Akorn, Inc. Reports Preliminary Fourth Quarter And Full Year 2014 Results

- Fourth Quarter GAAP EPS of $0.29; Non-GAAP Adjusted EPS of $0.50 -

- 2015 Revenue Guidance of Between $960 million and $980 million -

- 2015 Non-GAAP Adjusted EPS Guidance of $1.88 - $1.98 -

LAKE FOREST, Ill., Feb. 26, 2015 (GLOBE NEWSWIRE) -- In a release issued under the same headline earlier today by Akorn, Inc. (Nasdaq:AKRX) please note that an incorrect Table 8, Reconciliation of 2015 Non-GAAP Revenue, EPS and EBITDA Guidance to GAAP Revenue, EBITDA and EPS, was included in the original version of this press release. The corrected release follows:

Akorn, Inc. (Nasdaq:AKRX) today reported preliminary financial results for the fiscal fourth quarter and full year ended December 31, 2014 and provided initial 2015 financial guidance.

Consolidated revenue for the fourth quarter was $227.8 million and included $12.4 million of costs associated with competitive pricing actions during the fourth quarter. GAAP diluted earnings per share (EPS) was $0.29 in the fourth quarter of 2014, compared to GAAP EPS of $0.14 in the prior year period. Adjusted non-GAAP diluted EPS for the fourth quarter 2014 increased to $0.50 compared to $0.14 in the fourth quarter of 2013.

Consolidated revenue for full year 2014 was $601.9 million and included $52.2 million of costs associated with competitive pricing actions during the second half of the year. GAAP diluted EPS was $0.38 for the full year 2014, compared to GAAP EPS of $0.46 for the full year 2013. Adjusted non-GAAP diluted EPS for full year 2014 increased to $1.16 compared to $0.55 in full year 2013.

Akorn expects 2015 net revenue between $960 million and $980 million, representing growth of at least 47 percent from non-GAAP adjusted full year 2014 revenue. Full year 2015 non-GAAP adjusted diluted EPS is expected to be between $1.88 and $1.98, representing growth of at least 62 percent from full year 2014 non-GAAP adjusted EPS levels.

Fourth Quarter 2014 Key Highlights and Accomplishments

• Total revenue of $227.8 million, up 168 percent versus the prior year period. Excluding one-time costs associated with competitive pricing actions, adjusted total revenue for the quarter was $240.2 million, up 183 percent versus the prior year period.
• GAAP gross margin of 56.4 percent, compared to 55.3 percent in the prior year period; excluding $7.8 million in costs in the fourth quarter 2014 from amortization of inventory step-up and costs associated with competitive pricing actions, non-GAAP adjusted gross margin was 61.8 percent, up from 55.3 percent in the prior year period.
• GAAP diluted EPS of $0.29, up 107 percent from the prior year period; non-GAAP adjusted diluted EPS of $0.50, up 257 percent from the prior year period.
• Four products were approved by the U.S. Food and Drug Administration (FDA) in the fourth quarter: Adenosine Injection, USP 3mg/mL, 20mL and 30mL; Dexmedetomidine Hydrochloride (HCl) Injection; Phenylephrine HCl and Promethazine HCl Syrup; and Codeine Phosphate, Phenylephrine HCl and Promethazine HCl Syrup.
• Three products were launched in the fourth quarter: Gatifloxacin Ophthalmic Drops 0.5%; Adenosine Injection, USP 3mg/mL, 20mL and 30mL; and Atropine Sulfate Ophthalmic Solution 1%.

2014 Represented a Key Transformative Year for Akorn

• In 2014, Akorn received 14 unique product approvals, representing a combined IMS annual market size of $850 million.
• Akorn launched five of these products in 2014 and expects to be in a position to launch the remaining nine products approved in 2014 throughout 2015.
• The Company completed the acquisition of Hi-Tech Pharmacal on April 17, adding over 50 new products to the Akorn portfolio.
• Akorn completed the acquisition of VersaPharm on August 12, complementing the Hi-Tech acquisition through the addition of 20 products along with a robust pipeline of dermatology-focused pipeline products.
• In early October, Akorn acquired rights to Xopenex^® Inhalation Solution from Sunovion, adding a leading established respiratory product to the Akorn portfolio.
• Akorn acquired five marketed and four pipeline veterinary products from Lloyd, Inc. in early October, supplementing Akorn's growing presence in the veterinary market.

"2014 was a transformative and rewarding year for Akorn," said Raj Rai, Akorn's Chief Executive Officer. "In a short period of time we have built a robust and well-diversified specialty generics platform that will provide future growth opportunities through a growing pipeline of products and a reliable acquisition strategy. I remain confident in the long term prospects of our business."

Preliminary Financial Results for the Quarter Ended December 31, 2014

Revenue. Consolidated revenue for the fourth quarter of 2014 was $227.8 million, an increase of 168 percent over fourth quarter 2013 revenue of $85.0 million. Fourth quarter 2014 consolidated revenue included $12.4 million in costs associated with fourth quarter competitive pricing actions. Excluding the impact of these, the year-over-year increase was largely driven by the Hi-Tech Pharmacal and VersaPharm acquisitions, the addition of several branded ophthalmic products acquired in late 2013 and early 2014, the acquisition of Xopenex^® from Sunovion in October 2014 and competitive pricing actions for products in the Akorn generic portfolio coupled with strength in the Company's base business.

Gross Margin. Consolidated gross margin for the fourth quarter of 2014 was 56.4 percent compared to 55.3 percent in the fourth quarter of 2013. In addition to the costs associated with competitive pricing actions, fourth quarter 2014 consolidated gross margin included $7.8 million in amortization of inventory step-up, accelerated depreciation on plant assets and costs associated with competitive pricing actions. Excluding the impact of these items, fourth quarter 2014 adjusted non-GAAP gross margin was 61.8 percent.

Operating Expenses. GAAP selling, general and administrative (SG&A) expense in the fourth quarter of 2014 was $29.1 million compared to $14.4 million in the fourth quarter of 2013. GAAP SG&A expense in the fourth quarters of 2014 and 2013 included $2.5 million and $1.4 million, respectively, in stock compensation expense.

GAAP research and development (R&D) investment in the fourth quarter of 2014 was $7.8 million compared to $4.0 million in the fourth quarter of 2013.

Acquisition-related expenses in the fourth quarter of 2014 were $2.9 million compared to $0.9 million in the fourth quarter of 2013. Amortization of intangible assets was $16.7 million in the fourth quarter 2014 compared to $2.4 million in the fourth quarter of 2013. Akorn excludes acquisition-related expenses and amortization of intangible assets in its adjusted non-GAAP financials.

EBITDA. Earnings before interest, taxes, depreciation and amortization was $90.8 million in the fourth quarter 2014 compared to $33.5 million in the fourth quarter 2013. Adjusted EBITDA, which is a non-GAAP measure used by management to evaluate the continuing operations of the Akorn business, was $117.3 million in the fourth quarter of 2014 compared to $30.9 million in the fourth quarter of 2013. A full reconciliation of adjusted EBITDA adjustments can be found in table 4 at the end of this release.

Non-Operating Expenses. Non-operating expenses, which consist mainly of interest and other non-operating expenses, were $15.4 million in the fourth quarter 2014, compared to a net non-operating income of $1.5 million during the fourth quarter of 2013. Fourth quarter 2014 non-operating expenses included $1.9 million in amortization of debt financing costs, non-cash interest expense on convertible debt outstanding and other costs associated with acquisitions, litigation settlements and foreign currency adjustments. Fourth quarter 2013 non-operating income included $3.7 million in income from amortization of debt financing costs, non-cash interest expense on convertible debt outstanding, a bargain purchase gain from ophthalmic product acquisitions and other costs associated with acquisitions, litigation settlements and foreign currency adjustments.

GAAP Net Income per Share. GAAP net income for the fourth quarter 2014 was $34.2 million, compared to $16.7 million in the fourth quarter of 2013. Average fully-diluted shares outstanding for the fourth quarter 2014 were 124.5 million compared to 116.5 million in the fourth quarter of 2013. GAAP fully diluted earnings per share (EPS) was $0.29 in the fourth quarter of 2014 compared to $0.14 in the fourth quarter of 2013. Including a net adjustment of $26.7 million to net income for non-GAAP items, adjusted fully diluted EPS was $0.50 in the fourth quarter of 2014. Including a net adjustment of ($0.6) million to net income, adjusted fully diluted EPS was $0.14 in the fourth quarter of 2013.

Adjustments to net income in the fourth quarters of 2014 and 2013 include a number of items detailed in tables 5 and 6 at the end of this release. Please refer to these tables for a full reconciliation of GAAP to non-GAAP items for the fourth quarter and full year 2014 and 2013.

Capital Position and Liquidity

Cash & Cash Equivalents. As of December 31, 2014, Akorn had $70.7 million in cash and cash equivalents, compared to $34.2 million at December 31, 2013.

3.5% Convertible Notes Due 2016. As of December 31, 2014, $87.5 million of the original $120 million face value 3.5% convertible notes due 2016 remained, as $32.5 million face value of these notes were converted in the fourth quarter 2014. At the Company's option, substantially all conversions during the fourth quarter of 2014 were settled in Akorn common stock.