690 8,633 30,186 23,704
-------- -------- -------- --------
Total sales 16,878 16,795 51,842 47,604
Cost of sales 9,782 7,863 26,547 22,913
-------- -------- -------- --------
Gross profit 7,096 8,932 25,295 24,691
Selling, general and
Administrative 4,230 4,648 12,439 12,906
Amortization of intangibles 380 356 1,139 1,539
Research and development 1,074 603 2,804 1,703
-------- -------- -------- --------
5,684 5,607 16,382 16,148
-------- -------- -------- --------
Operating income 1,412 3,325 8,913 8,543
Interest & other
expense, net (742) (512) (1,801) (933)
-------- -------- -------- --------
Pretax income 670 2,813 7,112 7,610
Income taxes 255 1,111 2,719 2,775
-------- -------- -------- ---------
Net income $ 415 $ 1,702 $ 4,393 $ 4,835
======== ======== ======== =========
Per share:
Net income-basic $ 0.02 $ 0.09 $ 0.23 $ 0.26
======== ======== ======== =========
Net income-diluted $ 0.02 $ 0.09 $ 0.22 $ 0.26
======== ======== ======== =========
Weighted average shares
Basic 19,081 18,477 18,961 18,273
======== ======== ======== =========
Diluted 20,013 18,881 19,804 18,702
======== ======== ======== =========
