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)
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.
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 =========== ==========