===========================================================================

             SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, DC 20549

                         FORM 10-K
==========================================================================

[  ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934


[x]  Transition Report Pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934

    For the transition period from July 1, 1996 to December 31, 1996

                          ____________________

                    Commission File Number:  0-13976
                          ____________________

                        AKORN, INC.
      (Name of small business issuer as specified in its charter)

       LOUISIANA                                         72-0717400
  (State or other jurisdiction of            (IRS Employer Identification No.)
  incorporation or organization)

            100 Akorn Drive, Abita Springs, Louisiana 70420
         (Address of principal executive offices and zip code)
               Issuer's telephone number: (504) 893-9300
                          ____________________

     SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:

                                  None

     SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                       Common Stock, No Par Value
                            (Title of Class)


Check  whether the Issuer (1) has filed all reports required to be filed
by Section  13  or  15(d)  of  the  Exchange Act during the preceding 12
months (or for such shorter period that  the  Registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes  x    No


Check  if disclosure of delinquent filers in response  to  Item  405  of
Regulation S-K is not contained in this form, and will not be contained,
to the best  of  issuer's  knowledge, in definitive proxy or information
statements incorporated by reference  in  Part  III of this Form 10-K or
any amendment to this Form 10-K. [  ]

The  aggregate  market value of the voting stock held  by  nonaffiliates
(affiliates  being,   for  these  purposes  only,  directors,  executive
officers and holders of  more  than  5% of the Issuer's common stock) of
the Issuer as of February 28, 1997 was approximately $27,479,000.

The number of shares of the Issuer's common  stock,  no  par  value  per
share, outstanding as of February 28, 1997 was 16,591,918.


The information contained in this document, 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.


                                    PART I


Item 1.      Description of Business.

General Development of Business

   Akorn,   Inc.  (Akorn  or  the  Company)  manufactures,  markets  and
distributes an  extensive  line  of therapeutic, diagnostic and surgical
pharmaceutical and over-the-counter  ophthalmic  products.  In addition,
through  its  wholly-owned subsidiary Akorn Manufacturing,  Inc.,  doing
business as Taylor  Pharmaceuticals  (Taylor),  the Company manufactures
and distributes injectable pharmaceutical products  and provides sterile
contract  manufacturing  services  to  a  number  of  large   and  small
pharmaceutical  companies.  Akorn is a Louisiana corporation founded  in
1971.   For  most  of   its  25  year  history,  the  Company  has  been
headquartered in Abita Springs,  Louisiana,  a  suburb  of  New Orleans.
Recently, the Company announced that it would be moving its headquarters
and   most  of  its  Ophthalmic  Division  operations  to  Lincolnshire,
Illinois, a suburb of Chicago.

   Prior  to  the  fiscal  year  beginning  July  1,  1989,  the Company
purchased  its  entire ophthalmic product line on a contract basis  from
several suppliers,  who  packaged  and  labeled  the  products under the
Company's  name.   In  September  1989,  in  order  to  more  vertically
integrate  its  operations, the Company acquired Walnut Pharmaceuticals,
Inc. (Walnut), a  manufacturing facility in Los Angeles, California that
was capable of manufacturing  sterile ophthalmic solutions, suspensions,
and  human injectable products,  among  other  products.  This  facility
operated  until  mid  1991, at which time the facility was closed due to
current Good Manufacturing Practices (cGMP) concerns.

   In January 1992, the  Company  acquired  Taylor of Decatur, Illinois.
Akorn  immediately  began  the  process of transferring  to  Taylor  the
operations  formerly  conducted  at   the  Los  Angeles  facility  while
maintaining  the sterile contract manufacturing  business  conducted  by
Taylor.   In  May   1996,   the   Company   acquired  Pasadena  Research
Laboratories,  Inc.  (PRL),  a developer and distributor  of  injectable
products,  and  merged  PRL  into  Taylor,  thereby  creating  a  fully-
integrated injectable pharmaceutical  company.  The merger also expanded
Taylor's current product line.

   Upon  its  acquisition  of  PRL,  the   Company  reorganized  its
operations  into  two  divisions,  the  Ophthalmic   Division   and  the
Injectable  Division.   The  Ophthalmic Division, which operates through
Akorn,  consists  of  the  marketing   and  distribution  of  ophthalmic
products.  The Injectable Division, which  is  operated  through Taylor,
consists  of  the  injectable  products  manufacturing  and distribution
business and contract manufacturing business.  For information regarding
sales,  operating  income  and  identifiable  assets  for  each  of  the
Company's  segments, see Note R to the financial statements included  in

I
tem 8 of this report.

Ophthalmic Distribution Business

   The Company  distributes  a  complete line of therapeutic, diagnostic
and over-the-counter ophthalmic pharmaceutical products as well as other
surgical and office-based non-pharmaceutical  products.   The  Company's
therapeutic  ophthalmic  pharmaceutical  product  line is extensive  and
includes  antibiotics, anti-infectives, steroids, steroid  combinations,
glaucoma  medications,   decongestants/antihistamines,   and  anti-edema
medications. Diagnostic products, primarily for use in doctors' offices,
include  a  complete  line  of mydriatics and cycloplegics, anesthetics,
topical stains, gonioscopic solutions  and  others.   Surgical  products
available   from  Akorn  include  surgical  knives  and  other  surgical
instruments,  balanced  salt  solution,  post-operative  kits,  surgical
tapes, eye shields, anti-ultraviolet goggles, facial drape supports, and
other  supplies.   Ophthalmic  over-the-counter products include various
artificial tear solutions, preservative-free  lubricating ointments, lid
cleansers, vitamin supplements and contact lens accessories.

Injectable Manufacturing and Distribution Business

   Taylor  markets  a  line  of over 55 niche injectable  pharmaceutical
products through the newly acquired  operations  of   PRL.   Founded  in
1936,  PRL  had  over  50  years  of history in the generic small volume
parenteral market.  The niche injectable  products  sold are used in the
treatment  of  a  broad  spectrum  of indications, including  rheumatoid
arthritis and pain management.



Contract Manufacturing Business

   Taylor also manufactures sterile  products  on  a  contract basis for
third  parties.   The  majority  of  Taylor contracts are short-term  in
nature  and operate on the basis of signed  purchase  orders.   However,
Taylor is  in  the  process  of  developing  longer-term  contracts with
minimum  quantity  requirements  in  order to strengthen the commitments
from its contract customers.  Because  of the present nature of Taylor's
contracts,  its  contract  manufacturing  is   more  volatile  than  the
ophthalmic  distribution  and injectable distribution  segments.   Given
that  sales  to  contract  customers   are  large  in  relation  to  the
distribution segments, sharp reductions  in contract manufacturing sales
can occur should customers discontinue the contract for any reason.

Sales and Marketing

   While  the Company's distributed ophthalmic  and  injectable  product
lines include  some  unique  products, the majority are non-proprietary.
As  a  result,  the  Company  relies  on  its  expertise  in  marketing,
distribution,  development, and  low  cost  manufacturing  in  order  to
maintain and increase market share.

   The  Company  maintains   an   efficient   three-pronged   ophthalmic
distribution  sales  effort.   This  effort  includes  24  outside sales
representatives who, together with two district managers, make  personal
calls on customers in the Northeast, Southeast, Midwest and West regions
of  the  country.   In  addition,  the  Company  maintains  an  in-house
telemarketing  and  a  customer service sales group of 21 persons and  a
direct-mail marketing effort.  Ophthalmic distribution customers consist
primarily of ophthalmologists, optometrists, independent pharmacies, and
full-service wholesalers  whose  customers  include  hospitals and other
institutions.

   The   Company's   sales  and  marketing  efforts  in  the  injectable
distribution business  include  seven telemarketing and customer service
representatives  and  direct-mail activities.   Injectable  distribution
customers consist primarily  of  hospitals and specialty physicians.  In
addition, the Company has established  several  strategic  alliances  to
help   distribute   its   injectable   products   to   Group  Purchasing
Organizations (GPOs). The GPO market is expected to become a significant
component of sales to the injectable distribution segment as the Company
aggressively expands its generic injectable product offering  to include
more  high  volume  products.   The Company also intends to build a  key
account sales force for the injectable  segment  over  the  next several
years as new products are introduced.

   The   Company's   sales   and   marketing  efforts  in  the  contract
manufacturing business have been limited  to personal contact with major
pharmaceutical  companies  and  limited  trade  journal  advertisements.
Attendance at manufacturing trade shows and  an  aggressive marketing of
the  full-service  capabilities  of  Taylor's contract  operations  have
recently begun.  The Company's contract  customers include several large
pharmaceutical companies.  Throughout Taylor's history, it has performed
contract manufacturing services for some of  the  largest pharmaceutical
companies.

   The  Company  stresses  its  service, quality and cost  as  means  to
attract and keep customers.

Research and Development

   The acquisition of Taylor provided  the  Company  with  resources  to
begin  its  research  and  development  program, which began in the last
quarter of fiscal 1992 and has since expanded.  As of December 31, 1996,
the Company had three new ophthalmic Abbreviated  New  Drug Applications
(ANDAs) in various stages of development for products which  the Company
has  not  previously  manufactured.   See "Government Regulation"  these
products, along with a recently approved  ANDA product which the Company
will  market  upon patent expiration of the innovator  product,  have  a
current aggregate  brand  market  of  approximately  $150  million.   In
addition,  by  December  31,  1996,  the  Company  had eleven injectable
products  in  various stages of development.  These injectable  products
have a current  aggregate  brand  market  of approximately $500 million.
Several  of  these  products require ANDA submission  while  others  are
considered  Category  B   products  (see  "Government  Regulation")  and
therefore do not require FDA  approval.  No assurance can be given as to
whether the Company will develop  marketable  products  based  on  these
filings or as to the size of the market for any such products.

   The  Company  has  targeted its research and development efforts over
the next three years on  25  to  30 additional ophthalmic and injectable
products, the patents on which have  expired  or will expire in the near
future.  No assurance can be given as to whether  any  Company  products
will be developed  as  a  result of these efforts or as to when any such
products may be produced and  marketed  by  the Company.  Production and
marketing of any such products are expected to take several years.

   The  Company also maintains an aggressive product  licensing  effort.
This effort  allows  the  Company  to  use  its  strength  in  marketing
ophthalmic  and  injectable  products.   The  Company  also  anticipates
manufacturing many of the licensed products.

   At  December  31,  1996,  15 full-time employees of the Company  were
involved  in  research  and  development  and  product  licensing.   The
Company's research and development expenditures for the six month period
ended December 31, 1996 were $948,000.   For  the  twelve  month periods
ended  June  30,  1996,  1995  and 1994 these expenditures totaled  $1.9
million, $1.7 million and $1.4 million, respectively.

   The  Company expects its research  and  development  expenditures  to
increase in calendar 1997.

Employee Relations

   The Company  has  295 full-time employees, of whom 95 are employed in
its Ophthalmic Division,  198  are  employed in its Injectable Division,
and 2 are employed in its Corporate Division.   The  Company enjoys good
relations  with  its  employees,  none  of  whom  are represented  by  a
collective bargaining agent.

Competition

   The  manufacture  and  distribution  of  ophthalmic  and   injectable
pharmaceutical  products  is  highly  competitive, with many established
manufacturers, suppliers and distributors actively engaged in all phases
of the business. Most of the Company's  competitors  have  substantially
larger  financial  and  other  resources,  including a larger volume  of
sales, more sales personnel and larger facilities than the Company.

   The  competitors  which are dominant in the  ophthalmic  distribution
industry are Alcon Laboratories,  Inc.,  Allergan Pharmaceuticals, Inc.,
Steris Pharmaceuticals, Inc. (Steris) and  Bausch  &  Lomb,  Inc. (B&L).
The  Company competes primarily on the basis of price and service.   The
Company's principal suppliers of ophthalmic products, Steris and B&L are
in direct competition with the Company in several markets.  Both generic
and name  brand companies compete in the injectable generic distribution
industry and  include Abbott Labs, Gensia, Marsam, Steris, Elkin Sin and
American Regent.

   The manufacturing  of  sterile  products  must be performed under the
most rigorous FDA-mandated Good Manufacturing  Practices.  Therefore the
barriers  to  entry in the manufacturing of sterile  products  are  very
high.  The number  of  independent  contract  manufacturers  of  sterile
products  continues  to decline as a result of these barriers.  Taylor's
competitors in this area,  generally,  are larger companies with greater
financial and other resources.

Product Supply

   Since  the  acquisition  of  Taylor in 1992,  the  Company  has  been
steadily   regaining   control  of  the   supply   of   its   ophthalmic
pharmaceutical products,  which  had been impacted by the closure of the
Los Angeles facility in 1991. The only unaffiliated supplier of products
which  accounted  for  more  than  10%   of   the  Company's  ophthalmic
distribution sales during the six month period  ended  December 31, 1996
was  Sight  Pharmaceuticals,  Inc.  (a  division of B&L).  This  company
supplied products accounting for approximately  15% of the Company's net
ophthalmic distribution sales for the period.

   The  Company  uses several suppliers for its injectable  distribution
business, none of  which  accounted  for  10%  or more of net injectable
distribution sales in 1996.  Several of the leading products distributed
by  this  segment  are in the process of being transferred  to  Taylor's
manufacturing facilities.   The  Company intends to produce the majority
of  its  high  volume injectable distribution  products  over  the  next
several years.

Government Regulation

   All pharmaceutical  manufacturers  and  distributors  are  subject to
extensive regulation by the federal government, principally by  the  FDA
and,  to  a lesser extent, by state governments.  The federal Food, Drug
and Cosmetic  Act (the FDA Act), the Controlled Substance Act, and other
federal statutes  and  regulations  govern or influence the development,
testing,  manufacture,  safety,  labeling,   storage,   record  keeping,
approval, pricing, advertising, and promotion of products by the Company
and its subsidiaries.  Included among the requirements of these statutes
is that the manufacturer's methods conform to cGMPs provided  for in FDA
regulations.  Pursuant to its powers under the FDA Act, the FDA inspects
drug  manufacturers and storage facilities to determine compliance  with
its Good  Manufacturing  Practice regulations, non-compliance with which
can result in fines, recall  and  seizure  of products, total or partial
suspension of production, refusal of the government  to approve new drug
applications, and criminal prosecution.  The FDA also  has  authority to
revoke approval of drug products.

   Except in the case of drugs identified as Category B in the  FDA Act,
FDA  approval  is  required  before  any  drug  can  be manufactured and
marketed.  New drugs require the filing of a New Drug  Application (NDA)
with the FDA, which requires clinical studies demonstrating  the  safety
and  efficacy  of  the  drug  and  compliance with additional regulatory
requirements.

   Abbreviated procedures are available  for  obtaining FDA approval for
those generic drugs which are equivalents of existing  brand name drugs,
such  as  certain  drugs that had been manufactured at the  Los  Angeles
facility and are expected  to  be  manufactured  by Taylor.  In order to
obtain approval of a new generic drug, the Company  files an Abbreviated
New Drug Application (ANDA) with the FDA.  An ANDA is  similar to a NDA,
except  that  the  FDA  waives  the  requirement of conducting  clinical
studies of safety and efficacy.  Instead,  for  drugs  which contain the
same ingredients as drugs already approved for use in the United States,
the  FDA  ordinarily  requires  data  showing  that  the  generic   drug
formulation is equivalent to the brand name drug and that the product is
stable in its formulation.

   Over  the  past  several years, the FDA has increased its scrutiny of
the operations of generic  drug  manufacturers  like the Company and has
increased the time required for its approval of ANDAs and NDAs submitted
by such companies.  In addition, the Office of Generic Drugs of the FDA,
the  division  which  monitors  and  approves ANDAs, has  increased  its
scrutiny regarding concentrations of inactive  ingredients  for  generic
drugs as compared to the innovator drug.  This change has resulted in an
increase in the time spent on formulating ANDA products.

   The Company also manufactures and distributes several controlled-drug
substances, the distribution and handling of which are regulated by  the
Drug  Enforcement  Agency (DEA).  Strict compliance with DEA regulations
is necessary to continue  distribution  of controlled drugs.  Failure to
comply with regulations can result in fines or seizure of product.


Item 1A.   Executive Officers of the Registrant.

   The following table sets forth the executive  officers of the Company
as of February 28, 1997.  Each officer serves as such at the pleasure of
the Board of Directors.

Officer Name                Age         Position with the Company
- -------------              -----       --------------------------

John N. Kapoor, Ph.D.       53      Chairman   of  the  Board  and  Chief
                                    Executive Officer

Floyd Benjamin              53      Executive   Vice   President  of  the
                                    Company and President of the Injectable
                                    Division

R. Scott Zion               46      Senior Vice President of the Company 
                                    and General Manager of the Ophthalmic
                                    Division

Rita J. McConville          38      Vice President of the Company, Chief
                                    Financial Officer and Secretary



Item 2. Description of Property.

   Currently,  the  Company's  ophthalmic  executive  offices, sales and
distribution  center  are  based  in  two  adjacent  buildings  totaling
approximately 30,000 square feet located on ten acres  of  land in Abita
Springs,  Louisiana.  The  Company  plans  to  sell  and/or  lease these
facilities  once  the  relocation  of  these operations to Lincolnshire,
Illinois is completed.

   The Company recently signed a lease for  approximately  11,000 square
feet of office space in Lincolnshire, Illinois.  This space will be used
primarily for the Ophthalmic Division sales and marketing and  financial
accounting  operations,  along  with  all  corporate  operations  of the
Company.  Additional space will also be available for certain sales  and
marketing activities of the Injectable Division.

   The  Company  also  owns  a 76,000 square-foot facility located on 15
acres of land in Decatur, Illinois.  This facility is currently used for
packaging, distribution, warehousing and office space.  In addition, the
Company  owns  a  55,000 square-foot  manufacturing  facility,  also  in
Decatur, Illinois.   The Company also leases 7,000 square feet of office
and warehousing space  in  San  Clemente,  California  for  use  in  the
injectable  distribution  segment,  including  sales,  distribution  and
executive  offices.   This space, along with available space in Decatur,
Illinois, is considered adequate to accommodate growth in the injectable
distribution and contract  manufacturing  operations for the foreseeable
future.


Item 3.Legal Proceedings.

   From  time  to  time the Company becomes involved,  in  the  ordinary
course of its business,  in  legal  actions  and claims.  The amount, if
any,  of  ultimate  liability  with respect to such  matters  cannot  be
determined.  Management believes,  however, that any such liability will
not have a material effect on the Company's  financial position.


Item 4.Submission of Matters to a Vote of Security Holders.

No  matters were submitted to a vote  of  security  holders  during  the
quarter ended December 31, 1996.


                                   PART II


Item 5.Market for Common Equity and Related Stockholder Matters.

   The  Company's  Common  Stock is traded on the NASDAQ National Market
under the symbol AKRN. On February  28, 1997, the Company estimated that
the  number  of  holders of its Common Stock  was  approximately  3,000,
including  record  holders   and  individual  participants  in  security
position listings.

   High and low prices per NASDAQ for the periods indicated were:

                                        Low               High
                                       ------           -------
Six Months Ended December 31, 1996:
1st Quarter                          $  2.06         $     3.50
2nd Quarter                             1.63               2.44

Fiscal Year Ended June 30, 1996:
1st Quarter                          $  2.25         $     2.81
2nd Quarter                             2.06               3.13
3rd Quarter                             2.44               3.19
4th Quarter                             2.53               3.50

Fiscal Year Ended June 30, 1995:
1st Quarter                           $ 2.38         $     3.19
2nd Quarter                             2.94               4.00
3rd Quarter                             2.88               3.63
4th Quarter                             2.25               3.31


   The Company's Board of Directors  decided  to  suspend the payment of
dividends in the first fiscal quarter of 1992. Any  such future payments
will  be,  in part, contingent upon the level of the Company's  research
and development  efforts and expansion of operations. The Company's loan
agreement includes  restrictions  on  the  payment of dividends.  During
fiscal  1996,  dividends  paid  of  $583,000  pertain  to  Subchapter  S
distributions  made  to  former  PRL  shareholders  for  pre-acquisition
earnings.


Item 6.  Selected Consolidated Financial Data.

  In October 1996, the Board of Directors of the Company  determined  to
change  the  Company's  fiscal  year from the year ending June 30 to the
year  ending  December  31.  The following  table  sets  forth  selected
consolidated financial information  for  the  Company  for the six month
transition period ended December 31, 1996 and for the five  years  ended
June 30, 1996:


<TABLE>
<CAPTION>

                           Six months ended                        Years ended
                             December 31                             June 30
                                1996(1)      1996(1)      1995(1)    1994(1)    1993(3)     1992(4)
- --------------------------------------------------------------------------------------------------------
PER SHARE
<S>                           <C>         <C>            <C>         <C>        <C>        <C>        
Equity                        $    .98    $      0.97    $    0.93   $   0.76   $   0.47   $    0.35
Net income (loss)             $    .00    $      0.05    $    0.15   $   0.14   $   0.12   $   (0.51)
Price: High                   $   3.50    $      3.50    $    4.00   $   3.88   $   3.13   $    4.13
          Low                 $   1.63    $      2.06    $    2.25   $   1.88   $   1.50   $    1.25
P/E:   High                         NM             70x          27x        28x        26x         NM
          Low                       NM             41x          15x        13x        13x         NM

INCOME DATA (000)
Net sales                       16,519         33,925       37,505     31,266     23,612      20,914
Gross profit                     5,758         11,953       15,177     13,218      9,699       7,942
Operating income (loss)            130          1,089        3,910      2,654      1,712      (7,237)
Interest expense                 (243)          (441)         (25)      (181)      (288)        (305)
Pretax income (loss)                70            977        3,738      2,573      1,518      (7,370)
Income taxes (benefit)              26            189        1,232        158      (263)        (521)
Net income (loss)                   44            788        2,506      2,415      1,781      (6,849)
Weighted average shares 
  outstanding                   16,763         16,788       16,799     16,711     14,799      13,522

BALANCE SHEET (000)

Current assets                  16,921         17,251       15,474     15,044      9,209       9,989
Net fixed assets                12,833         11,524       11,060      6,346      5,325       5,174
Total assets                    31,094         29,817       27,491     22,190     15,008      15,692
Current liabilities              8,717          9,601        7,016      7,106      3,764       7,559
Long-term obligations            6,003          3,915        4,890      2,380      4,328       3,396
Shareholders' equity            16,374         16,301       15,585     12,704      6,916       4,737

FUNDS FLOW DATA (000)

From operations                  2,553             10          712      2,212      (479)        (414)
Dividends paid (2)                   -          (583)            -          -          -           -
From investing                 (2,028)          (873)      (4,943)    (3,745)      (531)       2,239
From financing                    (36)            979        3,112      2,313       (26)      (1,001)
Change in cash & equivalents       489            116      (1,119)        780    (1,036)         824

RATIO ANALYSIS

Gross margin                       34.9%         35.2%        40.5%      42.3%      41.1%       38.0%
Operating margin                     .8%          3.2%        10.4%       8.5%       7.3%      (34.6)%
Pretax margin                        .4%          2.9%        10.0%       8.2%       6.4%      (35.2)%
Effective tax rate                 37.1%         19.3%        33.0%       6.1%     (17.3)%        NM
Net margin                           .3%          2.3%         6.7%       7.7%       7.5%      (32.7)%
Return on assets                     .1%          2.8%        10.1%      13.0%      11.6%      (39.6)%
Return on equity                     .3%          4.9%        17.7%      24.6%      30.6%      (89.0)%

</TABLE>

All of the information shown in the table above for the five year period
ended June 30, 1996 has been restated to reflect the combined operations
of Akorn and Pasadena Research Laboratories, Inc. (PRL). The information
shown  in  the  table for 1992 has been restated to reflect the combined
operations of Akorn and Taylor.

(1)  For information  regarding the effects of unusual, infrequently occurring
   or year end adjustments  on  reported  results for the twelve month periods
   ended  June  30, 1994 through 1996, and for  the  six  month  period  ended
   December 31, 1996,  see  Notes  B,  E  and  P  to  the financial statements
   included in Item 8 of this report.

(2)  Dividends paid pertain to Subchapter S distributions  made  to former PRL
   shareholders for pre-acquisition earnings.

(3)   Includes  the reversal of the provision for a litigation judgment  ($0.7
   million), the  reduction  of  estimated costs of reorganizing manufacturing
   operations ($0.4 million), and income tax benefits ($0.3 million).

(4)  Includes charges for the reorganization of manufacturing operations ($5.3
   million), acquisition costs of Taylor ($1.3 million), and provision for a
   litigation judgment ($0.8 million).



Item 7. Management's Discussion and  Analysis of Financial Condition and
Results of Operations.

  Management's  discussion  and  analysis  of  financial  condition  and
results  of  operations  should  be  read   in   conjunction   with  the
accompanying financial statements.

RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995

  Effective  July 1, 1996, the Company changed its fiscal year end  from
June 30 to December  31.   The  table  below includes the summary income
statement for the six month periods ended  December  31,  1996  and 1995
which should be considered for the discussions which follow.

                                             Six Months Ended December 31
                                                  1996           1995
                                            _____________________________
                                      (in thousands, except per share amounts)

Net Sales:
  Ophthalmic distribution                       $ 10,271       $ 11,119
  Injectable distribution                          3,119          1,673
  Contract manufacturing                           3,129          4,157
                                               ____________  _____________
                                                  16,519         16,949

Cost of goods sold                                10,761         10,472
                                               ____________  _____________
  GROSS PROFIT                                     5,758          6,477

Selling, general and administrative expenses       4,819          4,701
Research and development                             809            478
                                               ____________  _____________  
                                                   5,628          5,179
                                               ____________  _____________  
  OPERATING INCOME                                   130          1,298

Interest and other income (expense) net             (60)            (9)
                                               ____________  _____________  
  INCOME BEFORE INCOME TAXES                          70          1,289

Income taxes                                          26            493
                                               ____________  _____________
  NET INCOME                                    $     44       $    796
                                               ============  =============
  NET INCOME PER SHARE                          $      -       $    .05
                                               ============  =============
Net Sales

  The  Company's consolidated net sales declined 3% to $16.5 million for
the six months ended December 31, 1996 as compared to the same period in
1995.  Ophthalmic  distribution  sales  declined  8% from the comparable
period in 1995.  This decline is primarily related  to the effect of the
Company's  decision to discontinue its practice of giving  discounts  to
wholesalers at the end of every quarter effective with the quarter ended
June 30, 1996.   The  effect of this decision was mainly realized in the
quarter ended September  30,  1996,  as  sales for this division for the
quarter ended December 31, 1996 were $5.4  million,  or  flat with sales
for the quarter ended December 31, 1995.

  While  this  decision  has  resulted  in  lower sales volumes,  it  is
expected to have a positive impact on margins  in  the future and it has
allowed  for  the  better  management and projection of  sales  for  the
division.  The generic pharmaceutical  market  continues  to  experience
price erosion which has impacted sales and margins.  However, the patent
of  the  most  significant therapeutic ophthalmic pharmaceutical product
(Timolol Maleate)  will  expire  in  late  March  1997.   As  previously
announced,  the  Company  has  received  pre-approval  from  the  FDA to
manufacture  and  sell  this  product as a generic pharmaceutical and is
aggressively pursuing negotiations with wholesalers and chain pharmacies
for the stocking of this product  once  patent  expiration  occurs.  The
Company's  core  business  of  sales to practitioners remains solid  and
margins are relatively stable.  Efforts of the ophthalmic division sales
and marketing group, now headed by the recently hired General Manager R.
Scott Zion, will continue to be focused in this area.

  For the six months ended December  31,  1996,  injectable distribution
sales  nearly  doubled  as compared to the same period  in  1995.   This
increase  includes the effects  of  the  acquisition  of  an  injectable
product line from Janssen Pharmaceutica, Inc. (Janssen) on July 1, 1996.
Prior to the  acquisition,  sales  of this product line were reported as
contract manufacturing sales.  Sales of the Janssen product line for the
six month period ended December 31, 1996 were $1.1 million. In addition,
the injectable distribution segment has experienced growth on several of
its high-margin niche products.

  Since the merger of Taylor with Pasadena  Research  Laboratories, Inc.
(PRL)  in May 1996, the Company has redirected a significant  amount  of
its R&D  efforts  towards the development of generic injectable products
that  will  enhance  the  current  product  portfolio  offering  of  the
injectable  distribution  segment.   Several  Category  B  products  are
expected to be  available for sale in early 1997, pending the outcome of
the Company's R&D efforts.

  For the six months  ended  December  31,  1996, contract manufacturing
sales declined 25% from the comparable period  in 1995.  This decline is
primarily attributable to the transfer of sales  of  the Janssen product
line to the injectable distribution segment as noted above.   Since  the
merger  with  PRL,  and  the addition of new management, the Company has
increased its marketing efforts  in  the area of contract manufacturing.
This marketing effort focuses on Taylor's  ability  to  provide  a  full
range of services, including product development, regulatory and sterile
manufacturing.   These efforts are expected to help establish more long-
term relationships with contract customers.

Gross Profit

  Consolidated gross  profit  declined  10%  to  $5.8 million in the six
months  ended December 31, 1996 compared to $6.5 million  for  the  same
period  of  the  previous  year,  with  gross  profit  margin  declining
approximately three percentage points to 34.9%.  Gross profit margin for
the ophthalmic  distribution segment improved slightly by one percentage
point. While gross profit margin improved in the injectable distribution
segment, reduced  volume  in the contract manufacturing segment resulted
in  an  overall  decline in consolidated  gross  profit  margin  due  to
underabsorption of overhead.

  In August 1996, the Company took steps to reduce a significant portion
of  its  fixed  and variable  costs  in  the  manufacturing  operations.
However,  low  plant   volume   related  to  weakness  in  the  contract
manufacturing  segment  and  lower ophthalmic  production  due  to  high
inventory  levels  caused  by  the   change  in  wholesaler  discounting
policies, had a negative impact on manufacturing margins.

  In  the quarter ended December 31, 1996,  the  Company  increased  its
reserve  for  estimated  unsaleable inventory by approximately $260,000.
This change in estimate is  reported  as  a  decrease  in  gross profit.
Excluding  this  change in estimate, the gross margin of the six  months
ended December 31, 1996 and 1995 was 36.4% and 38.2%, respectively.

  The  Company anticipates  that  gross  margins  will  continue  to  be
impacted  by  price  erosion  on generic pharmaceuticals.  However, with
anticipated  growth  in  certain  higher   margin  niche  products,  the
Company's overall gross margins should remain  relatively  stable during
1997.  As the injectable segment begins the marketing of more  commodity
generic products, overall Company margins are expected to decline beyond
1997.

Selling, General and Administrative Expenses

  Selling,  general  and  administrative  (S,G&A) expenses increased  3%
during the six months ended December 31, 1996  as  compared  to the same
period  in  1995.   This  slight  increase is primarily associated  with
changes  in the timing of certain large  promotional  expenses  for  the
Ophthalmic  Division  and  enhanced  sales  and marketing efforts in the
contract  manufacturing  and  injectable  distribution  segments.In  the
quarter ended December 31, 1996, the Company  reduced  its  reserve  for
products  being  transferred  from  the Company's previous manufacturing
facilities (site transfers) by $207,000,  primarily  due to the decision
not to pursue an exclusive raw material source on one of these products.
  The percentage of S,G&A expenses to sales increased  to  29.2% for the
six  months  ended December 31, 1996 from 27.7% in the comparable  prior
year period.

Research and Development

  Research and  development  (R&D)  expense  for  the  six  months ended
December 31, 1996 increased by 69% to $809,000, compared to $478,000 for
the same period in 1995.  This increase reflects a change in  the mix of
products  under development due to a reduced emphasis on site transfers.
The estimated  cost  of these site transfers has been previously accrued
and therefore does not  have an effect on R&D expense as reported in the
statements of income. In  addition, through most of the six months ended
December 31, 1996, the Company continued the aggressive R&D efforts that
had been ongoing at PRL through contractual arrangements

  As noted previously, the  Company has redirected a significant portion
of its R&D efforts to injectable products in response to the PRL merger.
These efforts include development  of  new  products  and  the  in-house
manufacture  of  products  distributed  by  the  injectable distribution
segment.  The Company also continues the development of a non-steroidal,
anti-inflammatory  drug (NSAID) for ophthalmic use  which  was  licensed
from Pfizer Inc. (Pfizer).  Phase III studies for the NSAID are expected
to begin in early 1997.  As of December 31, 1996, approximately $600,000
of funds received from Pfizer remain available for the financing of this
project.  Based on the  above,  it  is anticipated that R&D expense will
increase in 1997.  However, the Company  will  continue  to monitor such
expenses in light of operating performance.

Interest and other income/expense

  Interest and other expense, net increased $51,000 for the  six  months
ended  December  31,  1996 as compared to the same period in 1995.  This
increase  is primarily related  to  the  increase  in  interest  expense
associated  with  a  greater  average  outstanding  loan  balance on the
Company's  term  debt.   The primary increase in the term debt  resulted
from the borrowing of $1.5  million  in July 1996 in connection with the
acquisition  of  the  Janssen  product  line   which   included  certain
production equipment for the products.

  The   Company   anticipates   that   interest  expense  will  increase
significantly in 1997 as a result of the  new  long-term debt associated
with  the  Janssen  product  acquisition  and  1997 anticipated  capital
improvements.  A portion of this interest is expected  to be capitalized
during 1997 during validation and construction periods.

Income taxes

  The effective tax rate for the six months ended December  31, 1996 and
1995  was  36.9%  and  38.2%,  respectively.  The Company has reached  a
preliminary settlement with the Internal Revenue Service (IRS) regarding
proposed adjustments made during the examination  of tax returns for the
periods of 1988 through 1993 which the Company appealed.  These proposed
adjustments primarily related to the timing of deductions  taken for tax
purposes   in  connection  with  the  reorganization  of  the  Company's
manufacturing operations in 1991. The settlement which has been obtained
through the  appeals  process must be approved by the Joint Committee on
Taxation.  Adjustments  to  reflect  the  proposed settlement, primarily
related to interest of approximately $300,000 to $400,000 have been made
in previous financial statements.

Net Income

  Net  income  for  the  six  months  ended  December   31,   1996   was
approximately  break-even  compared to the prior year income of $796,000
or five cents per share, primarily due to the low overhead absorption in
the  Company's  manufacturing   facility   and   the   increase  in  R&D
expenditures noted above.

COMPARISON OF THE TWELVE MONTHS ENDED JUNE 30, 1996, 1995 AND 1994

In the following discussions, references to financial results  during  a
given  year  relate  to  the  twelve-month period ending June 30 of that
year, unless otherwise indicated.

Net Sales

  The Company's consolidated net sales declined 10%  to $33.9 million in
1996 compared to the prior year.  This  follows  a  20%  increase in the
prior year as compared with 1994.  The following table sets  forth,  for
the  periods  indicated,  net  sales  by segment, excluding intersegment
sales:

                                                Years Ended June 30
                                          1996          1995        1994
                                     _________________________________________
                                                     (In millions)
Ophthalmic distribution              $    20.8       $   23.8        $   20.7
Injectable distribution                    4.2            4.6            2.9
Contract manufacturing                     8.9            9.1            7.7
                                     _________________________________________
  Total net sales                    $   33.9        $   37.5        $  31.3
                                     =========================================

  Ophthalmic distribution sales include  a  broad  range of therapeutic,
diagnostic, surgical and office-based products.  Ophthalmic distribution
sales declined 13% in 1996 as compared to 1995 and increased 15% in 1995
as  compared  to  1994.  The decline in sales for 1996  is  attributable
primarily to two factors.  These include the loss of sales for AK-Con-A,
the  Company's  previously   best-selling   allergy   product,  and  the
discontinuance of certain discounting practices with wholesalers  in the
fourth quarter of 1996 discussed above.

  As  previously  announced,  AK-Con-A was converted to over-the-counter
status by the FDA, which required the filing of a NDA.  Sales of AK-Con-
A were discontinued in October  1994,  pending  FDA approval of the NDA.
The  Company received approval  of the OTC version  of  the  product  in
January 1996.  The OTC version is being marketed through a joint venture
with Pfizer.  Royalties earned under this joint venture totaled $333,000
in fiscal  1996.   Sales  of  AK-Con-A were approximately $2 million and
$1.4 million, respectively, in 1995 and 1994.

  As  discussed  above,  in the fourth  quarter  of  1996,  the  Company
discontinued the practice  employed by the Ophthalmic Division of giving
discounts to wholesalers at  the  end of every quarter.  The Company was
willing to forego the additional sales  in  the  quarter in an effort to
maintain margins at an acceptable rate in the future.   Because  of  the
discontinuance  of  this  practice, the Company estimates that sales for
the quarter and fiscal year ended June 30, 1996 were negatively impacted
by approximately $1 million.

  Excluding the effects of  the  loss of AK-Con-A and the discontinuance
of   the  wholesaler discounting practice,  sales  for   the  ophthalmic
segment were  relatively  flat.   Continued  erosion  of generic pricing
along with some product shortages have offset sales increases  in  other
products during 1996.  The Company continues to experience increases  in
its  sales  of surgical products which includes surgical instruments and
surgical packs.   The surgical products area will continue to be a major
focus for the ophthalmic segment since margins are generally higher than
for generic pharmaceuticals  and  sales  are controlled more directly by
physicians, a customer base which has been traditionally a strength  for
Akorn.

  In 1995, ophthalmic distribution sales were  enhanced  by sales of AK-
Con-A, the introduction of several new surgical products,  including new
surgical   instruments  and surgical  packs, and sales of the  Company's
generic therapeutic products.

  Injectable distribution sales (attributable to PRL, which was acquired
by the Company on May 31,  1996  in  a pooling of interests transaction)
declined 9% in 1996 as compared to 1995  and  increased  59%  in 1995 as
compared to 1994.  The current year decline is primarily attributable to
delays in new product introductions and additional competition  on a few
of  the  Company's  injectable products.  The sales increase in 1995  is
primarily attributable  to an expanded offering of certain grandfathered
products, including this  segment's  lead  product  for the treatment of
rheumatoid  arthritis.   In  addition, in 1995, the Company  established
several marketing alliances which  gave  it  an  entree  into  the Group
Purchasing Organization (GPO) market for injectables.

   Contract manufacturing sales were relatively flat in 1996 versus 1995
and increased 18% in 1995 as compared to 1994.  Contract sales for  1995
were  enhanced  by  a  new  contract from Janssen, which increased sales
significantly beginning in the  second  half  of  fiscal 1994.  Sales to
Janssen accounted for 12% and 13% of consolidated net  sales in 1996 and
1995, respectively.  Janssen had recently notified the Company  that  it
would  be  transferring the production of certain products during fiscal
1996 and 1997  to  its  own  facilities  in  Puerto Rico.  Such products
accounted  for $1.3 million and $1.4 million in  contract  manufacturing
sales for 1996 and 1995, respectively.

As noted above,  effective  July  1, 1996, Janssen agreed to transfer to
the   Company   ownership   of   three  injectable   products   in   the
analgesia/anesthesia area, two of which previously had been produced for
Janssen  by Taylor, but which Janssen  had  determined  to  discontinue.
These products accounted for approximately $2.6 million and $2.9 million
in sales for  Taylor  in 1996 and 1995, respectively. The acquisition of
these products will help  maintain  plant volume from these products and
has  provided  the  injectable  distribution  segment  with  two  highly
recognized products.

Income and Expenses

  The following table sets forth  the  relationship  to sales of various
income statement items:

                                                 Years Ended June 30

                                       1996            1995          1994
                                       -------------------------------------

Net sales                               100.0%          100.0%      100.0%
Cost of goods sold                       64.8            59.5        57.8
                                      --------------------------------------

Gross margin                             35.2            40.5        42.2

Selling, general and administrative
  expenses                               26.4            27.7        30.8
Research and development                  3.6             2.4         2.9
Acquisition and severance costs           2.0              -            -
                                      ---------------------------------------

Operating income                          3.2            10.4        8.5

Interest and other income
  (expense), net                          (.3)            (.4)       (.3)
                                      --------------------------------------

Income before income taxes                2.9            10.0        8.2

Income taxes                               .6             3.3         .5
                                     ---------------------------------------

Net income                                2.3%            6.7%       7.7%
                                     =======================================

Gross Profit

  The  consolidated gross margin percentage declined by  5.3  percentage
points from 40.5% in 1995 to 35.2% in 1996.  The decline in gross profit
margin is  primarily  due  to continued price pressure in the ophthalmic
generic pharmaceuticals area  due to competition, as well as the loss of
the Company's high margin sales  of  AK-Con-A.  In addition, lower plant
throughput,  primarily in the second half of fiscal  1996,  resulted  in
margin declines  for  the  contract manufacturing segment.  Also, in the
second half of fiscal 1996,  the  Company  increased  its  estimate  for
unsaleable  inventory  by  approximately $500,000.  In the quarter ended
June  30,  1996,  the  Company increased  its  estimate  for  wholesaler
chargebacks by approximately  $250,000.   These  changes in estimate are
reported as a decrease in gross margin.  Excluding  these  changes,  the
gross  margin  for  1996  was 37.4%, a 3.1 percentage point decline from
1995.

  The gross margin percentage  declined 1.7 percentage points from 42.2%
in 1994 to 40.5% in 1995.  The decline  in  gross  margin  percentage in
1995   is   primarily  due  to  the  effects  of  price  increases  from
manufacturers  (primarily  in the second half of the fiscal year), which
were not fully offset by price  increases  to customers.  In addition, a
shift in the mix of lower margin catalog products  added  to the decline
in gross margin.  The decline in gross margin was more prevalent  in the
second half of the fiscal year as a result of the loss of sales from AK-
Con-A discussed earlier.

Selling, General and Administrative Expenses

  Selling,  general  and  administrative expenses as a percentage of net
sales declined 1.3 percentage  points  from  27.7%  in  1995 to 26.4% in
1996.   In the quarter ended March 31, 1996, the Company decided  to  no
longer pursue ANDAs for several ophthalmic site transfer products.  This
decision  was  based  on  the  cost  of  the  ANDAs  versus  the  future
incremental profit to be derived from the sales of these products, given
changed  market  conditions.  This change in estimate was also based  on
the Company's recent  decision to enter into the injectable distribution
marketplace and the need  to  redeploy  R&D resources for the pursuit of
injectable  ANDAs.   The  total  amount  of  the  accrual  reversed  was
approximately $316,000 and is included as a reduction in S,G&A expenses.
During  the  quarter  ended  March  31,  1995,  the  Company,  based  on
evaluations made by management, changed the estimated  liability related
to  aged  customer  credits.   This  resulted  in a reduction  in  S,G&A
expenses of approximately $330,000.

  The decline in S,G&A expenses as a percentage  of  net sales, in spite
of  the  decrease in sales from 1995 to 1996, is primarily  due  to  the
decision to  eliminate approximately $1 million to $1.5 million of S,G&A
expenses and other  manufacturing  operating  expenses  in response to a
slowing in sales growth during the third quarter of fiscal 1995.

  Selling,  general and administrative expenses as a percentage  of  net
sales declined 3.1 percentage points from 30.8% in 1994 to 27.7% in 1995
primarily due  to  the  Company's operating leverage and the increase in
net sales from 1994 to 1995.

Research and Development

  R&D expense increased 36%  in 1996 as compared to 1995.  This increase
was primarily attributable to  the  increase  in R&D associated with the
recently acquired operations of PRL.  Prior to fiscal 1996, PRL had very
little  R&D  expense.  Research and development expense  was  relatively
flat in 1995 as  compared  to  1994.   In 1995, the Company maintained a
stable mix of new ophthalmic ANDAs and site-transfers  from its previous
manufacturing facility in Los Angeles.

    Throughout 1995 and the first half of 1996, the Company incurred R&D
costs  associated with its NDA for the over-the-counter version  of  AK-
Con-A in  connection  with  the licensing arrangement with Pfizer.  This
NDA was approved in January 1996.   Costs  associated with this NDA have
been  capitalized  in  connection  with  the  long-term   contract   for
manufacturing  and  royalty rights.  The Company also continued its work
on an NDA for the ophthalmic  NSAID Piroxicam licensed from Pfizer.  The
first $1 million of costs associated  with  this NDA are offset by funds
obtained  from Pfizer.  Total cash expenditures  for  all  research  and
development activities were approximately $1.9 million, $1.7 million and
$1.4 million in 1996, 1995 and 1994, respectively.

  As noted  above,  with  the acquisition of PRL, the Company expects to
increase its mix of injectable  Category  B  and ANDA products.  PRL had
several  ANDA  filings  in process through joint  venture  arrangements.
Some of these arrangements  have continued subsequent to the acquisition
and some of the projects have  been  brought  in house.  The Company has
also continued to develop other injectable products  for  manufacture by
Taylor.   Several of the products currently marketed and distributed  by
the injectable  distribution  segment  do  not  require FDA approval and
production of such products will be transferred to the Taylor facilities
as soon as practicable

Acquisition and Severance Costs

  In connection with the merger of PRL and Taylor,  the Company recorded
certain  charges  in the fourth quarter of fiscal 1996  for  transaction
costs ($110,000) and  transitional  costs ($568,000) associated with the
realignment of the Company into two separate  reporting  divisions.  The
transaction  costs include legal, accounting and other directly  related
acquisition costs.   Transitional  costs consist primarily of provisions
for severance related costs.

Operating Income

  Operating income in 1996 of $1.1 million  or  3.2%  of  sales  was 72%
lower  than  1995  operating  income  of  $3.9  million.  The decline in
operating  income  for  1996  is attributable to several  factors  noted
above.  These include acquisition  and  severance  costs,  the  loss  of
high-margin  sales  of  AK-Con-A,  the Company's decision to discontinue
wholesaler discounting practices in  the fourth quarter, and the changes
in estimate noted above.  In addition,  the  overall  reduction in gross
margins  for  the  Company,  primarily  associated with increased  price
sensitivity  for ophthalmic generic pharmaceuticals,  reduced  operating
margins.

   Operating income  in 1995 was $3.9 million or 10.4% of sales compared
to the 1994 amount of  $2.7  million  or 8.5% of sales.  The increase in
1995 operating income was primarily the  result  of  increased sales and
operating   leverage,  coupled  with  stable  research  and  development
expenses.  The  sales  increase  was  somewhat  offset by the decline in
gross margin resulting from cost increases of products  distributed  but
not   manufactured  and  continued  price  sensitivity  in  the  generic
ophthalmic pharmaceutical market.

Interest and Other Income (Expense)

  Net interest  and  other  expense  declined $60,000 from 1995 to 1996.
During  these  periods, interest income  remained  relatively  constant.
Interest expense increased significantly in 1996 to $441,000 as compared
to $25,000 in 1995.   Most  interest  expense in 1995 was capitalized in
connection  with  construction  at  Taylor's   facilities   in  Decatur,
Illinois.  The increase in interest expense in 1996 was offset by a gain
on  the  sale  of  marketable equity securities of $80,000.  In 1995,  a
$308,000 decline in  market value of an equity investment was determined
to  be  other than temporary.   This  determination  was  based  on  the
significant  deterioration  in  the  value  of  the  investment  and the
evaluation that a price recovery was not imminent.

  From  1994  to 1995, net interest and other expense increased $91,000.
During these periods,  interest  income  remained  relatively  constant.
Interest  expense  declined in 1995 from $181,000 to $25,000.  As  noted
above, the majority  of  interest  expense in 1995 was capitalized.  The
loss of $308,000 related to the decline  in  market  value  of an equity
investment more than offset the decline in interest expense.


Income Taxes

  The Company's consolidated effective income tax rate was 19.3%,  33.0%
and 6.1% for 1996, 1995 and 1994, respectively.  The effective rate  for
1996  varies  from the statutory rates primarily due to the inclusion of
net income for  PRL  prior  to  the  acquisition date as a result of the
pooling of interests.  PRL was a Subchapter  S corporation and therefore
was  not  subject  to  corporate  income  taxes.  The  effects  of  pre-
acquisition earnings or loss of PRL did not  have  a  material effect on
the 1995 or 1994 effective rate since such income or loss was immaterial
to consolidated pretax income.

  The effective rate for 1994 varies from the statutory  rates primarily
due  to  the  effects  of  adoption of Statement of Financial Accounting
Standards Board (SFAS) No. 109, "Accounting for Income Taxes," effective
July  1,  1993.  Under SFAS 109,  the  Company  was  able  to  recognize
estimated future tax benefits attributable to expenses recorded for book
purposes but  not  currently deductible for tax purposes.  In July 1993,
the Company recorded  a net deferred tax asset in the amount of $896,000
along  with  a  100% valuation  reserve  to  reflect  the  uncertainties
surrounding the ultimate  realization  of  the  benefits.  In the fourth
quarter  of  fiscal  1994,  the  Company decided to reverse  the  entire
remaining balance of the valuation reserve since uncertainties regarding
the ultimate realization of the benefits  were  reduced  to a relatively
low level.  This resulted in the recording of a $384,000 ($.03 cents per
share) benefit in the fourth quarter.

Net Income

  Net income declined  $1.7 million or $.10 cents per share in 1996 from
$2.5 million or $.15 cents per share in 1995. The decline in sales along
with   certain   unusual,   infrequently   occurring  adjustments  noted
previously, including acquisition and severance costs, and certain other
changes in accounting estimates, are the primary reasons for the decline
in net income.

  Net income increased $100,000 or $.01 cent per share from $2.4 million
or $.14 cents per share in 1994 to $2.5 million  or $.15 cents per share
in 1995.  This marginal increase, in spite of the  significant  increase
in  operating  income  in  1995,  is due to the lower effective tax rate
incurred  in 1994 as a result of the  adoption  of  SFAS  109  and  full
realization of the benefit of deferred tax assets.

FINANCIAL CONDITION AND LIQUIDITY

  Management assesses the Company's liquidity by its ability to generate
cash to fund  its  operations.   The  significant components in managing
liquidity are: funds generated by operations;  levels of working capital
items including accounts receivable, inventories,  wholesaler chargeback
accruals  and accounts payable; capital expenditure and  debt  repayment
requirements; adequacy of available lines of credit; and availability of
long-term capital at competitive prices.
  In December  1996, the Company successfully obtained the restructuring
of  its  existing  debt  facilities.   The  restructuring  ,  which  was
completed in March 1997, included the following:

* an increase  in  the  current working capital line of credit from $2.5
  million to $3.0 million
* a consolidation of all  term  debt  into one note, with an increase in
  available term funding from $1.2 million to $2.0 million, resulting in
  maximum term financing of $7 million
* reduction in the interest rate on all the facilities to prime rate
* postponement  of  principal repayments  on  the  term  facility  until
  January 1998
* Restructuring of loan  covenants  based on current financial condition
  and cash flow of the Company

  With this restructuring in place, the Company is confident that it can
meet its capital requirements for 1997.

  The Company traditionally has generated cash from operations in excess
of working capital requirements.  The  net  cash  provided  by operating
activities was $2.5 million for the six months ended December  31, 1996.
For  the  twelve  months  ended  June  30, 1996, 1995 and 1994, net cash
provided  by  operating  activities  was  $10,000,  $712,000,  and  $2.2
million,  respectively.   The  increase in cash  provided  by  operating
activities  for the six months ended  December  31,  1996  is  primarily
related to the increase in accruals for wholesaler chargebacks (see Note
A to the financial statements).  This increase in the chargeback accrual
is primarily related to the Janssen product line which has a significant
price difference  between  the  wholesale  price  and  the  majority  of
contract  prices  for  the  products.  This accrual has stabilized as of
December 31, 1996.

  The decline in cash provided  from  operating  activities  in 1996 and
1995  is primarily related to the increase in inventory associated  with
new product additions and a continual increase in the amount of products
produced in-house which require Akorn to inventory related raw materials
and  components.    Also   in   1996,   the  majority  of  new  contract
manufacturing business requires that the Company inventory raw materials
and  components.   In  1995,  cash  provided from  operations  was  also
negatively impacted by a decrease in  the  average  days outstanding for
payables.  This decline was due to more timely payments  to  vendors  by
the  Company  resulting  from the availability of working capital credit
lines.

  The Company recently announced  that  it would be moving its Corporate
offices  and  the  majority of its Ophthalmic  Distribution  offices  to
Lincolnshire, Illinois.   The  costs  of  this  relocation,  for which a
charge  will  be made in the quarter ended March 31, 1997, are estimated
to be in the range  of  $850,000  to  $950,000 after taxes.  These costs
include  severance, asset write downs and  relocation  costs,  the  cash
portion of  which are expected to be financed by current cash, available
lines of credit,  and  operating  cash flows.  In 1997, the Company will
also continue to fund the development of the NDA for Piroxicam discussed
previously  which  will be funded primarily  from  funds  received  from
Pfizer.

  In addition to these short-term needs, the Company will be required to
make payments of additional  interest  and taxes, currently estimated to
be  approximately  $300,000  to  $400,000,  in   connection   with   the
anticipated settlement of the IRS appeal discussed above.  The timing of
the  payment of this settlement will be based on the length of the Joint
Committee  approval  process.   Also,  in  connection  with  the Janssen
product  line  acquisition,  the  Company is required to provide certain
products  to  Janssen  in 1997, at no  cost,  estimated  not  to  exceed
$100,000, should certain contingent events occur.

  Net cash utilized for investing activities during the six month period
ended December 31, 1996  of  approximately  $2.0  million, includes $2.0
million  of  property,  plant  and  equipment additions,  primarily  for
equipment  acquired  for  the Janssen products,  and  $340,000  for  the
allocated  portion of the product  line  itself.  These  additions  were
partially offset by net sales of investments of $326,000.  The remainder
of these investing  activities  were funded through $1.5 million of bank
financing.  The  Company has plans  for  capital  improvements  of  $1.5
million  to  $2 million  in  1997.   These  improvements  are  for  both
requirements to meet current FDA and DEA regulations as well as upgrades
to the Company's  management  information  systems.   These improvements
will  be  financed  through  available term debt financing  through  the
Company's prime banking institution.

  The  Company used net cash of  $36,000  in  its  financing  activities
during the  six  months ended December 31, 1996, as principal repayments
on capital leases,  and  both  long-term  and  short-term  debt slightly
exceeded  the  $1.5  million of borrowings for the Janssen product  line
acquisition.


SELECTED QUARTERLY DATA

In Thousands, Except Per Share Amounts


<TABLE>
<CAPTION>                               
                                                                    Net Income (loss)
                                       -------------------------------------------------
                                            Net      Gross                       Per
                                          Sales      Profit         Amount      Share
                                       -------------------------------------------------
<S>                                    <C>           <C>          <C>           <C>
Six Months Ended December 31, 1996:
  1st Quarter                          $  8,101      $ 2,969      $     35      $    -
  2nd Quarter                             8,418        2,789             9           -
                                       _________________________________________________
                                       $ 16,519      $ 5,758      $     44      $    -
                                       =================================================
Fiscal Year Ended June 30, 1996:
  1st Quarter                          $  8,739      $ 3,305      $    499      $  0.03
  2nd Quarter                             8,210        3,172           296         0.02
  3rd Quarter                             8,817        3,066           550         0.03
  4th Quarter                             8,159        2,410         (557)        (0.03)
                                       _________________________________________________
                                       $ 33,925      $11,953      $    788      $  0.05
                                       =================================================
Fiscal Year Ended June 30, 1995:
  1st Quarter                          $  9,929      $ 4,174      $  1,043      $  0.06
  2nd Quarter                             9,707        4,169           364         0.02
  3rd Quarter                             8,637        3,225           404         0.02
  4th Quarter                             9,232        3,609           695         0.04
                                       _________________________________________________
                                       $ 37,505      $15,177      $  2,506      $  0.15
                                       =================================================

</TABLE>


  All  of  the  information  shown  in the table above for the two years
ended June 30, 1996 has been restated to reflect the combined operations
of  Akorn  and  PRL.   For information regarding  unusual,  infrequently
occurring or year end adjustments, see notes B, E and P to the financial
statements included in Item 8 of this report.

I
tem 8.       Financial Statements and Supplementary Data.

The following financial  statements are included in Part II, Item 7 of
this Form 10-K.

Report of Independent Auditors.............................................. 18
Consolidated Balance Sheets  as  of  December 31, 1996 and June 30, 1996
and 1995.................................................................... 19
Consolidated Statements of Operations  for the six months ended December
31, 1996 and for the years ended June 30, 1996, 1995 and 1994............... 20
Consolidated Statements of Shareholders' Equity for the six months ended
December 31, 1996 and for the years ended June 30, 1996, 1995 and 1994...... 21
Consolidated Statements of Cash Flows for  the six months ended December
31, 1996 and for the years ended June 30, 1996, 1995 and 1994............... 22
Notes to Consolidated Financial Statements.................................. 23


<PAGE>

Report of Deloitte & Touche
LLP


Independent Auditors





To the Board of Directors and Shareholders of

Akorn, Inc.




We have audited the accompanying consolidated  balance  sheets of Akorn,

Inc.  and  subsidiaries as of December 31, 1996, and June 30,  1996  and

1995,  and  the   related   consolidated   statements   of   operations,

shareholders'  equity, and cash flows for the six months ended  December

31, 1996 and for  each  of  the three years in the period ended June 30,

1996.   These  financial  statements   are  the  responsibility  of  the

Company's management. Our responsibility  is  to  express  an opinion on

these financial statements based on our audits.


We  conducted our audits in accordance with generally accepted  auditing

standards. Those standards require that we plan and perform the audit to

obtain  reasonable  assurance about whether the financial statements are

free of material misstatement.  An  audit  includes examining, on a test

basis, evidence supporting the amounts and disclosures  in the financial

statements.  An audit also includes assessing the accounting  principles

used and significant estimates made by management, as well as evaluating

the overall financial statement presentation. We believe that our audits

provide a reasonable basis for our opinion.


In our opinion,  such  consolidated financial statements present fairly,

in all material aspects,  the  financial  position  of  Akorn,  Inc. and

subsidiaries  at  December 31 1996, and June 30, 1996 and 1995, and  the

results of their operations  and  their  cash  flows  for the six months

ended December 31, 1996 and for each of the three years  in  the  period

ended  June  30,  1996  in conformity with generally accepted accounting

principles.


As discussed in Note O to  the  consolidated  financial  statements, the

Company  changed  its  method  of accounting for income taxes  in  1994.

Also, as discussed in Note E to  the  consolidated financial statements,

the Company changed its method of accounting  for certain investments in

debt and equity securities in 1995.

New Orleans, Louisiana

March 7, 1997

                                       

<PAGE>                                       
                                       AKORN, INC.

                               CONSOLIDATED BALANCE SHEETS

                                  (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                 December 31                June 30
                                                    1996              1996          1995
                                               ______________________________________________
<S>                                            <C>                <C>               <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                    $   1,380          $     891         $     775
  Certificates of deposit                            576                  -                -
  Short-term investments                            -                   902             1,569
  Trade accounts receivable
    (less allowances for uncollectibles of $359 at
    December 31, 1996 and $339 and $291 at June 30,
    1996 and 1995, respectively)                   4,625              4,916             5,464
  Inventory                                        8,838              8,860             6,476
  Deferred income taxes                            1,101              1,157               709
  Prepaid expenses and other assets                  401                525               481
                                                ------------------------------------------------
    TOTAL CURRENT ASSETS                          16,921             17,251            15,474

OTHER ASSETS
  Intangibles, net                                 1,162                848               728
  Other                                              178                194               229
                                                ------------------------------------------------
    TOTAL OTHER ASSETS                             1,340              1,042               957

PROPERTY, PLANT AND EQUIPMENT, NET                12,833             11,524            11,060
                                                ------------------------------------------------

    TOTAL ASSETS                               $  31,094          $  29,817           $27,491
                                                ================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Short-term borrowings                        $     250          $   1,294           $   288
  Current installments of long-term debt              19                707               513
  Current portion of capital lease obligations       151                151               149
  Current portion of pre-funded development costs    685                650               667
  Trade accounts payable                           1,892              2,680             1,878
  Income taxes payable                                 1                626               782
  Accrued compensation                               885              1,106               905
  Accrued reorganization costs                       108                306               727
  Accrued chargebacks                              3,081                250                 -
  Deferred royalties                                 167                667                 -
  Accrued expenses and other liabilities           1,478              1,164             1,107
                                               -------------------------------------------------
    TOTAL CURRENT LIABILITIES                      8,717              9,601             7,016

LONG-TERM DEBT                                     4,858              3,117             3,353
CAPITAL LEASE OBLIGATIONS                            353                427               580
PRE-FUNDED DEVELOPMENT COSTS                           -                174               304
DEFERRED INCOME TAXES                                792                197               327
OTHER LONG-TERM LIABILITIES                            -                  -               326

SHAREHOLDERS' EQUITY
  Common stock, no par value--authorized 20,000,000
    shares; issued 16,600,927 shares in 1996 
    and 16,515,673 shares in 1995; 
    outstanding 16,591,918, 16,573,915
    and 16,304,653 shares at December 31, 1996, 
    and June 30, 1996 and 1995, respectively       14,174            14,174            13,959
  Treasury stock, at cost -- 9,009, 27,012 
    and 211,020 shares at December 31, 1996, 
    and June 30, 1996 and 1995, respectively          (31)              (92)             (291)
  Retained earnings                                 2,231             2,219             1,830
  Unrealized gain on marketable equity securities      -                  -                87
                                                  ---------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                    16,374             16,301            15,585

    TOTAL LIABILITIES AND
       SHAREHOLDERS' EQUITY                    $  31,094          $  29,817           $27,491
                                                 ==============================================

See notes to consolidated financial statements.
</TABLE>


                                       AKORN, INC.

                              CONSOLIDATED STATEMENTS OF OPERATIONS

                          (In Thousands, Except per Share Data)


<TABLE>
<CAPTION>
                                        Six Months                Years Ended June 30
                                    Ended December 31
                                          1996           1996           1995            1994
                                    ------------------------------------------------------------

<S>                                 <C>            <C>               <C>             <C>
Net sales                           $  16,519      $  33,925         $ 37,505        $  31,266
Cost of goods sold                     10,761         21,972           22,328           18,048
                                    _____________________________________________________________
   GROSS PROFIT                         5,758         11,953           15,177           13,218

Selling, general and
  administrative expenses               4,819          8,974           10,376            9,643
Research and development                  809          1,213              891              921
Acquisition and severance costs             -            677                -                -
                                    _____________________________________________________________
                                        5,628         10,864           11,267           10,564
                                    _____________________________________________________________
   OPERATING INCOME                       130          1,089            3,910            2,654

Interest and other income (expense):
   Interest income                         33            113              106               84
   Interest expense                      (243)          (441)             (25)            (181)
   Gain (loss) on marketable equity 
     securities                             -             80             (308)               -
   Other income, net                      150            136               55               16
                                    _____________________________________________________________
                                          (60)          (112)            (172)             (81)

   INCOME BEFORE INCOME TAXES              70            977            3,738            2,573

Income taxes                               26            189            1,232              158
                                     ____________________________________________________________

   NET INCOME                       $      44      $     788        $   2,506       $    2,415
                                     ============================================================


   NET INCOME PER SHARE             $      .00     $      .05       $      .15      $      .14
                                     ============================================================

Weighted average shares outstanding     16,763         16,788           16,799           16,711
                                     ============================================================

See notes to consolidated financial statements.
</TABLE>



                                        AKORN, INC.

                   CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS' EQUITY

                                      (In Thousands)


<TABLE>
<CAPTION>
                                         Common Stock                                             Unrealized
                                      ----------------------------    Retained                    Gain (loss)
                                         Shares                        Earnings      Treasury     on Marketable
                                      Outstanding       Amount         (Deficit)        Stock      Equity Securities  Total
                                        --------------------------------------------------------------------------------------
<S>                                      <C>           <C>              <C>             <C>             <C>        <C>
Balances at July 1, 1993                 13,715        $   10,709       $ (3,152)       $    (641)      $     -    $   6,916

Net income for 1994                                                        2,415                                       2,415
Exercise of stock options and warrants    2,010             3,000             (1)              20                      3,019
Issuance of common stock                    467               250                                                        250
Cancellation of shares due to resolution 
  of manufacturing pre-acquisition 
  contingencies                             (52)                                                                           -
Unrealized loss on marketable equity                                                                        
   securities                                                                                               (32)         (32)
Treasury stock reissued                      58                                   19          118                        137
                                         ______________________________________________________________________________________


Balances at June 30, 1994                16,198               13,959           (719)         (503)          (32)      12,705

Net income for 1995                                                           2,506                                    2,506
Exercise of stock options                    35                                   8            70                         78
Unrealized loss on marketable equity
  securities                                                                                              (276)         (276)
Reversal of unrealized loss on marketable
  equity  securities, net of tax                                                                           308           308
Unrealized gain on marketable
  equity securities, net of tax                                                                             87            87
Treasury stock reissued                      72                                  35           142                        177
                                         _______________________________________________________________________________________


Balances at June 30, 1995                16,305               13,959          1,830          (291)          87        15,585

Net income for 1996                                                             788                                      788
Exercise of stock options                   249                  215            186           198                        599
Treasury stock received in lieu of cash     (36)                                             (123)                      (123)
Dividends paid to Subchapter S shareholders                                    (583)                                    (583)
Reversal of unrealized gain on marketable
   equity securities, net of tax                                                                           (87)          (87)
Treasury stock reissued                      56                                  (2)          124                        122
                                         ______________________________________________________________________________________
Balances at June 30, 1996                16,574               14,174          2,219           (92)           -        16,301

Net income for six months ended
   December 31, 1996                                                             44                                       44
Treasury stock reissued                      18                                 (32)           61                         29
                                         _____________________________________________________________________________________
Balances at December 31, 1996            16,592           $   14,174      $   2,231        $  (31)       $    -      $16,374
                                         =====================================================================================

See notes to consolidated financial statements.
</TABLE>

                                       
                                       AKORN, INC.

                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Dollars in Thousands)


<TABLE>
                                       Six months
                                   Ended December 31          Years Ended June 30
                                        1996           1996          1995            1994
                                  ----------------------------------------------------------
<S>                                 <C>            <C>              <C>             <C>
OPERATING ACTIVITIES
Net income                          $      44      $     788        $  2,506        $  2,415
 Adjustments to reconcile net income
   to net cash provided by
   operating activities:
        Depreciation and amortization     720            984             980             763
        (Gain) loss on marketable 
         equity securities                  -            (80)            308               -
        Provision for losses on 
          accounts receivable
          and inventory                   303            825             160              68
        Deferred income taxes             651           (578)              2            (387)
        Other                              26              -              (1)             11
        Changes in operating assets 
         and liabilities:
          Accounts receivable             267            424            (350)         (2,172)
          Inventory, prepaid expenses and
             other assets                (132)        (3,129)          (1,420)        (1,047)
          Refundable income taxes           -              -                -            288
          Trade accounts payable and
            accrued expenses            1,438          1,229          (1,514)          1,600
          Income taxes payable          (625)          (155)               70            673
          Pre-funded development costs  (139)          (298)             (29)              -
                                      _________________________________________________________
NET CASH PROVIDED BY OPERATING
  ACTIVITIES                            2,553             10              712          2,212

INVESTING ACTIVITIES
Purchases of property, plant and 
  equipment                            (1,986)        (1,360)          (4,818)        (1,671)
Product licensing costs                   (28)          (172)            (421)          (432)
Purchases of investments                 (576)        (1,173)          (2,023)        (2,625)
Sales of investments                      902          1,832            2,319            983

Purchase of Janssen injectable products  (340)             -                -              -
                                      __________________________________________________________

  NET CASH USED IN INVESTING 
    ACTIVITIES                         (2,028)          (873)         (4,943)         (3,745)

FINANCING ACTIVITIES
Proceeds from sale of stock                29            599             256           1,805
Repayments of long-term debt             (447)          (442)           (944)           (118)
Proceeds from issuance of                                            
  long-term debt                        1,500            400           3,900              -
Pre-funded development receipts             -            150               -           1,000
Principal payments under capital
  lease obligations                       (74)          (151)            (58)           (464)
Short-term borrowings, net             (1,044)         1,006             128              90
Dividends paid                              -           (583)              -              -
Debt acquisition costs                      -             -             (170)             -
                                       _________________________________________________________

NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES                    (36)           979            3,112          2,313

                                        ________________________________________________________
INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                        489            116           (1,119)           780

Cash and cash equivalents at 
   beginning of year                      891            775            1,894          1,114
                                        ________________________________________________________

CASH AND CASH EQUIVALENTS
   AT END OF YEAR                   $   1,380      $     891        $     775       $  1,894
                                        =========================================================


See notes to consolidated financial statements.
</TABLE>



Notes to Consolidated Financial Statements

Akorn, Inc.

Note A - Summary of Significant Accounting Policies

   Consolidation:  The accompanying  consolidated  financial  statements
include the accounts  of  Akorn, Inc. (the Company) and its wholly owned
subsidiaries,  Spectrum  Scientific  Pharmaceuticals,  Inc.  (Spectrum),
Walnut Pharmaceuticals, Inc.  (Walnut)  and  Akorn  Manufacturing, Inc.,
doing   business   as   Taylor  Pharmaceuticals  (Taylor).  Intercompany
transactions and balances have been eliminated in consolidation.

   The  Company  acquired Pasadena  Research  Laboratories,  Inc.  (PRL)
effective May 31,  1996  in  a  business  combination accounted for as a
pooling of interests.  The acquired operations  of  PRL were merged into
Taylor's  operations  subsequent  to  the  acquisition  (see   Note  B).
Accordingly,  all  financial information presented has been restated  to
include the operations of PRL.

   Change in Fiscal  Year  End:   Effective  July  1,  1996, the Company
changed its fiscal year end from June 30 to December 31.   The following
table  sets  forth  the results of operations for the transition  period
ended December 31, 1996  and the unaudited results of operations for the
six months ended December  31,  1995, the prior period comparable to the
transition period:

                                                               (Unaudited)
                                      Six Months                Six Months
                                        Ended                     Ended
                                      December 31              December 31
                                          1996                     1995
                                    ________________________________________
                                     (in thousands, except per share amounts)

Net sales                              $  16,519              $  16,949
Gross profit                               5,758                  6,477
Income before income taxes                    70                  1,289   
Provision for income taxes                    26                    493
Net income                                    44                    796
Net income per share                   $       -         $          .05

   Revenue Recognition:  The Company  recognizes sales upon the shipment
of goods.

   Cash   Equivalents:   The  Company  considers   all   highly   liquid
investments  with a maturity of three months or less, when purchased, to
be cash equivalents.

   Investments:   Effective  July 1, 1994, the Company adopted Statement
of  Financial Standards No. 115  (SFAS  115),  "Accounting  for  Certain
Investments  in  Debt and Equity Securities." The Company records short-
term and long-term  investments  under  the provisions of this Statement
(see Note E).

   Inventory:  Inventory is stated at the  lower  of  cost (average cost
method)  or  market  (see  Note  G).  Provision is made for slow-moving,
unsalable and obsolete items.

   Intangibles: Intangibles consist primarily of product licensing costs
which are capitalized at cost and amortized  on the straight-line method
over the lives of the related license periods,  which range from 5 years
to  15  years.   For  the  six  month period  ended December  31,  1996,
amortization expense was $54,001.   Amortization  expense  for the years
ended  June  30, 1996, 1995 and 1994 was $53,328, $144,820 and  $82,143,
respectively.   Accumulated  amortization  at December 31, 1996 and June
30, 1996 and 1995 was $323,829, $269,828 and $216,500, respectively.

   Property,  Plant and Equipment: Property,  plant  and  equipment  are
stated at cost,  less accumulated depreciation. Depreciation is provided
using the straight-line  method  in  amounts  considered  sufficient  to
amortize  the  cost  of  the  assets  to operations over their estimated
service lives.   The average estimated  service  lives  of buildings and
leasehold  improvements,  furniture  and equipment, and automobiles  are
approximately  30, 8, and 5 years, respectively.   Depreciation  expense
for the six months  ended December 31, 1996 and for the years ended June
30, 1996, 1995 and 1994  was  $650,629, $896,537, $800,330 and $559,321,
respectively.
   
   Under  an  agreement with Pfizer,  Inc.  (see  Note  I)  the  Company
received reimbursement  for the purchase of certain equipment. The total
amount reimbursed was approximately $593,000, which was received by June
30, 1995. The Company accounted for these reimbursements by reducing its
carrying value of the associated equipment.

   Accrual for Chargebacks:   The  Company  records  an estimate for the
difference  between gross sales of certain products to  wholesalers  and
expected resales  of  such  products under contractual arrangements with
third parties such as hospitals  and group purchasing organizations as a
reduction of sales.  As part of the Company's sale terms with wholesalers,  
it  agrees  to reimburse wholesalers for such differentials  between  
wholesale  prices and  contract  prices.   The  portion  of  this accrual 
which relates to wholesaler  sales  that have not yet been collected  is  
reported  as  a reduction to accounts  receivable.  The portion  of this 
accrual which relates to wholesaler sales which have been collected  is  
reported as a liability  in the balance sheet. For the products acquired 
from  Janssen (Note D), the wholesale price is significantly greater than 
the contract prices. Accordingly, the liability  for  accrued chargebacks 
increased significantly at December 31, 1996.

   Interest  Capitalization:   The Company capitalizes  interest  during
periods of construction of qualifying  assets.  For the six months ended
December  31,  1996 and for the year ended June 30,  1995,  the  Company
capitalized  interest   costs  of  $39,880  and  $282,007,  respectively
relating to construction.   No  interest  was  capitalized  during years
ended June 30, 1996 or 1994.

   Stock-Based   Compensation:    Statement  of  Financial  Accounting
Standards  No.  123, "Accounting for Stock-Based  Compansation,"  (SFAS
123) encourages, but does not require, companies to record compensation
cost for stock-based  employee  compensation  plans  at fair value.  The
Company  has chosen to continue to account for stock-based  compensation
using the  intrinsic  value  method  prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for  Stock  Issued to Employees" (APB
25),  and  related interpretations and has adopted  the  disclosure-only
provisions of  SFAS  123.   Accordingly,  compensation  cost  for  stock
options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock.  See Note L.

   Income  Taxes:   Deferred  income taxes are provided in the financial
statements, where necessary, to account for the tax effects of temporary
differences resulting from reporting  revenues  and  expenses for income
tax  purposes  in  periods  different  from  those  used  for  financial
reporting purposes.  The temporary differences result primarily from the
use   of   different   methods   of   accounting  for  depreciation  and
amortization, provisions for bad debts,  inventory  reserves and accrued
reorganization and severance costs, and pre-funded development costs.

   Fair  Value  of  Financial Instruments:  The carrying  value  of  the
Company's financial instruments, including cash, short-term investments,
receivables, payables,  and certain accrued liabilities approximate fair
market value due to their  short-term  nature.   The  fair  value of the
Company's  long-term  debt  at  December 31, 1996 and June 30, 1996  and
1995, based upon available market information, approximated its carrying
value.

   Use  of  Estimates:   The  preparation  of  financial  statements  in
conformity  with  generally  accepted   accounting  principles  requires
management to make estimates and assumptions  that  affect  the reported
amounts  of  assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported
amounts of revenues  and  expenses  during the reporting period.  Actual
results could differ from those estimates.

Note B - Acquisition of Pasadena Research Laboratories, Inc.

    On  May 31, 1996, the Company acquired  Pasadena  Research  Laboratories,  
Inc.  in  a business  combination  accounted for as a pooling  of interests.  
PRL is a specialized distributor of injectable pharmaceuticals.  Pursuant to  
the merger agreement, the Company issued  1.4 million shares of its common 
stock in exchange  for  all  of  the  outstanding shares of PRL.  As part of 
the acquisition, PRL was merged into the operations of Taylor and the Company 
was  realigned  into  two  separate  reporting  divisions,  an  ophthalmic
division and an injectable division.

   The Company's financial statements for each of the three years in the
period  ended  June 30, 1996, as contained herein, have been restated to
include the results  of  PRL  for  all  periods presented.  Combined and
separate results of operations of the Company and PRL during the periods
preceding the merger are presented below.

                                          Akorn         PRL      Combined
                                          _________________________________
                                                 (in  thousands)
Eleven months ended May 31, 1996 (unaudited):
   Net sales                              $ 27,361     $ 3,684    $ 31,045
   Net income                                  675         409       1,084

Fiscal year ended June 30, 1995:
   Net sales                                32,863       4,642      37,505
   Net income                                2,280         226       2,506

Fiscal year ended June 30, 1994:
   Sales                                    28,404       2,862      31,266
   Net income (loss)                         2,721        (306)      2,415

   The combined financial results presented above include no significant
adjustments to conform the accounting policies of the two companies.

   In  connection  with the merger, the Company recorded certain charges
in the fourth quarter  of  the  fiscal  year  ended  June  30,  1996 for
transaction   costs   ($109,534)   and   transitional  costs  ($567,772)
associated  with  the  realignment  of  the Company  into  two  separate
reporting divisions.  The transaction costs  include  legal,  accounting
and  other  directly  related  acquisition  costs.   Transitional  costs
consist primarily of provisions for severance related costs.

Note C - Reorganization of Manufacturing Operations

   On  January 15, 1992, the Company acquired Akorn Manufacturing, Inc.,
which does  business  as  Taylor Pharmaceuticals (Taylor), in a business
combination  accounted for as  a  pooling  of  interests.  Taylor  is  a
contract manufacturer  of sterile pharmaceuticals, which it produces and
delivers pursuant to contracts with third parties.

   As part of the acquisition,  the  Company  paid  a finder's fee to an
affiliate of Dr. John N. Kapoor, Chairman of the Board  (the affiliate).
This  finder's  fee was in the form of 250,000 shares of Company  Common
Stock valued at $3.50  per  share.  Of  the total shares issued, 125,000
were subject to forfeiture if the market  price  of the Company's Common
Stock  did not reach at least $5.00 per share by January  15,  1996.  In
August 1995,  the  Company, the affiliate and Dr. Kapoor entered into an
agreement under which  (i) the forfeiture period was extended to January
15, 1998, (ii) forfeiture  would  not  occur  in  the event that persons
unaffiliated with Dr. Kapoor acquire beneficial ownership  of  more than
50% of the outstanding common stock of the Company and (iii) Dr.  Kapoor
waived  his  right  to  receive  $40,000 otherwise payable to him by the
Company for serving as Chairman of the Board in fiscal 1996.

   Following the Taylor acquisition,  the  Company  began the process of
transferring  the manufacture of its product line from  previously-owned
manufacturing facilities  to  the  Taylor  facility.  At  that time, the
Company  estimated  the  cost of completing the FDA approval process  at
Taylor for products previously  manufactured  elsewhere  and  recorded a
provision for reorganization costs.

   As  of  December  31,  1996  and June 30, 1996 and 1995, the balances
remaining in accrued reorganization  costs  associated with the transfer
process  were  $108,000,  $306,000 and $727,000,  respectively.   It  is
anticipated that the filing  of  all  such  product  approvals  will  be
completed by the end of 1997.

Note D - Acquisition of Injectable Product Line

   Effective  July  1,  1996, the Company entered into an agreement with
Janssen  Pharmaceutica,  Inc.   (Janssen)   to  acquire  the  rights  to
distribute an injectable product line in the  anesthesia/analgesia area.
As part of this agreement, the Company also acquired  certain high-speed
inspection  equipment.   Pursuant  to  the  agreement,  the  acquisition
transfers ownership of the NDAs for the three products, as well  as  the
trade  names and trademarks in the United States.  In exchange for these
product licenses and equipment, the Company paid Janssen $1.6 million on
the effective date of the agreement which was financed primarily through
a $1.5 million  credit  facility with the Company's commercial bank.  In
accordance with the agreement, Akorn will be required to provide certain
other products to Janssen,  at  no  cost, having a value expected not to
exceed $100,000.  The portion of the  acquisition costs allocated to the
acquired products ($340,000) will be amortized over 15 years.

Note E - Investments

   Effective July 1, 1994, the Company  adopted  Statement  of Financial
Standards  No.  115  (SFAS 115), "Accounting for Certain Investments  in
Debt and Equity Securities".  This Statement requires certain securities
to  be  classified  into  one of three  reporting  categories  (held-to-
maturity, available-for-sale  or  trading).  The  Company   completed  a
review  of  its  securities  relative  to  SFAS  115  and classified its
investments in debt securities as held-to-maturity. As  of June 30, 1996
and  1995, investments of $902,000 and $1,439,000, respectively  include
U.S. government  securities  and  municipal bonds which have contractual
maturities within one year and are  being  reported  at  amortized cost,
which approximates fair market value.

     The  Company  classified  its  investment  in equity securities  as
available-for-sale, requiring that they be carried  at  fair  value with
any  unrealized  gain  or loss reflected as a component of shareholders'
equity.  Such investments  had  a  fair  market  value  of approximately
$130,000  at  June 30, 1995.  The Company held no equity investments  at
December 31, 1996 or June 30, 1996.

   At June 30,  1994,  the  cost  of  the  Company's  marketable  equity
securities  exceeded the market value by $32,044. Therefore, a valuation
allowance  was   established   by   a  charge  to  shareholders'  equity
representing the net unrealized loss. During fiscal 1995, this allowance
was increased by $275,661 due to the continuous decline in market value.
At March 31, 1995, management determined  the loss to be permanent given
the significant decline in market value since  June  30,  1994  and  the
unlikelihood  of a recovery in value. Therefore, the $307,705 unrealized
loss previously  charged  to shareholders' equity was accounted for as a
realized loss in the 1995 statement of operations. At June 30, 1995, the
market value of the marketable  equity  securities exceeded the adjusted
cost, subsequent to the write-down noted  above,  by $87,397; therefore,
an  unrealized gain was recorded as a component of shareholders'  equity
to reflect this increase in value.  During fiscal 1996, the Company sold
its investment  in  marketable equity securities for an amount in excess
of adjusted cost.  Accordingly,  the  unrealized gain previously charged
to shareholders' equity was reversed and  a realized gain of $79,859 was
recorded in the 1996 statement of operations.

Note F  - Allowance for Uncollectibles
   The activity in the allowance for uncollectibles  is  as  follows for
the periods indicated:


<TABLE>
<CAPTION>
                                  Six months ended       
                                    December  31             Years ended June 30
                                     1996            1996          1995            1994
                                 _________________________________________________________
                                                       (in thousands)
<S>                                 <C>          <C>           <C>             <C>    
Balance at beginning of year        $   339      $    291      $   272         $  240
Provision for bad debts                  24           124           60             61
Accounts written off                     (4)          (76)         (41)           (29)
                                 _________________________________________________________

Balance at end of year              $   359      $    339      $   291         $  272
                                 =========================================================
</TABLE>


Note G - Inventory

   The components of inventory are as follows:

                                   December 31                   June 30
                                       1996        1996            1995
                                __________________________________________
                                                 (in thousands)
Finished goods                  $ 5,181        $    5,376       $  4,239
Work in process                   1,375             1,311          1,043
Raw materials and supplies        2,282             2,173          1,194
                                __________________________________________
                                $ 8,838        $    8,860       $  6,476
                                ==========================================

   Inventory at December 31, 1996 and June 30, 1996 and 1995 is reported
net  of  reserves  of $589,007, $681,920 and $352,143, respectively, for
slow-moving, unsalable and obsolete items.

   The activity in the  inventory  reserve is as follows for the periods
indicated:

                              Six months
                           ended December 31         Years ended June 30
                                 1996          1996        1995          1994
                             __________________________________________________
                                             (in thousands)

Balance at beginning of year $   682      $    352      $   290      $   427
Provision for slow-moving, unsalable
   and obsolete items            279           701          100            7
Inventory written off           (372)         (371)         (38)        (144)
                             _________________________________________________

Balance at end of year       $   589      $    682      $   352      $   290
                             =================================================

Note H - Property, Plant and Equipment

   Property, plant and equipment consists of the following:

                                  December 31               June 30
                                     1996          1996                 1995
                                  ____________________________________________
                                                    (in thousands)
Land                            $     479       $     479           $   479
Buildings and leasehold 
   improvements                     8,217           7,738             5,516
Furniture and equipment          11,238             10,139            7,880
Automobiles                         135                166              133
                                ______________________________________________
                                 20,069             18,522           14,008
Accumulated depreciation         (8,415)            (7,771)          (6,875)
                                ______________________________________________ 
                                 11,654             10,751            7,133
Construction in progress          1,179                773            3,927
                                ______________________________________________
                              $  12,833         $   11,524          $11,060
                                ==============================================

Note I - Pre-Funded Development Costs

   In April 1994, the Company entered into a series  of  agreements with
Pfizer Inc. (Pfizer) regarding the cross-licensing of several ophthalmic
pharmaceutical products.  Under this arrangement Akorn granted a license
to  Pfizer  on  an  Akorn  product then under development (the  licensed
product), and agreed to provide  manufacturing  services  and  marketing
assistance for the licensed product. In exchange, Akorn received  (1)  a
royalty  stream  on  sales  of  the  licensed product, (2) an exclusive,
royalty-free license to manufacture and  market  a  Pfizer  prescription
ophthalmic  non-steroidal anti-inflammatory drug (NSAID), and  (3)  non-
exclusive rights to market an existing Pfizer ophthalmic antibiotic.

   As part of  this agreement, in fiscal 1994 Pfizer paid the Company an
advance of $1 million  to  be  used  to fund the costs of developing the
NSAID,  which  are estimated at $1.8 million.  The  Company  intends  to
recognize the pre-funded  balance  as  an offset to development costs as
these expenses are incurred. During the  six  months  ended December 31,
1996  and  during  fiscal 1996 and 1995, the Company incurred  $138,829,
$297,463 and $29,012,  respectively,  of  development  costs  which were
charged   against   the   pre-funded   balance.  The  Company's  current
projections indicate that the remaining  costs  of  development  will be
paid over the next 15 - 18 months.

   In  addition,  the  agreement  stipulated that Pfizer would reimburse
Akorn for one-half of the costs to  obtain  FDA approval on the licensed
product,   including   the  cost  of  certain  agreed   upon   equipment
acquisitions required for  the manufacturing of the licensed product.  A
New Drug Application (NDA) was filed for the licensed product on June 8,
1994.  During the year ended  June  30,  1996,  the Company obtained FDA
approval of the NDA for the licensed product. Therefore,  in  accordance
with  the  agreement, Pfizer paid the Company an advance royalty  of  $1
million for the initial year sales of the licensed product.  The Company
is recognizing  this  deferred  revenue  balance  over a one year period
beginning in March 1996.

Note J - Financing Arrangements

  The Company's short-term borrowings are summarized as follows:


<TABLE>
<CAPTION>
                                                                December  31             June 30
                                                                   1996             1996      1995
                                                             __________________________________________
                                                                                 (in thousands)
<S>                                                               <C>            <C>         <C>
Line of Credit with First National Bank of Commerce;
  permitting borrowings up to $2.5 million, interest at
  the Chase Manhattan prime rate (8.25% at June 30, 1996)         $   -          $   227     $    -
Line of credit with Bank of  America; permitting borrowings
  up to $600,000, interest at the bank's prime rate plus .75%
  (9.00% and 9.75% at June 30, 1996 and 1995); secured by the
  receivables, inventory and equipment of PRL                         -              517        288
Short-term note payable to First National Bank of Commerce;
  due 1997, interest at the bank's prime rate (8.25% and 8.75%
  respectively, at December 31, 1996 and June 30, 1996),
  payable in monthly principal installments of
  $50,000 commencing July 1996                                      250              550          -
                                                              _________________________________________
                                                                $   250          $ 1,294     $  288
                                                              =========================================
</TABLE>


  The  $2.5  million  Line of Credit and the short-term note payable are 
pursuant to the credit facility  amended  during fiscal 1996 as further
described below.

  Long-term debt consists of:


<TABLE>
<CAPTION>
                                                             December  31           June 30
                                                                1996            1996       1995
                                                           ________________________________________
                                                                     (in  thousands)
<S>                                                           <C>            <C>           <C>
Note payable to First National Bank of Commerce; due 2000;
  interest at the Chase Manhattan prime rate (8.25% at
  December 31, 1996), payable in monthly principal
  installments of $83,333 commencing January 1998             $4,855         $     -       $    -      
Note payable to First National Bank of Commerce; due 1999;
  interest at 8.03%, payable in monthly principal installments
  of $33,521 commencing December 1995                              -           2,308        2,600
Note payable to First National Bank of Commerce; due 1999;
  interest at 10.25%, payable in monthly principal installments
  of $10,834 with a final installment of $660,794 due in 1999      -           1,083        1,213
</TABLE>


<TABLE>
<CAPTION>
                                                             December  31           June 30
                                                                1996            1996       1995
                                                           ________________________________________
                                                                     (in  thousands)
<S>                                                           <C>            <C>           <C>
Note payable to First National Bank of Commerce; due 1999;
  interest at .75% over the Chase Manhattan prime
  rate (9% at June 30, 1996), payable in monthly principal
  installments of $12,857 commencing July 1996                $     -        $   400       $    -
Other obligations                                                  22             33           53
                                                           ________________________________________
                                                                4,877          3,824        3,866
Deduct: Current installments payable within one year              (19)          (707)        (513)
                                                           ________________________________________
Portion payable after one year                                $ 4,858        $ 3,117       $3,353
                                                           ========================================
Maturities of long-term debt are as follows (in thousands):

Years ending December 31:
1997                                                                                       $   19
1998                                                                                        1,002
1999                                                                                        1,000
2000                                                                                        2,856
                                                                                          _________
Total                                                                                      $4,877
                                                                                          =========
</TABLE>


   In September 1992, the Company entered into an agreement to obtain up
to  $2.5  million of credit financing from the John N. Kapoor Trust (the
Trust), an affiliate of John N. Kapoor, Chairman of the Board. Under the
terms of the  agreement,  the  Trust,  which held warrants to purchase 2
million shares of stock at prices ranging  from  $1.50  to $2.00 through
November 15, 1995, was required to exercise 1,666,667 of  those warrants
at $1.50 per share on or prior to November 15, 1993. On that  date,  the
Trust  exercised  the  entire  two  million  warrants  for a total of $3
million, of which $1.6 million was used to repay debt to  the  Trust and
the  remaining  $1.4  million  was  received  in  cash. Interest expense
related to this indebtedness was $61,334 in 1994.

   As part of the September 1992 arrangement, the Company  granted a new
warrant to the Trust to purchase an additional 1 million shares at $2.00
per  share,  exercisable  for  five  years.  Upon  the issuance of  this
warrant,   Dr.  Kapoor  became  entitled  to  designate  an   additional
individual as a director of the Company.

   In 1995 the  Company  entered into a $6.3 million loan agreement with
First National Bank of Commerce to obtain financing for the expansion of
its manufacturing facilities  in  Decatur,  Illinois  and  to  refinance
existing  debt.   During fiscal 1996, the loan agreement was amended  to
provide additional  financing  and  to  adjust  the  interest  rate  and
principal  payment  requirements for certain facilities.  The amendments
increased the total loan commitment to $10.1 million including: (1) $2.6
million Term loan, (2)  $1.3 million Term loan, (3) $2.5 million Line of
Credit, (4) $1.5 million Term loan for financing of Janssen acquisition,
(see Note D), (5) $1.6 million  Revolver/Term  loan,  and  (6)  $600,000
short-term financing for IRS settlements (see Note O).


   In  March  1997,  the  loan  agreement  was  further  amended with an
effective  date of December 31, 1996.  This amendment provided  for  (1)
the consolidation  of the term facilities into one revolver/term loan of
$7 million, (2) the  deferral of principal payments on the revolver/term
loan until January 1998,  (3)  an increase in the line of credit to $3.0
million, and (4) the reduction in the interest rate on all facilities to
prime rate.  As of December 31,  1996,  $2 million remained available to
be drawn under the revolver/term loan.

   Borrowings   under   the  loan  agreements  are   collateralized   by
substantially all of the  Company's receivables, inventory and property,
plant and equipment. In addition, the Company is required to comply with
positive and negative loan  covenants,  including  restrictions  on  the
payment  of  dividends and maintenance of specified financial covenants,
including minimum  net  worth  and  working capital.  Accordingly, as of
December  31,  1996,  the Company is prohibited  from  paying  dividends
without the prior approval by the bank.

Note K- Leasing Arrangements

   The  Company  leases  certain   equipment   under   capital   leasing
arrangements which expire through the year 2000.

   Property, plant and equipment includes the following amounts relating
to such capital leases:

                             December 31              June 30
                                 1996             1996          1995
                             ____________________________________________
                                            (in thousands)

Furniture and equipment       $     806        $     806       $   100
Less accumulated
 depreciation                      (226)            (147)          (53)
                             _____________________________________________
                                    580              659            47
Construction in progress              -                -           706
                             _____________________________________________
                              $     580        $     659       $   753
                             =============================================

   Depreciation expense provided on these assets was  $78,517,  $94,254,
$25,822  and $18,833 for the six months ended December 31, 1996 and  for
the years ended June 30, 1996, 1995 and 1994, respectively.

   The following is a schedule by years of future minimum lease payments
under these  capital  leases  together with the present value of the net
minimum lease payments (in thousands).

Years ending December 31:

1997                                                       $    186
1998                                                            173
1999                                                            173
2000                                                             43
                                                           ___________
Total Minimum Lease Payments                                    575
Less: Amount Representing Interest                              (71)
                                                           ___________
Present Value of Net Minimum  Lease Payments               $    504
                                                           ===========

   The Company leases real and personal property in the normal course of
business under various operating  leases,  including  non-cancelable and
month-to-month  agreements.  Payments under these leases  were  $38,051,
$73,196, $169,825 and $198,072  for  the six month period ended December
31,  1996  and  for  the  years ended June  30,  1996,  1995  and  1994,
respectively.  During fiscal  1993,  the Company entered into a sublease
agreement  for  one  of  its leased facilities.  Sublease  rentals  were
$113,326 and $111,164, respectively,  for  fiscal  years  ended June 30,
1995 and 1994. This agreement expired effective May 1995, in conjunction
with the expiration of the primary lease.

   The  following  is  a  schedule  by  years  of  future minimum rental
payments  required  under  these  non-cancelable  operating  leases  (in
thousands).

Years ended December 31:

1997                                                        $   49
1998                                                            19
1999                                                             8
                                                           ___________
Total Minimum Payments Required                             $   76
                                                           ===========

Note L - Stock Options and Warrants

   The Company has two stock option plans and one stock  purchase  plan.
The  first  stock option plan is the 1988 Incentive Compensation Program
(the Incentive  Program). Under the Incentive Program any officer or key
employee of the Company  is  eligible to receive options when designated
by the Company's Board of Directors. As of December 31, 1996, the number
of shares of the Company's Common  Stock  which  may be issued under the
Incentive Program upon the exercise of options may  not exceed 2,000,000
shares.  This maximum allowable shares was increased to 3,000,000 shares
by  way  of  vote  of  shareholders  effective February 28,  1997.   The
exercise price of the options granted  under  the Incentive Program will
be determined by the Board of Directors but may  not be less than 50% of
the fair market value of the shares subject to the option on the date of
grant. All options granted under the Incentive Program  during  the  six
months  ended  December 31, 1996 and the years ended June 30, 1996, 1995
and 1994 have exercise  prices  equivalent  to  the  market value of the
Company's Common Stock on the date of grant.  Options  granted under the
Incentive  Program,  generally  vest  over a period of three  years  and
expire within a period of five years.

   The second stock option plan is the Akorn, Inc. Stock Option Plan for
Directors (the Directors' Plan). The Directors'  Plan  provides  for the
grant  of  nonqualified  options  to persons elected as directors of the
Company at the fair market value of  the shares subject to option on the
date of grant. The total number of shares  of the Company's Common Stock
for which stock options may be granted under the Directors' Plan may not
exceed 500,000 shares.  Options granted under  the  Directors' Plan vest
immediately and expire five years from the date of grant.

   A summary of the status of the Company's stock options as of December
31,  1996 and June 30, 1996, 1995 and 1994 and changes  during  the  six
months  ended  December 31, 1996 and the years ended June 30, 1996, 1995
and 1994 is presented below (shares in thousands):



<TABLE>
<CAPTION>
                                   December 31                      June 30
                                       1996           1996            1995           1994
                                   ____________________________________________________________
                                            Wgtd           Wgtd          Wgtd            Wgtd
                                            Avg             Avg           Avg             Avg
                                            Exer           Exer           Exer            Exer
                                    Shares  Price  Shares  Price  Shares  Price   Shares  Price
                                    ____________________________________________________________
<S>
                                    <C>    <C>      <C>    <C>     <C>     <C>     <C>     <C>
Outstanding at beginning of period  1,243  $2.47    1,624  $2.56   1,459   $2.51   1,241   $2.47
Granted                               401  $2.19      215  $2.75     238   $2.93     228   $2.66
Exercised                               -      -     (250) $2.40     (73)  $2.34     (10)  $1.94
Expired/Canceled                     (363) $3.00     (346) $3.00       -       -       -       -
                                     _____          ______         ______          ______
Outstanding at end of period        1,281  $2.35    1,243  $2.57   1,624   $2.56   1,459   $2.51
                                    ======          ======         ======          ======
Options exercisable at end of period  870  $2.33    1,134  $2.56   1,348   $2.67   1,237   $2.54

Options available for future grant    886             924            793           1,031

Weighted average fair value of options
  granted during the period                $ .83           $1.04

</TABLE>

   The  fair  value  of  each option granted during the six months ended
December 31, 1996 and the  fiscal  year ended June 30, 1996 is estimated
on the date of grant using the Black-Scholes  option  pricing model with
the  following  assumptions:  (I)  dividend  yield of 0%, (ii)  expected
volatility  of  28%, (iii) risk-free interest rate  of  6.5%,  and  (iv)
expected life of 5 years.



   The  following  table  summarizes  information  about  stock  options
outstanding at December 31, 1996 (shares in thousands):


<TABLE>      
<CAPTION>
                           Options Outstanding                    Options Exercisable
                ___________________________________________   _______________________________
                               Weighted Avg
    Range of         Number      Remaining    Weighted Avg        Number        Weighted Avg
   Exercise       Outstanding   Contractual      Exercise       Exercisable       Exercise
     Prices       at 12/31/96       Life            Price       at 12/31/96         Price
   __________    _____________ _____________  _____________  _______________  _______________
      <S>             <C>           <C>             <C>            <C>            <C>
      $1.50            87           3.4  yrs        $1.50           87            $1.50
      $1.75-$2.12     321           1.6 yrs         $1.92          308            $1.91
      $2.13           356           4.8  yrs        $2.13           89            $2.13
      $2.25           135            .6  yrs        $2.25          135            $2.25
      $2.63-$2.81     177           3.8  yrs        $2.74           82            $2.75
      $2.88-$3.50     205           2.4  yrs        $3.49          169            $3.49
                   _________                                 _____________
                    1,281                                          870
                   =========                                 =============
</TABLE>


   In  accordance with APB 25 no stock-based expense was recorded during
any of the  periods  presented  herein.  Had  compensation  cost for the
Company's  grants for stock-based compensation plans for the six  months
ended December  31,  1996  and  the fiscal year ended June 30, 1996 been
determined consistent with SFAS 123,  the  Company's  net income and net
income  per  share  for  these respective periods would approximate  the
following proforma amounts (in thousands, except per share data):

                               Six months ended         Years ended
                              December 31, 1996         June 30, 1996
                              __________________________________________
                                As                     As
                              Reported Proforma     Reported    Proforma
                              ________ _________   _________   _________

Net income, (loss)             $   44    $ (40)     $  788      $   769
                              ======== =========   =========   =========
Net income per share           $    -    $   -      $  .05      $   .05
                              ======== =========   =========   =========

   In  addition  to  these  plans, the Company has issued a total  of  3
million warrants ranging from  $1.50  to  $2.00 per share, in connection
with several transactions (See Note J).  As  of  December  31,  1996,  1
million  of  these  warrants remain outstanding and exercisable at $2.00
per share.

Note M - Employee Stock Purchase Plan

   All employees who  have  been  employed  by  the  Company  for twelve
continuous  months  are  eligible  to  participate  in  the  Akorn, Inc.
Employee   Stock   Purchase  Plan  (the  Purchase  Plan).  Participating
employees may elect  to contribute up to 15% of their gross compensation
towards the purchase of  the  Company's Common Stock. At the end of each
quarter, the amount contributed  is applied to acquire, on behalf of the
participating employees, the Company's  Common Stock at a purchase price
equal to 85% of the current market price.  A maximum of 1,000,000 shares
of the Company's Common Stock may be acquired  under  the  terms  of the
Purchase Plan. Purchases of shares were issued from treasury stock under
the  Purchase  Plan  and  amounted to 18,000, 56,000, 72,000, and 58,000
shares, respectively, during  the six months ended December 31, 1996 and
the years ended June 30, 1996, 1995 and 1994.

Note N - Earnings Per Share

   Earnings per share is based  upon  the  weighted  average  number  of
common  shares  outstanding.  The  computation  of  the weighted average
number  of  shares  outstanding  includes  the effect of dilutive  stock
options  and  warrants using the treasury stock  method.   The  weighted
average number  of shares outstanding used in the per share computations
was 16,763,740, 16,787,635, 16,799,350 and 16,710,885 shares for the six
month period ended  December  31,  1996 and for the years ended June 30,
1996, 1995 and 1994, respectively.

Note O - Income Taxes

Effective  July  1, 1993, the Company  adopted  Statement  of  Financial
Accounting Standards  No.  109,  "Accounting  for  Income  Taxes."  This
standard  requires  recognition  of future tax benefits, attributable to
deductible temporary differences between  the  financial  statement  and
income  tax  bases  of  assets  and  liabilities,  to  the  extent  that
realization  of  such  benefits  is  more  likely  than  not.  Financial
statements of prior years were not restated and the cumulative effect of
the  accounting  change  was not material due to the uncertainties  that
existed at July 1, 1993 concerning  the  ultimate  realization of future
tax  benefits.  As  indicated  at  Note P, uncertainties  regarding  the
ultimate realization of future tax benefits were reduced to a relatively
low  level  by  the fourth quarter of fiscal  1994,  thereby  justifying
removal of the valuation allowance applicable to the deferred tax asset.

   The components of income tax expense (benefit) are as follows:

                           Six months ended
                             December 31           Years ended June  30
                                 1996          1996       1995       1994
                          ________________________________________________
                                             (in thousands)

Current:                 
  Federal                      $(557)      $   756      $ 1,177     $ 481
  State                          (68)           11           53        61
                          ________________________________________________
                                (625)          767        1,230       542
                          ________________________________________________
Deferred:
  Federal                        581          (516)           2      (343)
  State                           70           (62)           -       (41)
                          _________________________________________________
                                 651          (578)           2      (384)
                          _________________________________________________
                               $  26      $    189      $ 1,232     $ 158
                          =================================================


   A reconciliation of income tax expense at  the federal statutory rate
to income tax expense at the Company's effective rate is as follows:

                             Six months ended
                                 December 31        Years ended June 30
                                      1996       1996      1995      1994
                            _______________________________________________
                                              (in thousands)

Computed tax expense at
  expected statutory rate    $   24      $   332      $ 1,271     $  875
State income tax expense,
  net of federal tax benefits     2            4           32         41
Pre-merger (earnings) loss of 
   PRL                            -        (139)          (84)        98
Change in valuation allowance
  applicable to deferred tax 
  assets                          -           -             -       (896)
Other                             -          (8)           13         40
                            _______________________________________________

Income tax expense           $   26      $   189      $ 1,232     $  158
                             ______________________________________________
Effective tax rate             37.1%        19.3%        33.0%       6.1%
                             ==============================================

   Deferred  income  taxes  reflect  the  net tax effects  of  temporary
differences between the carrying amounts of  assets  and liabilities for
financial  reporting  purposes  and  the  amounts  used for  income  tax
purposes.  Significant components of the Company's deferred  tax  assets
and liabilities are as follows:

                                      December 31            June 30
                                          1996          1996        1995
                                      _______________________________________
Deferred Tax Assets:                              (in thousands)
Reserves for reorganization costs 
  not currently deductible              $    40     $   118     $   376
Other reserves not currently deductible     711         658         380
Difference between book and tax bases 
  of intangible assets                        -         436          43
Pre-funded development costs                253         305           -
Other                                       132         133         103
                                     _______________________________________
Total                                     1,136       1,650         902

Deferred Tax Liabilities:
Difference between book and tax bases 
  of property, plant and equipment      $  (537)    $  (478)    $  (367)
Difference between book and tax bases 
  of intangible assets                      (99)        
Other                                      (191)       (212)       (153)
                                     ________________________________________
Total                                      (827)       (690)       (520)
                                     ________________________________________
Net deferred tax asset                  $   309     $   960     $   382
                                     ========================================

The  net  deferred  tax  asset is classified in the accompanying balance
sheets as follows:

                                       December 31         June 30
                                          1996        1996        1995
                                       ___________________________________
                                                 (in thousands)

Deferred income
  tax asset-current                      $ 1,101     $ 1,157     $    709
Deferred income tax liability
  non-current                               (792)       (197)        (327)
                                       ____________________________________
                                         $   309     $   960     $    382
                                       =====================================

   Income  taxes  refunded during the years ended June 30, 1996 and 1994
were $178,690 and $282,641, respectively.

The Company has reached  a  preliminary  settlement  with  the  Internal
Revenue  Service  (IRS)  regarding proposed adjustments made during  the
examination of tax returns  for  the  periods of 1988 through 1993 which
the Company has been appealing.  These  proposed  adjustments  primarily
related to the timing of deductions taken for tax purposes in connection
with  the  reorganization  of the Company's manufacturing operations  in
1991. The preliminary settlement  which  has  been  obtained through the
appeals  process  must be approved by the Joint Committee  of  the  IRS.
Adjustments  to reflect  the  proposed  settlement  have  been  made  in
previous financial statements.

Note P - Changes in Accounting Estimates

   During the  fourth  quarter  of  the  year  ended  June 30, 1996, the
Company  revised  its estimate for recording chargeback accruals.  As  a
result, a reduction  in  net  sales  of $250,000 ($.01 per share, net of
tax) was recorded during the quarter ended June 30, 1996.

   In addition, during the quarters ended March 31, June 30 and December
31, 1996, the Company increased its estimate for unsaleable inventory by
approximately $300,000 ($.01 per share,  net of tax), $200,000 ($.01 per
share  net  of  tax),  and  $260,000  ($.01  per   share  net  of  tax),
respectively.  These changes in estimate are reported  as an increase in
cost of goods sold.

   In the quarter ended March 31, 1996, the Company decided to no longer
pursue  Abbreviated  New Drug Applications (ANDAs) for certain  products
which  had been produced  in  previously-owned  facilities  (transferred
products),  and for which estimated costs of transferring such ANDAs had
been accrued.  This decision was based on a reevaluation of the costs of
developing such  products  as  compared to their potential market, given
the emergence of alternate suppliers,  since the Company suspended their
production.  This change in estimate was  also  based  on  the Company's
decision to enter into the injectable distribution marketplace  and  the
need to redeploy R&D resources for the pursuit of injectable ANDAs.  The
total  amount  of  the accrual reversed was approximately $316,000 ($.01
per share, net of tax).   In addition, in the quarter ended December 31,
1996, the Company decided not  to  pursue  exclusive raw material source
arrangements on one transferred product.  This  resulted  in a reduction
of  the  estimated  cost  of  transferring this product by approximately
$200,000 ($.01 per share, net of tax).

   During the quarter ended March 31, 1995, an evaluation by the Company
resulted in a change in the estimated liability related to aged customer
credits.  This change resulted  in  a  reduction  of  S,G&A  expenses of
approximately  $330,000  ($.01  per  share,  net of tax) for the quarter
ended March 31, 1995.

   As a consequence of sustained growth in sales  and  profitability, in
particular  during the latter part of the year, the Company  recorded  a
reduction of  $384,298  ($.03  per  share,  net of tax) to its valuation
allowance for deferred tax assets in the fourth quarter of fiscal 1994.

Note Q - Supplemental Disclosures of Cash Flow Information

   The following is a summary of supplemental  cash  flow  and  non-cash
investing and financing information for the periods indicated:

                                 Six months ended
                                   December  31       Years ended June 30
                                       1996        1996      1995     1994
                                 ___________________________________________
                                               (in thousands)

Cash paid for:

Interest, net of amount 
  capitalized                         $ 189      $  442     $   25    $ 176
Income taxes                              -         867      1,150       91

Non-cash investing and financing
  activities:

Treasury stock received for exercise
  of stock options                        -         123          -        -

Conversion of debt to common stock        -           -          -    1,600
Issuance of capital lease obligation      -           -        706       49

Note R - Industry Segment Information

   The  Company  classifies  its  operations  into  three  core business
segments: (1) ophthalmic distribution, (2) injectable distribution,  and
(3)   contract   manufacturing.   The  ophthalmic  distribution  segment
includes  the  marketing  and  distribution  of  an  extensive  line  of
ophthalmic    products,    including    diagnostic    and    therapeutic
pharmaceuticals,  over-the-counter products and surgical instruments and
supplies.  The injectable  distribution  segment  includes the marketing
and  distribution  of  specialized  injectable  products.  The  contract
manufacturing   segment   consists   of  the  manufacture   of   sterile
pharmaceuticals,  including  human injectable  products  and  ophthalmic
solutions pursuant to contracts with others.

Selected financial information  by  industry  segment  is  presented  as
follows:

                           Six months ended
                            December   31          Years ended June 30
                                1996         1996         1995        1994
                           ____________________________________________________
                                                 (in thousands)

NET SALES
Ophthalmic distribution        $10,271     $20,833      $ 23,791      $ 20,694
Injectable distribution          3,119       4,160         4,642         2,862
Contract manufacturing:
  Sales to unaffiliated 
   customers                     3,129       8,932         9,072         7,710
  Sales to affiliated customer   1,082       2,395         2,521         1,666
                           ____________________________________________________

                                17,601      36,320        40,026        32,932
Eliminations                    (1,082)     (2,395)       (2,521)       (1,666)
                           ____________________________________________________

    Total net sales           $ 16,519     $33,925       $37,505      $ 31,266
                           ====================================================
OPERATING INCOME                                    
Ophthalmic distribution       $   691     $ 1,037       $  3,515      $  2,821
Injectable distribution         1,370         670            238          (280)
Contract manufacturing         (1,562)        324          1,228         1,155
General corporate                (369)       (942)        (1,071)       (1,042)
                           ____________________________________________________
  Total operating income          130       1,089          3,910         2,654
Interest and other income
  (expense), net                  (60)       (112)          (172)          (81)
                           ____________________________________________________
Income before income taxes    $    70     $   977       $  3,738      $  2,573
                           ====================================================

IDENTIFIABLE ASSETS
Ophthalmic distribution       $12,365     $13,287        $13,044       $12,817
Injectable distribution         2,027       1,525          1,235           968
Contract manufacturing         16,551      14,863         13,085         8,296
General corporate                 151         142            127           108
                           ____________________________________________________
  Total identifiable assets   $31,094     $29,817       $ 27,491       $22,189
                           ====================================================

DEPRECIATION AND
  AMORTIZATION
Ophthalmic distribution       $   209     $  323        $   339       $    286
Injectable distribution            11         14             33             37
Contract manufacturing            495        639            552            433
General corporate                   5          8             56              7
                           ____________________________________________________
  Total depreciation and 
    amortization              $  720      $  984        $   980       $    763
                           ====================================================

CAPITAL ADDITIONS
Ophthalmic distribution       $   176     $  340        $   354       $    465
Injectable distribution            18          5              -             35
Contract manufacturing          1,783      1,001          5,162          1,216
General corporate                   9         14              8              4
                           ____________________________________________________

  Total capital additions     $ 1,986     $1,360        $ 5,524       $  1,720
                           ====================================================

   For the year ended June 30, 1996, operating income for the ophthalmic
distribution segment was affected by the changes in accounting estimates
related to accrued costs of transferring ANDAs,  chargeback accruals and
inventory  reserves  (see Note P).  In addition, for  the  same  period,
operating  income  for  the   ophthalmic   distribution   and   contract
manufacturing   segments   includes   the  effects  of  transaction  and
transitional costs associated with the  realignment  of the Company into
two  separate  divisions  (see Note B) totaling $110,000  and  $568,000,
respectively.

   For the year ended June  30, 1995 operating income for the ophthalmic
distribution  segment includes  a  reduction  in  selling,  general  and
administrative  expense of approximately $330,000 related to a change in
accounting estimate for aged customer credits.

   During the years  ended  June 30, 1996 and 1995, the Company reported
sales  to one customer, Janssen  Pharmaceutica,  Inc.,  (Janssen)  which
accounted  for  approximately 12% and 13%, respectively, of consolidated
net sales. The net  sales  attributable to Janssen were accounted for in
the contract manufacturing segment.   In 1995 this customer notified the
Company that it will be transferring the  production of certain products
to  its  own  facilities  in  Puerto Rico during  1997.   Such  products
accounted  for  $1.3  and  $1.4  million,   respectively,   in  contract
manufacturing  sales  for  the  years ended June 30, 1996 and 1995.   In
addition,  this  customer  notified   the   Company   that  it  will  be
discontinuing the sale of two other products previously  produced by the
contract   manufacturing   segment.    These   products  accounted   for
approximately $2.6 and $2.9 million in sales during the years ended June
30,  1996  and  1995,  respectively.  Following this  notification,  the
Company  entered into discussions  with  this  customer  to  assume  the
licenses  to  distribute  these  two  injectable  products  and  another
injectable  product.   Effective  July 1, 1996, an agreement was reached
whereby Akorn acquired ownership of  these  NDA's,  as well as the trade
names and trademarks in the United States (see Note D).   During the six
month period ended December 31, 1996 and the year ended June  30,  1994,
the Company did not derive ten percent or more of its revenues from  any
single customer.

   The  Company  records  sales  between  the segments at fully absorbed
cost.

Note S - Concentration of Credit Risk

   The   Company  specializes  in  the  manufacturing,   marketing   and
distribution  of  ophthalmic  and  injectable  products to companies and
doctors in the healthcare industry. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. Receivables are generally due within 60 days. Credit
losses have consistently been within management's expectations.

Note T - Defined Contribution Plan

   The Company sponsors a qualified defined contribution  plan which was
established  under  the  provisions  of  Internal  Revenue  Code Section
401(k). The plan covers all employees with six months of employment  and
who  are  21 years of age or older. The employees can defer a portion of
their compensation  up  to  the  maximum allowed by the Internal Revenue
Code regulations. The plan provides  for  discretionary contributions by
the Company on behalf of the employees. Since  January 1994, the Company
has  made a discretionary matching contribution on  a  quarterly  basis.
During  the six month period ended December 31, 1996 and the years ended
June 30,  1996,  1995 and 1994, the Company recorded expenses related to
the plan of $34,805, $100,615, $86,296 and $12,274, respectively.


 Note U - Subsequent Events

   Subsequent to the  year  ended December 31, 1996, the Company's board
of directors decided to relocate  the  Ophthalmic Division operations to
the Chicago area from Abita Springs, Louisiana.   The Company expects to
incur severance and related expenses associated with  the relocation, as
well  as  a  write-down  to  the estimated net realizable value  of  the
Louisiana facility.  This charge,  estimated  to approximate $850,000 to
$950,000 after taxes, will be recorded in the first  quarter of calendar
1997.

  The Company will also change the timing of overhead  absorption in its
manufacturing operations, resulting in a one-time charge  in  the  first
quarter  of  calendar  1997  of approximately $250,000 to $350,000 after
taxes.  Management does not expect  these  charges  to affect compliance
with the Company's loan covenants.

On  February  28  ,  1997,  shareholders  of  the  Company approved  two
amendments to the Company's articles of incorporation  which allowed for
(1)  an  increase  in  the  number of authorized common shares  from  20
million to 40 million and (2)  the issuance of up to 5 million shares of
preferred stock at the discretion of the Company's Board of Directors.

Note V - Litigation

   The  Company is a party in legal  proceedings  and  potential  claims
arising in  the  ordinary  course  of its business.  Management does not
believe these matters will materially  effect the Company's consolidated
financial statements.


I
tem 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

   There was no change in the principal  independent  accountant  of the
Company  or  any  significant  subsidiary  of the Company during the six
month  transition period ended December 31, 1996  or  the  fiscal  years
ended June 30, 1996, 1995 or 1994.



                                   PART III


Item 10. Directors,  Executive  Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act.

   Information concerning directors  is incorporated by reference to the
Company's Definitive Proxy Statement for  its  1997  Annual  Meeting  of
Shareholders.   Information  concerning the Company's executive officers
is included in Item 1A (Executive  Officers of the Registrant) of Part I
hereof.


Item 11. Executive Compensation.

   The information called for by Item 11 is incorporated by reference to
the Company's definitive Proxy Statement  for its 1997 Annual Meeting of
Shareholders.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

   The information called for by Item 12 is incorporated by reference to
the Company's definitive Proxy Statement for  its 1997 Annual Meeting of
Shareholders.


Item 13. Certain Relationships and Related Transactions.

   The information called for by Item 13 is incorporated by reference to
the Company's definitive Proxy Statement for its  1997 Annual Meeting of
Shareholders.



                                PART IV


Item 14. Exhibits and Reports on Form 8-K.

              (a)     Exhibits.

   Those exhibits marked with an asterisk (*) refer  to  exhibits  filed
herewith  and  listed  in  the  Exhibit  Index which appears immediately
before  the  first  such  exhibit; the other exhibits  are  incorporated
herein by reference, as indicated in the following list.

( 2.0)        Agreement and  Plan  of Merger dated December 17, 1991, by
              and  among  the Company,  Aksub,  Inc.,  Taylor  Pharmacal
              Company    (currently    doing    business    as    Taylor
              Pharmaceuticals  and  referred to hereinafter as "Taylor")
              and certain former shareholders of Taylor, incorporated by
              reference  to  the Company's  report  on  Form  8-K  dated
              January 15, 1992.

( 2.1)        Agreement and Plan  of  Merger  among Akorn, Inc., Taylor,
              and  Pasadena Research Laboratories,  Inc.  dated  May  7,
              1996, incorporated by reference to the Company's report on
              Form 10-K for the fiscal year ended June 30, 1996.

( 3.1)        *Composite Articles  of  Incorporation of the Company as
              amended through February 28, 1997.

( 3.2)        *Composite of By-laws of the Company, including amendments
              approved through October 26, 1996.

( 4.1)        Specimen  Common   Stock   Certificate,   incorporated  by
              reference to Exhibit 4.1 to the Company's report  on  Form
              10-K for the fiscal year ended June 30, 1988.

(10.1)        Akorn, Inc. Savings and Retirement Plan effective July  1,
              1984,  incorporated  by  reference  to  Form  10-K for the
              fiscal year ended June 30, 1987.

(10.2)        Stock  Purchase Agreement dated November 15, 1990  by  and
              between the John N. Kapoor Trust dated September 20, 1989,
              and the  Company,  incorporated  by  reference  to Exhibit
              10.21 to the Company's report on Form 10-K for the  fiscal
              year ended June 30, 1991.

(10.3)        Common  Stock  Purchase  Warrant  dated  November 15, 1990
              between the John N. Kapoor Trust dated September  20, 1989
              and  the  Company,  incorporated  by  reference to Exhibit
              10.22 to the Company's report on Form 10-K  for the fiscal
              year ended June 30, 1991.

(10.4)        Consulting  Agreement  dated  November  15,  1990  by  and
              between  E.  J.  Financial  Enterprises,  Inc., a Delaware
              corporation, and the Company, incorporated by reference to
              Exhibit 10.23 to the Company's report on Form 10-K for the
              fiscal year ended June 30, 1991.

(10.5)        Stock  Registration  Rights  Agreement dated November  15,
              1990  by  and  between  the  John N.  Kapoor  Trust  dated
              September  20,  1989  and  the  Company,  incorporated  by
              reference to Exhibit 10.24 to the Company's report on Form
              10-K for the fiscal year ended June 30, 1991.

(10.6)        Agreement dated February 15, 1991  amending Stock Purchase
              Agreement dated November 15, 1990 by  and between the John
              N. Kapoor Trust dated September 20, 1989, and the Company,
              incorporated  by  reference  to  Exhibit  10.25   to   the
              Company's  report  on  Form 10-K for the fiscal year ended
              June 30, 1991.

(10.7)        Akorn, Inc. Stock Option  Plan for Directors, incorporated
              by reference to Exhibit 4.4  to the Company's registration
              statement on Form S-8, registration number 33-24970.

(10.8)        Form of Akorn, Inc. Letter Agreement  between  the Company
              and   its  directors  under  the  Stock  Option  Plan  for
              Directors, incorporated by reference to Exhibit 4.5 to the
              Company's registration statement on Form S-8, registration
              number 33-24970.

(10.9)        Akorn,   Inc.   1988   Incentive   Compensation   Program,
              incorporated  by reference to Exhibit 4.6 to the Company's
              registration statement  on  Form  S-8, registration number
              33-24970.

(10.10)       Form of Akorn, Inc., Letter Agreement  between the Company
              and  its  key  employees  and  executives under  the  1988
              Incentive Compensation Program,  incorporated by reference
              to Exhibit 4.7 to the Company's registration  statement on
              Form S-8, registration number 33-24970.

(10.11)       Amended   and   Restated   Akorn,   Inc.   1988  Incentive
              Compensation Program dated December 7, 1991, incorporated 
              by reference to Exhibit 10.32 to the Company's report on 
              Form 10-K for  the fiscal year ended June 30, 1992.

(10.12)       Amendment  No.  1 to the Amended and Restated Akorn,  Inc.
              1988  Incentive  Compensation   Program,  incorporated  by
              reference to Exhibit 10.33 to the Company's report on Form
              10-K for the fiscal year ended June 30, 1992.

(10.13)       Form of Stock Option Agreement under  Amendment  No.  1 to
              Amended   and  Restated  Incentive  Compensation  Program,
              incorporated   herein   by   reference  to  the  Company's
              registration statement on Form  S-8,  registration  number
              33-70686.

(10.14)       Amended and Restated Akorn, Inc. 1988 Incentive Compensation
              Program dated October 26, 1996, incorporated by reference to
              Exhibit B to the Company's definitive Proxy Statement dated
              January 10, 1997.

(10.15)       1991   Akorn,   Inc.  Stock  Option  Plan  for  Directors,
              incorporated by reference  to Exhibit 4.3 to the Company's
              registration statement on Form  S-8,  registration  number
              33-44785.

(10.16)       Form  of  Pledge  Agreement  between  the Company and each
              shareholder  of  Taylor,  incorporated  by   reference  to
              Exhibit  10.1  of  the Company's report on Form 8-K  dated
              January 15, 1992.

(10.17)       Agreement  dated  January  15, 1992 among the Company, the
              John N. Kapoor Trust dated September  20,  1989,  John  N.
              Kapoor and EJ Financial Enterprises, Inc., incorporated by
              reference to Exhibit 10.37 of the Company's report on Form
              10-K for the fiscal year ended June 30, 1992.


(10.18)       Loan  Agreement  dated  September  3,  1992,  between  the
              Company and the John N. Kapoor Trust dated  September  20,
              1989,  incorporated  by  reference  to  Exhibit  No.  6 to
              Amendment  No.  3  to Schedule 13D filed by John N. Kapoor
              and the John N. Kapoor  Trust  dated  September  20, 1989,
              dated September 10, 1992.

(10.19)       Common  Stock  Purchase  Warrant  dated September 3, 1992,
              issued by the Company to the John N.  Kapoor  Trust  dated
              September  20,  1989, incorporated by reference to Exhibit
              No. 7 to Amendment  No. 3 to Schedule 13D, dated September
              10, 1992, filed by John  N.  Kapoor and the John N. Kapoor
              Trust dated September 20, 1989.

(10.20)       Agreement, Waiver and Release,  dated  September  3, 1992,
              between  the  Company  and  the John N. Kapoor Trust dated
              September 20, 1989, incorporated  by  reference to Exhibit
              10.44 of the Company's report on Form 10-K  for the fiscal
              year ended June 30, 1992.

(10.21)       Amendment No. 1 to Agreement dated January 15,  1992 among
              the Company, the John N. Kapoor Trust dated September  20,
              1989,  John  N. Kapoor and EJ Financial Enterprises, Inc.,
              incorporated  by   reference   to  Exhibit  10.23  of  the
              Company's report on Form 10-K for the  fiscal  year  ended
              June 30, 1995.

(10.22)       Employment  Agreement  among Akorn, Inc., Taylor and Floyd
              Benjamin dated May 31, 1996,  incorporated by reference to
              Exhibit 10.24 of the Company's  report on Form 10-K for the
              fiscal year ended June 30, 1996.

(10.23)       Employment  Agreement between Akorn,  Inc.  and  Barry  D.
              LeBlanc dated  as  of  January  1,  1996,  incorporated by
              reference to Exhibit 10.25 of the Company's report on Form
              10-K for the fiscal year ended June 30, 1996.

(10.24)       Separation  Agreement  between  Akorn, Inc. and  Barry  D.
              LeBlanc dated July 3, 1996, incorporated  by  reference to
              Exhibit 10.26 of the Company's report on Form 10-K for the
              fiscal year ended June 30, 1996.

(10.25)       Employment  Agreement  between  Akorn,  Inc.  and  Eric M.
              Wingerter  dated  as  of January 1, 1996, incorporated  by
              reference to Exhibit 10.27 of the Company's report on Form
              10-K for the fiscal year ended June 30, 1996.

(10.26)       Employment Agreement between  Akorn,  Inc.  and  Harold O.
              Koch  dated January 1, 1996, incorporated by reference  to
              Exhibit  10.28 of the Company's report on Form 10-K for the
              fiscal year ended June 30, 1996.

(10.27)       Employment Agreement between Taylor and Tim J. Toney dated
              as  of January  1,  1996,  incorporated  by  reference  to
              Exhibit  10.29 of the Company's report on Form 10-K for the
              fiscal year ended June 30, 1996.

(11.1)        *Computation of Earnings Per Share.

(21.1)        *Subsidiaries of the Company.

(23.1)        *Consent of Deloitte & Touche LLP

(24.1)        *Power of Attorney of Floyd Benjamin.

(24.2)        *Power of Attorney of Daniel E. Bruhl, M.D.

(24.3)        *Power of Attorney of Doyle S. Gaw.

 (27)         *Financial Data Schedule

              (b)     Reports on Form 8-K.

   None.


<PAGE>

                            SIGNATURES

   In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant  has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                 AKORN, INC.


                                         By:   /s/ John N. Kapoor, Ph.D.
                                              ____________________________
                                                  John N. Kapoor, Ph.D.
                                                 Chief Executive Officer

Date:  March 19, 1997

      In accordance with the  Securities  Exchange  Act  of  1934,  this
report  has  been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated.

       Signature                   Title                   Date
       ---------                  -------                 ------


/s/ John N. Kapoor, Ph.D.     Chief Executive          March 19, 1997
 John N. Kapoor, Ph.D.          Officer and
                            Director (Principal
                             Executive Officer)


/s/ Rita J. McConville      Chief Financial Officer    March 19, 1997
 Rita J. McConville         (Principal Financial
                           Officer and Principal
                            Accounting Officer)



* /s/ Floyd Benjamin              Director             March 19, 1997
Floyd Benjamin


* /s/ Daniel E. Bruhl, M.D.       Director             March 19, 1997
 Daniel E. Bruhl, M.D.


* /s/ Doyle S. Gaw                Director             March 19, 1997
 Doyle S. Gaw


*By:   /s/ Rita J. McConville
    Rita J. McConville
     Attorney-in-fact








                            COMPOSITE

                    ARTICLES OF INCORPORATION
                                OF
                           AKORN, INC.

                            ARTICLE I

                            NAME

     The name of this corporation shall be:

                           AKORN, INC.

under which corporate name it shall have authority to have a
corporate  seal  and  to  alter  the same at pleasure, but a
failure to affix said seal shall not  affect the validity of
any  instrument;  to  contract,  sue  and  be  sued  in  its
corporate  name;  to  acquire, in any legal manner,  and  to
hold,  sell,  dispose  of,   lease,   pledge,  mortgage,  or
otherwise  alienate  or encumber, any property,  movable  or
immovable,  corporeal  or   incorporeal,   subject   to  any
limitations  prescribed  by  law,  or  by these Articles; to
acquire,  in  any legal manner, to hold, sell,  dispose  of,
pledge, mortgage,  or  otherwise  alienate  or  encumber the
shares,  bonds, debentures and other securities or  evidence
of debt, or  franchises and rights of any other corporation,
domestic or foreign,  subject to the limitation contained in
these Articles, and in  relation thereto to exercise all the
rights, powers and privileges  of  ownership,  including the
right   to  vote  on  any  shares  of  stock  of  any  other
corporation,   to   conduct   business  in  this  state  and
elsewhere,  as may be permitted  by  law;  to  appoint  such
officers and  agents  as the business of the corporation may
require;
 to borrow money  and  to  issue,  sell,  pledge  or
otherwise  dispose  of  its  bonds,  debentures,  promissory
notes, bills of exchange and other obligations and evidences
of debt, and to secure the same by mortgage, pledge or other
hypothecation of any kind of property; to make by-laws,  not
inconsistent herewith or contrary to law, for the management
and  operation  of  its  business,  the  regulation  of  its
affairs, and the certification and transfer of its shares of
stock;  to accomplish its purposes as stated hereinafter, it
shall be  authorized  to guarantee shares, bonds, contracts,
securities and/or evidences of debt of any other domestic or
foreign  corporation, including  interest  and/or  dividends
thereon and  subject to the provisions of Louisiana law, and
to acquire by  purchase,  or  otherwise,  its  own shares of
stock.

     The  said  corporation  generally  shall  possess   all
powers, rights, privileges and immunities which corporations
are,  or  may  be hereafter, authorized to have and possess,
under the Constitution and laws of this State; and its Board
of Directors shall have all corporate powers, allowed by the
laws of the State of Louisiana.

                            ARTICLE II

                       OBJECTS AND PURPOSES

     The objects  and purposes for which this corporation is
organized and the nature of the business or businesses to be
conducted by it are stated and declared to be as follows:

     To enter any business  lawful  under  the  laws  of the
State  of Louisiana, either for its own account, or for  the
account  of  others,  as  agent,  and  either  as  agent  or
principal,  to  enter upon or engage in any kind of business
of any nature whatsoever,  in  which  corporations organized
under the Louisiana Business Corporation Law may engage; and
to  the  extent  not prohibited thereby to  enter  upon  and
engage in any kind  of  business of any nature whatsoever in
any other state of the United States of America, any foreign
nation, any territory of any country to the extent permitted
by the laws of such other state, nation or territory.

                           ARTICLE III

                             DURATION

     The  duration  of  this   corporation   shall   be   in
perpetuity,  or  such maximum period as may be authorized by
the Laws of Louisiana.

                            ARTICLE IV

             REGISTERED OFFICE AND REGISTERED AGENTS

     The registered office of this corporation is located at
2854 St. Charles Avenue, New Orleans, Louisiana 70115, which
shall continue as  the registered office of this corporation
until  changed by the  Board  of  Directors  in  the  manner
required by law. [Registered office has been changed.]

     The  name  and address of the registered agents for the
service  of process  of  this  corporation  are:  Joseph  M.
Singerman,  2854  St. Charles Avenue, New Orleans, Louisiana
70115;  Robert  F. Azar,  M.D.,  4634  Bancroft  Drive,  New
Orleans, Louisiana  70122;  Joseph  A.  Yazbeck, 1425 Melody
Drive,  Metairie,  Louisiana. [Registered agents  have  been
changed.]

                            ARTICLE V

                        AUTHORIZED CAPITAL

     A.   The Corporation  shall  have authority to issue an
aggregate of 40 million shares of common stock, no par value
per share.

     B.   The Corporation shall have  authority  to  issue 5
million  shares  of  Preferred  Stock,  $1.00  par value per
share.  Shares of Preferred Stock may be issued from time to
time on one or more series.  Authority is hereby  vested  in
the  Board  of  Directors  of the Corporation to amend these
Articles of Incorporation from  time  to  time  to  fix  the
preferences,  limitations and relative rights as between the
Preferred Stock  and  the  Common  Stock,  and  to  fix  the
variations  in  the  preferences,  limitations, and relative
rights as between different classes  and series of Preferred
Stock.

                            ARTICLE VI

                            DIRECTORS

     A.   Unless  and until otherwise provided  in  the  By-
laws, all of the corporate  powers of this corporation shall
be  vested  in  and all the business  and  affairs  of  this
corporation shall  be  managed  by  a Board of not more than
thirty (30) directors, who need not be stockholders, of whom
any majority shall constitute a quorum.

     B.   The  Board of Directors shall  have  authority  to
make and alter the  by-laws,  fix  their own qualifications,
classification, or terms of office and fix or increase their
compensation, subject to the power of  the  stockholders  to
change or repeal the by-laws so made.

     C.   Unless or until otherwise provided in the by-laws,
the  Directors shall hold office until their successors have
been  duly   elected   and   qualified,   and   the  number,
qualification,  classification,  terms of office, manner  of
election, time and places of meetings  and powers and duties
of the Directors shall be as from time to  time fixed by the
by-laws.

     D.   Any  vacancy occurring on the Board  of  Directors
shall be filled  by  the remaining members of the said Board
for the unexpired term  at  any  meeting  of  the  Board  of
Directors.

     E.   The  first  Board of Directors of this Corporation
shall be composed of:

                         Joseph M. Singerman
                         Robert F. Azar, M.D.

     These Directors shall  hold  their  offices until their
successors  are elected at the General Annual  Stockholders'
Meeting, to be  held on the first Monday of February of each
year,  beginning with  the  year  1971,  or  the  first  day
thereafter  when  said date falls on a legal holiday, unless
otherwise provided by the by-laws of the Corporation.

                           ARTICLE VII

                             OFFICERS

     The Officers of  this Corporation shall be a President,
one or more Vice Presidents,  a  Secretary  and a Treasurer.
Any two Offices may be combined under one Officer.

     The  failure, from any cause whatsoever,  to  hold  the
annual meeting  of  the stockholders or the failure to elect
Directors or the failure of the Directors to elect Officers,
shall not dissolve this  Corporation,  but the Directors and
Officers then in office shall remain in  office  until their
successors have been duly elected and installed.

                           ARTICLE VIII

                      STOCKHOLDERS' MEETINGS

     All  stockholders' meetings, general or special,  shall
be  held in  accordance  with  the  laws  of  the  State  of
Louisiana unless changed by the by-laws of this corporation,
and at  all  stockholders' meetings a majority of the stock,
whether present  or represented by proxy, shall constitute a
quorum.  All stockholders  may  vote  at  all  stockholders'
meetings,  either in person or by his agent duly  authorized
in writing to appear and act for him.  However, whenever the
vote of shareholders is necessary to authorize or constitute
corporate action,  it  may be so authorized and evidenced by
the  written  consent  of a  majority  of  all  shareholders
without the necessity of a formal meeting.

                            ARTICLE IX

     This charter may be  amended  and  the  capital of this
corporation   may   be  increased  or  decreased,  or   this
corporation  may be dissolved,  in  the  method  and  manner
provided by law.

                            ARTICLE X

     The corporation  claims  and  shall have the benefit of
the provisions of R.S. 12:61 and its  stock and shareholders
shall  have  the benefit of Internal Revenue  Code,  Section
1244.

                            ARTICLE XI

     No stockholder  of  this corporation shall ever be held
liable or responsible for  the  contracts  or faults of this
corporation  in any further sum than the unpaid  balance  of
the stock for  which  he  has subscribed, nor shall any mere
informality in organization  have  the  effect  of rendering
this  charter  null  or  of  exposing  stockholders  to  any
liability other than as above provided.

                           ARTICLE XII

        LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS

     No  director  or  officer  of  the Corporation shall be
personally liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary  duty as a director
or  officer  for  any  act or omission occurring  after  the
effective date of this Article XII, except for liability (i)
for  any  breach  of the director's  or  officer's  duty  of
loyalty to the Corporation  or  its  shareholders;  (ii) for
acts  or  omissions  not  in  good  faith  or  which involve
intentional  misconduct  or knowing violation of law;  (iii)
for liability under Section  92D  of  the Louisiana Business
Corporation Law; or (iv) for any transaction  from which the
director  or  officer derives an improper personal  benefit.
No  amendment  to  these  Articles  of  Incorporation  shall
adversely affect  any  right  or protection of a director or
officer  of  the Corporation under  this  Article  XII  with
respect to any  act  or  omission  occurring  prior  to  the
effective date of such amendment.





                             BY-LAWS
                                of
                           AKORN, INC.

         (COMPOSITE, AS AMENDED THROUGH OCTOBER 26, 1996)

                            ARTICLE I

                           SHAREHOLDERS

     Section  1 - Place of Holding Meeting.  All meetings of
the shareholders  shall  be  held  at the principal business
office of the corporation in Metairie, Louisiana, or at such
other  place  as  may  be  specified in the  notice  of  the
meeting.

     Section 2 - Annual Meeting of Shareholders.  The annual
meeting of shareholders for  the  election of directors, and
the transaction of other business,  shall  be  held at least
once in each calendar year, on a date fixed by the  Board of
Directors.

     Section 3 - Voting.

     (a)  On   demand  of  any  shareholder,  the  vote  for
directors, or on  any question before a meeting, shall be by
ballot.   All  elections   of  directors  shall  be  had  by
plurality, and all other questions  decided  by majority, of
the votes cast, except as otherwise provided by the articles
or by-laws.

     (b)  At  each  meeting of shareholders, a list  of  the
shareholders entitled  to  vote, arranged alphabetically and
certified by the secretary (or  the  transfer  agent, if one
has been appointed) showing the number and class  of  shares
held  by  each  such  shareholder on the record date for the
meeting,  shall  be  produced   on   the   request   of  any
shareholder.

     Section  4  -  Quorum.   Except as
 provided in the next
section hereof, any number of shareholders, together holding
at least a majority of the outstanding  shares  entitled  to
vote  thereat,  who  are present in person or represented by
proxy  at  any  meeting,   constitute   a   quorum  for  the
transaction of business despite the subsequent withdrawal or
refusal to vote of any shareholder.

     Section  5 - Adjournment of Meeting.  If  less  than  a
quorum is in attendance  at  any time for which a meeting is
called, the meeting may, after the lapse of at least half an
hour,  be  adjourned  by  a  majority  in  interest  of  the
shareholders present or represented  and  entitled  to  vote
thereat.  If notice of such adjourned meeting is sent to the
shareholders  entitled  to  vote at the meeting, stating the
purpose or purposes of the meeting  and  that  the  previous
meeting  failed  for  lack  of a quorum, then any number  of
shareholders, present in person or represented by proxy, and
together  holding  at least one-fourth  of  the  outstanding
shares entitled to vote  thereat, constitute a quorum at the
adjourned meeting.

     Section  6 - Special Meetings:   How  Called.   Special
meetings of the shareholders for any purpose or purposes may
be called by the  president  or  secretary  upon  a  written
request  therefor,  stating the purpose or purposes thereof,
delivered to the president or secretary and signed either by
a majority of the directors  or  by one-fifth in interest of
the shareholders entitled to vote.

     Section 7 - Notice of Shareholders'  Meetings.  Written
or  printed  notice,  stating  the  place  and time  of  any
meeting,  and, if a special meeting, the general  nature  of
the business  to  be  considered,  shall  be  given  to each
shareholder  entitled  to  vote  thereat,  at his last known
address, at least ten days before the meeting in the case of
an  annual meeting, and fifteen days before the  meeting  in
the case  of  a  special  meeting.   Any irregularity in the
notice  of  an  annual  meeting  held  at the  corporation's
principal business office at the time prescribed  in Section
2  of this Article I, shall not affect the validity  of  the
meeting or any action taken thereat.

     Section  8  - Waiver.  Any requirements of this Article
as to meetings of  shareholders  and  notices thereof may be
waived,  and shall be deemed to have been  waived  when  all
shareholders  shall  have  signed  a  consent  to the action
taken,  or  to be taken, at the meeting.  (See Article  VII,
Section 5.)


                            ARTICLE II

                            DIRECTORS

     Section  1  -  Number  of  Directors.   The  number  of
directors shall be four.

     The remaining directors, even though not constituting a
quorum,  may,  by  a  majority vote, fill any vacancy on the
Board (including any vacancy  resulting  from an increase in
the authorized number of directors, or from  failure  of the
shareholders to elect a full number of authorized directors)
for  an unexpired term, provided that the shareholders shall
have the  right,  at  any  special  meeting  called  for the
purpose  prior  to  such  action  by  the Board, to fill the
vacancy.

     Section 2 - Place of Holding Meetings.  Meetings of the
directors,  regular or special, may be held  at  any  place,
within or outside  Louisiana,  or  pursuant  to  a telephone
conference  as  permitted in Section 81(10) of the Louisiana
Business Corporation  Law (LSA-R.S. 12:81(10)), as the board
may determine.

     Section 3 - First  Meeting.   The first meeting of each
newly-elected board of directors shall  be  held immediately
following the annual meeting of shareholders,  and no notice
of  such  meeting  shall  be  necessary to the newly-elected
directors  in  order  legally  to  constitute  the  meeting,
provided a quorum is present; or they  may meet at such time
and place as fixed by the consent in writing  of  all of the
directors.   At  the  first  meeting,  or  at any subsequent
meeting  called for the purpose, the directors  shall  elect
the officers of the corporation.

     Section  4  -  Regular  Directors'  Meetings.   Regular
meetings  of  the  directors may be held without notice,  at
such time and place as may be designated by the directors.

     Section 5 - Special  Directors'  Meetings:  How Called.
Special  meetings  of  the directors may be  called  by  the
Chairman of the Board or  by  the  President  on  notice  as
provided  in Section 6.  Special meetings shall be called on
like notice  by the Chairman of the Board, the President, or
the Secretary  on the request of a majority of the directors
or a majority of the members of the Executive Committee and,
if any such officer  fails,  refuses  or is unable to call a
special  meeting  within  24  hours  of  such  request,  any
director  or  Executive Committee member requesting  such  a
meeting may call  the  meeting  on  notice  as  provided  in
Section 6.

     Section  6  -  Notice  of  Special Directors' Meetings.
Special meetings of the directors  (and of the first meeting
of the newly elected board, if held  on notice) may be given
on  notice  of  no less than two days or,  in  the  case  of
meetings called at  the request of a majority of the members
of the Executive Committee,  no less than eight hours, given
to each director.  Notice of two  days  or more may be given
either  personally  or  by  telephone,  mail,  or  facsimile
transmission.   Notice of less than two days  may  be  given
either personally or by telephone or facsimile transmission.
Notice given by telephone  shall  be  effective  when  given
either  directly to the director or to a person believed  by
the person calling the meeting to be an employee or relative
of the director or a person able to deliver a message to the
director  promptly.   Notice given by facsimile transmission
shall be effective when  transmitted to a facsimile receiver
at an office or a residence  of  the  director.   Except  as
otherwise  required  by  law or by these by-laws, the notice
need not state the purpose or purposes of the meeting.

     Section 7 - Quorum.   At  all  meetings of the board, a
majority of the directors in office and  qualified to act in
person or by proxy constitute a quorum for  the  transaction
of  business,  and the action of a majority of the directors
present in person  or  by  proxy  at  any meeting at which a
quorum is present is the action of the  board  of directors,
unless  the concurrence of a greater proportion is  required
for such action by law, the articles or these by-laws.  If a
quorum is  not  present  at  any  meeting  of directors, the
directors present thereat may adjourn the meeting  from time
to  time,  without  notice  other  than  announcement at the
meeting, until a quorum is present.  If a quorum be present,
the directors present in person or by proxy  may continue to
act  by  vote  of  a majority of a quorum until adjournment,
notwithstanding  the   subsequent   withdrawal   of   enough
directors to leave less than a quorum or the refusal of  any
directors present to vote.

     Section  8  - Waiver.  Any requirements of this Article
as to meetings of  directors  and  notices  thereof  may  be
waived,  and  shall  be  deemed to have been waived when all
directors shall be present  in  person  or  by  proxy at the
meeting, or when the directors shall have signed  a  consent
to  the action taken, or to be taken, at the meeting.   (See
Article VII, Section 5.)

     Section  9  -  Compensation of Directors.  The Board of
Directors may by resolution  determine  the  compensation of
directors  for  their services as such and the reimbursement
of directors for their actual expenses of attending meetings
of the Board and  committees  thereof.   Directors may serve
the   corporation   in   any  other  capacity  and   receive
compensation therefor.  Directors, as such, may receive such
salary for their services  and  such  reimbursement of their
expenses of attendance at meetings of directors  as  may  be
fixed  by  resolution  of  the board.  This Section does not
preclude any director from serving  the  corporation  in any
other capacity and receiving compensation therefor.

     Section  10  -  Powers  of  Directors.   The  board  of
directors  is charged with the management of the business of
the corporation,  and subject to any restrictions imposed by
law, the articles or  these  by-laws,  may  exercise all the
powers of the corporation. Without prejudice to such general
powers, the directors have the following specific powers:

     a -  From  time  to  time,  to  devolve the powers  and
          duties of any officer upon any  other  person  for
          the time being.

     b -  To  confer  upon any officer the power to appoint,
          remove  and  suspend,   and  fix  and  change  the
          compensation of, subordinate  officers, agents and
          factors.

     c -  To determine who shall be entitled  to vote, or to
          assign  and  transfer any shares of stock,  bonds,
          debentures   or    other   securities   of   other
          corporations held by this corporation.

     d -  To delegate any of the  powers of the board to any
          standing or special committee or to any officer or
          agent (with power to subdelegate)  upon such terms
          as they deem fit.

     Section 11 - Resignations and Removal.  The resignation
of  a director shall take effect on receipt thereof  by  the
president  or secretary, or on any later date, not more than
thirty days  after  such  receipt,  specified  therein.  The
shareholders,  by  vote  of  a majority of the total  voting
power at any special meeting called  for  the  purpose,  may
remove  from office any one or more of the directors with or
without cause.
                           
                           ARTICLE III

                            COMMITTEES

     Section  1  -  Executive  Committee.   If  an executive
committee is appointed, the president shall be a member, and
the committee shall have all of the powers of the board when
the  board  is  not in session, except the power to  declare
dividends, make or  alter  by-laws,  fill  vacancies  on the
board  or  the executive committee, or change the membership
of the executive committee.

     Section  2  -  Minutes  of Meetings of Committees.  Any
committees  designated  by  the  board  shall  keep  regular
minutes of their proceedings, and  shall  report the same to
the board when required, but no approval by the board of any
action properly taken by a committee shall be required.

     Section 3 - Procedure.  If the board fails to designate
the  chairman of a committee, the president,  if  a  member,
shall  be chairman.  Each committee shall meet at such times
as it shall  determine,  and  at  any  time  on  call of the
chairman.   A majority of a committee constitutes a  quorum,
and the committee  may  take  action  either  by  vote  of a
majority  of  the  members  present  at any meeting at which
there is a quorum or by written concurrence of a majority of
the  members.  In case of absence of disqualification  of  a
member  of a committee at any meeting thereof, the qualified
members present,  whether  or  not they constitute a quorum,
may unanimously appoint a director  to  act  in place of the
absent  or  disqualified  member.   The board has  power  to
change the members of any committee at  any  time,  to  fill
vacancies, and to discharge any committee at any time.


                            ARTICLE IV

                             OFFICERS

     Section  1  -  Titles.  The officers of the corporation
shall  be  a  president,  one  or  more  vice-presidents,  a
treasurer, a secretary, and such other officers as may, from
time to time, be elected or appointed by the board.  Any two
officers may be  combined  in the same person, and none need
be a director.

     Section  2  - Chairman of  the  Board.   The  board  of
directors may designate  one  of  its members as chairman of
the board.  The chairman of the board  or  another  director
designated  by  the  chairman  shall preside at meetings  of
directors and shareholders.

     Section 3 - President.  The President, unless otherwise
provided  by  the  Board,  shall  have  general  and  active
responsibility for the management of  the  business  of  the
Corporation,   shall   be  the  chief  executive  and  chief
operating officer of the  Corporation,  shall  supervise the
daily  operations  of  the  business of the Corporation  and
shall ensure that all orders,  policies  and  resolutions of
the Board are carried out.  He shall have power  to  execute
all  instruments  on  behalf  of the Corporation and, in the
absence of the chairman of the  board  or  in the event that
the chairman has not designated another director  to  do so,
shall preside at meetings of the directors and shareholders.

     Section 4 - Vice-Presidents.  Each vice-president shall
have such powers, and shall perform such duties, as shall be
assigned  to  him by the directors or by the president, and,
in the order determined  by the board, shall, in the absence
or  disability  of the president,  perform  his  duties  and
exercise his powers.

     Section 5 -  Treasurer.   The  treasurer has custody of
all funds, securities, evidences of indebtedness  and  other
valuable documents of the corporation.  He shall receive and
give,  or  cause  to be given, receipts and acquittances for
moneys paid in on account  of the corporation, and shall pay
out of the funds on hand all  just  debts of the corporation
of whatever nature, when due.  He shall  enter,  or cause to
be entered, in books of the corporation to be kept  for that
purpose,  full  and accurate accounts of all moneys received
and paid out on account  of  the  corporation, and, whenever
required by the president or directors,  he  shall  render a
statement of his account.  He shall keep or cause to be kept
such  books  as  will  show  a  true record of the expenses,
gains, losses, assets and liabilities  of  the  corporation;
and he shall perform all of the other duties incident to the
office  of  treasurer.   If required by the board, he  shall
give the corporation a bond  for  the  faithful discharge of
his  duties  and  for  restoration to the corporation,  upon
termination  of  his  tenure,   of   all   property  of  the
corporation under his control.

     Section  6 - Secretary.  The secretary shall  give,  or
cause to be given,  notice  of all meetings of shareholders,
directors and committees, and  all other notices required by
law  or by these by-laws, and in  case  of  his  absence  or
refusal or neglect so to do, any such notice may be given by
the shareholders or directors upon whose request the meeting
is called as provided in these by-laws.  He shall record all
the proceedings  of the meetings of the shareholders, of the
directors, and of  committees  in a book to be kept for that
purpose.  Except as otherwise determined  by  the directors,
he  shall  have charge of the original stock book,  transfer
books and stock  ledgers, and shall act as transfer agent in
respect of the stock  and  other  securities  issued  by the
corporation.   He  shall  have  custody  of  the seal of the
corporation, and shall affix it to all instruments requiring
it;  and  he  shall  perform  such  other duties as  may  be
assigned to him by the directors of the president.

     Section  7  -  Assistants.   Assistant  secretaries  or
treasurers shall have such duties as  may  be  delegated  to
them by the secretary and treasurer respectively.


                            ARTICLE V

                         INDEMNIFICATION

     Section  1  - General.  The corporation shall indemnify
any person who was or is a party or is threatened to be made
a party to any action,  suit  or  proceeding, whether civil,
criminal,  administrative  or investigative  (including  any
action by or in right of the  corporation)  by reason of the
fact  that  he  is  or was a director, officer, employee  or
agent of the corporation,  or  is  or  was  serving  at  the
request  of the corporation as a director, officer, employee
or  agent  of   another   business,  foreign  or  non-profit
corporation, partnership, joint venture or other enterprise,
against  expenses (including  attorneys'  fees),  judgments,
fines and amounts paid in settlement actually and reasonably
incurred by  him  in  connection  with  such action, suit or
proceeding, if he acted in good faith and  in  a  manner  he
reasonably  believed  to  be  in  or not opposed to the best
interest  of  the  corporation,  and, with  respect  to  any
criminal action or proceeding, has  no  reasonable  cause to
believe his conduct was unlawful; provided that, in case  of
actions by or in the right of the corporation, the indemnity
shall  be limited to expenses (including attorneys' fees and
amounts paid in settlement not exceeding, in the judgment of
the board  of directors, the estimated expense of litigating
the action to  conclusion)  actually and reasonably incurred
in connection with the defense or settlement of such action,
and no indemnification shall  be  made  in  respect  of  any
claim,  issue  or  matter as to which such person shall have
been adjudged to be  liable  for negligence or misconduct in
the performance of his duty to  the  corporation  unless and
only  to  the  extent  that  the  court shall determine upon
application that, despite the adjudication of liability, but
in view of all the circumstances of  the  case, he is fairly
and reasonably entitled to indemnity for such expenses which
the court shall deem proper.  The termination of any action,
suit   or   proceeding   by   judgment,  order,  settlement,
conviction,  or  upon  a  plea  of nolo  contendere  or  its
equivalent, shall not, of itself,  create a presumption that
the person did not act in good faith  and  in a manner which
he reasonably believed to be in or not opposed  to  the best
interests  of  the  corporation,  and,  with  respect to any
criminal  action  or  proceeding,  and  reasonable cause  to
believe that his conduct was unlawful.

     Section 2 - Expenses of Litigation.  To the extent that
a  director, officer, employee or agent of  the  corporation
has been successful on the merits or otherwise in defense of
any  such  action,  suit or proceeding, or in defense of any
claim, issue or matter  therein,  he  shall  be  indemnified
against  expenses  (including attorneys' fees) actually  and
reasonably incurred by him in connection therewith.

     Section   3   -  Determination   by   Directors.    The
indemnification hereunder  (unless  ordered  by  the  court)
shall  be  made  by the corporation only as authorized in  a
specific  case upon  a  determination  that  the  applicable
standard of  conduct has been met.  Such determination shall
be made (a) by  the board of directors by a majority vote of
a quorum consisting  of  directors  who  were not parties to
such action, suit or proceeding, or (b) if  such  quorum  is
not  obtainable  or  a  quorum of disinterested directors so
directs,  by  independent  legal  counsel,  or  (c)  by  the
shareholders.

     Section 4 - Advance of Expenses.  The expenses incurred
in defending such an action,  suit  or  proceeding  shall be
paid  by the corporation in advance of the final disposition
thereof,  upon  receipt of an undertaking by or on behalf of
the director, officer,  employee  or  agent  to  repay  such
amount  unless  it shall ultimately be determined that he is
entitled to be indemnified  by the corporation as authorized
hereunder.  The board of directors may determine, by special
resolution, not to have the corporation  pay  in advance the
expenses incurred by any persons or person in the defense of
any such action, suit or proceeding.

     Section 5 - Other Rights.  The indemnification provided
hereunder shall not be deemed exclusive of any  other rights
to which one indemnified may be entitled, both as  to action
in  his  official  capacity  and  as  to  action  in another
capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer,  employee
or  agent  and  shall inure to the benefit of his heirs  and
legal representatives.

     Section 6 -  Insurance.   The  corporation  may procure
insurance on behalf of any person who is or was a  director,
officer, employee or agent of the corporation, or is  or was
serving  at  the  request  of the corporation as a director,
officer, employee or agent of  another  business, non-profit
or foreign corporation, partnership, joint  venture or other
enterprise,  against  any  liability  asserted  against   or
incurred  by him in any such capacity, or arising out of his
status as such,  whether  or  not the corporation would have
the power to indemnify him against  such liability under the
Business Corporation Law of Louisiana.


                            ARTICLE VI

                          CAPITAL STOCK

     Section  1  - Certificates of Stock.   Certificates  of
stock,  numbered, and  with  the  seal  of  the  corporation
affixed,  signed  by  the president or a vice-president, and
the treasurer or secretary, or assistant secretary, shall be
issued to each shareholder,  certifying the number of shares
of the corporation owned by him.   If the stock certificates
are countersigned by a transfer agent  and  a registrar, the
signatures of the corporate officers may be a facsimile.

     Section  2  - Lost Certificates.  A new certificate  of
stock may be issued  in place of any certificate theretofore
issued  by  the corporation,  alleged  to  have  been  lost,
stolen, mutilated  or destroyed, or mailed and not received,
upon receipt of an affidavit  or  affirmation  of  that fact
from  the  person  claiming the loss.  The directors may  in
their  discretion  require   the   owner   of  the  replaced
certificate to give the corporation a bond,  unlimited as to
stated  amount  or  in  any amount set by the directors,  to
indemnify the company against  any  claim  which may be made
against it on account of the replacement of  the certificate
or  any  payment  made  or  other  action  taken  in respect
thereof.

     Section 3 - Transfer of Shares.  Shares of stock of the
corporation  are  transferable  only  on  its books, by  the
holders  thereof  in  person  or  by  their duly  authorized
attorneys or legal representatives, and  upon such transfer,
the old certificates shall be surrendered  to  the person in
charge of the stock transfer records, by whom they  shall be
cancelled,  and  new certificates shall thereupon be issued.
A record shall be  made  of  each  transfer,  and whenever a
transfer is made for collateral security and not absolutely,
it shall be so expressed in the entry of the transfer.   The
directors  may  make  regulations concerning the transfer of
shares, and may in their  discretion  authorize the transfer
of shares from the names of deceased persons  whose  estates
are not administered, upon receipt of such indemnity as they
may require.

     Section  4  - Record Dates.  The board may fix a record
date for determining shareholders of record for any purpose,
such date to be not  more  than sixty days and, if fixed for
the purpose of determining shareholders  entitled  to notice
of  and to vote at a meeting, not less than ten days,  prior
to the date of the action for which the date is fixed.

     Section   5   -  Registered  Shareholders.   Except  as
otherwise  provided  by   law,   the  corporation,  and  its
directors, officers and agents, may  recognize  and  treat a
person registered on its records as the owner of shares,  as
the  owner  in  fact  thereof  for  all purposes, and as the
person  exclusively  entitled to have and  to  exercise  all
rights and privileges  incident  to  the  ownership  of such
shares,  and rights under this Section shall not be affected
by an actual  or  constructive notice which the corporation,
or any of its directors, officers or agents, may have to the
contrary.

     Section 6 - Dividends.  Except as otherwise provided by
law or the articles  of  incorporation,  dividends  upon the
stock  of  the  corporation may be declared by the board  of
directors at any  regular or special meeting.  Dividends may
be paid in cash, in property, or in shares of stock.

     Section  7 - Reserves.   The  board  of  directors  may
create and abolish  reserves  out  of earned surplus for any
proper  purposes. Earned surplus so reserved  shall  not  be
available  for  payment of dividends, purchase or redemption
of shares, or transfer to capital surplus or stated capital.

     Section 8 -  Transfer  Agent, Registrar.  The board may
appoint and remove transfer agents  and  registrars  for any
class  of  stock.   If  this  action  is taken, the transfer
agents shall effect original issuances of stock certificates
and transfers of shares, record and advise  the  corporation
and one another of such issuances and transfers, countersign
and deliver stock certificates, and keep the stock, transfer
and  other  pertinent  records;  and  the  registrars  shall
prevent  over-issues  by registering and counter-signing any
stock certificates issued.   A  transfer agent and registrar
may be identical.  The transfer agents  and registrars, when
covered  with the company as obligees by an  indemnity  bond
substantially  in  a  form,  and issued by a surety company,
approved by the corporation's  general counsel and providing
indemnity unlimited to stated amount,  or in form and amount
and  signed  by  a  surety approved by the board,  and  upon
receipt of an appropriate affidavit and indemnity agreement,
may (a) countersign,  register  and deliver, in place of any
stock  certificate  alleged  to  have   been  lost,  stolen,
destroyed  or  mutilated,  or  to have been mailed  and  not
received, a replacement certificate  for  the same number of
shares,  and  make any payment, credit, transfer,  issuance,
conversion or exchange  to  which the holder may be entitled
in respect to such replaced certificate,  without  surrender
thereof for cancellation, and (b) effect transfers of shares
from  the  names  of  deceased  persons  whose  estates (not
exceeding  $20,000 gross asset value and not containing  any
immovable property) are not administered.


                           ARTICLE VII

                     MISCELLANEOUS PROVISIONS

     Section  1  -  Corporate  Seal.   The corporate seal is
circular in form, and contains the name  of  the corporation
and the words, "SEAL, LOUISIANA."  The seal may  be  used by
causing  it,  or  a  facsimile  thereof,  to be impressed or
affixed or otherwise reproduced.

     Section 2 - Checks, Drafts, Notes.  All checks, drafts,
other orders for the payment of money, and  notes  or  other
evidences  of  indebtedness,  issued  in  the  name  of  the
corporation,  shall  be  signed by such officer or officers,
agent or agents of the corporation  and  in  such  manner as
shall, from time to time, be determined by the board.

     Section  3  -  Fiscal  Year.   The  fiscal  year of the
corporation begins on July 1.

     Section 4 - Notice.  Whenever any notice is required by
these  by-laws  to  be  given, personal notice is not  meant
unless expressly so stated.   Any  notice  is  sufficient if
given  by  depositing  it  in the United States mail  or  by
delivering it to a commercial  courier  service for next day
delivery, with postage or delivery service  charges  prepaid
and  addressed  to  the  person entitled thereto at his last
known  address  as  it  appears   in   the  records  of  the
corporation; and such notice is deemed to have been given on
the  day  of  such  deposit in the mail or delivery  to  the
courier service.

     Section 5 - Waiver  of  Notice.  Whenever any notice of
the time, place or purpose of  any  meeting of shareholders,
directors or committee is required by  law,  the articles or
these  by-laws, a waiver thereof in writing, signed  by  the
person or persons entitled to such notice and filed with the
records  of  the meeting before or after the holder thereof,
or  actual  attendance   at  the  meeting  of  shareholders,
directors or committee in  person or by proxy, is equivalent
to the giving of such notice except as otherwise provided by
law.  (See Article I, Section 8, and Article II, Section 8.)

     Section 6 - Except as otherwise  provided  herein,  all
meetings  of  shareholders or directors shall be governed by
the last published  revised  edition  of  Robert's  Rules of
Order.

     Section  7  - Louisiana Control Share Law Inapplicable.
The  provisions  of   Sections  135  through  140.2  of  the
Louisiana Business Corporation  Law ("LBCL") shall not apply
to control share acquisitions, as  defined  in  the LBCL, of
shares of stock of the Corporation.


                           ARTICLE VIII

                            AMENDMENTS

     The shareholders or the directors, by affirmative  vote
of  a  majority of those present or represented, may, at any
meeting,  amend  or  alter  any  of  the  by-laws;  subject,
however,  to  the  right  of  the  shareholders to change or
repeal any by-laws made or amended by the directors.






Exhibit 11.1
                     COMPUTATION OF NET INCOME PER SHARE

                    (In Thousands, Except Per Share Data)


<TABLE>
<CAPTION>
                                      Six months
                                         ended
                                      December 31           Years  ended June 30
                                          1996       1996           1995             1994
                                      ______________________________________________________
<S>                                     <C>         <C>            <C>            <C>

Earnings
  Income applicable to common stock     $     44    $    788       $   2,506      $   2,415
                                      =======================================================

Shares
  Weighted average number of shares 
   outstanding                            16,580      16,383          16,236         16,185
  Additional shares assuming conversion 
   of options and warrants up to 20% 
   of shares outstanding                     183         405             563            526
                                      _______________________________________________________

  Pro forma shares                        16,763      16,788          16,799         16,711
                                      =======================================================

Net income per share                    $      -    $    .05        $    .15       $    .14
                                      =======================================================






6


</TABLE>





                                             Exhibit 21.1

                       SUBSIDIARIES OF AKORN, INC.

                Name                     State of Incorporation
   _______________________________      __________________________


   1.  Taylor Pharmaceuticals, Inc.             Illinois

   2.  Spectrum Scientific 
          Pharmaceuticals, Inc.                 Louisiana

   3.  Walnut Pharmaceuticals, Inc.             Louisiana

   4.  Compass Vision, Inc.                     Louisiana





                                                            Exhibit 23.1






INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement
Nos. 33-44785, 33-24970 and 33-70686 of Akorn, Inc. on Form S-8 of our
report dated March 7, 1997 (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the Company's change in
its method of accounting for income taxes in 1994 and the Company's
change in its method of accounting for certain investments in debt and
equity securities in 1995), appearing in this Annual Report on Form 10-K
of Akorn, Inc. for the six months ended December 31, 1996.





New Orleans, Louisiana
March 7, 1997





                                                EXHIBIT 24.1




                     POWER OF ATTORNEY

          (Form 10-K, Six Month Transition Period
                  Ended December 31, 1996)


     KNOW  ALL  MEN  BY THESE PRESENTS, that the undersigned
director  of  Akorn,  Inc.   (the   "Company")  does  hereby
constitute and appoint John N. Kapoor,  Ph.D.  and  Rita  J.
McConville,  and anyone of them acting in the absence of the
others, his true and lawful attorney-in-fact and agent, with
full power of  substitution,  for him and in his name, place
and stead, in any and all capacities,  to sign the Company's
Annual  Report  on  Form  10-K for the six month  transition
period  ended  December  31,  1996,  to  sign  any  and  all
amendments thereto, and to file  the  same with all exhibits
thereto, and other documents in connection  therewith,  with
the  Securities  and Exchange Commission, granting unto said
attorney-in-fact and  agent  full  power and authority to do
and  perform  each  and  every act and thing  requisite  and
necessary to be done, as fully  to  all intents and purposes
as  he  might  or could do in person, hereby  ratifying  and
confirming all that  said  attorney-in-fact and agent or his
substitutes may lawfully do  or  cause  to be done by virtue
hereof.

     This instrument is executed by the undersigned on the
date indicated below.



/s/ Floyd Benjamin
- -------------------
Floyd Benjamin
March 19, 1997




                                                EXHIBIT 24.2




                     POWER OF ATTORNEY

          (Form 10-K, Six Month Transition Period
                  Ended December 31, 1996)


     KNOW ALL MEN BY THESE PRESENTS,  that  the  undersigned
director   of   Akorn,  Inc.  (the  "Company")  does  hereby
constitute and appoint  John  N.  Kapoor,  Ph.D. and Rita J.
McConville, and anyone of them acting in the  absence of the
others, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his  name,  place
and  stead, in any and all capacities, to sign the Company's
Annual  Report  on  Form  10-K  for the six month transition
period  ended  December  31,  1996,  to  sign  any  and  all
amendments thereto, and to file the same  with  all exhibits
thereto,  and other documents in connection therewith,  with
the Securities  and  Exchange Commission, granting unto said
attorney-in-fact and agent  full  power  and authority to do
and  perform  each  and  every  act and thing requisite  and
necessary to be done, as fully to  all  intents and purposes
as  he  might  or could do in person, hereby  ratifying  and
confirming all that  said  attorney-in-fact and agent or his
substitutes may lawfully do  or  cause  to be done by virtue
hereof.

     This instrument is executed by the undersigned on the
date indicated below.



/s/ Daniel E. Bruhl, M.D.
Daniel E. Bruhl, M.D.
March 20,
 1997




                                                EXHIBIT 24.3




                     POWER OF ATTORNEY

          (Form 10-K, Six Month Transition Period
                  Ended December 31, 1996)


     KNOW ALL MEN BY THESE PRESENTS,  that  the  undersigned
director   of   Akorn,  Inc.  (the  "Company")  does  hereby
constitute and appoint  John  N.  Kapoor,  Ph.D. and Rita J.
McConville, and anyone of them acting in the  absence of the
others, his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his  name,  place
and  stead, in any and all capacities, to sign the Company's
Annual  Report  on  Form  10-K  for the six month transition
period  ended  December  31,  1996,  to  sign  any  and  all
amendments thereto, and to file the same  with  all exhibits
thereto,  and other documents in connection therewith,  with
the Securities  and  Exchange Commission, granting unto said
attorney-in-fact and agent  full  power  and authority to do
and  perform  each  and  every  act and thing requisite  and
necessary to be done, as fully to  all  intents and purposes
as  he  might  or could do in person, hereby  ratifying  and
confirming all that  said  attorney-in-fact and agent or his
substitutes may lawfully do  or  cause  to be done by virtue
hereof.

     This instrument is executed by the undersigned on the
date indicated below.



/s/ Doyle S. Gaw
Doyle S. Gaw
March 19, 1997






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                       1,380,401
<SECURITIES>                                   576,000
<RECEIVABLES>                                4,984,211
<ALLOWANCES>                                   358,773
<INVENTORY>                                  8,837,933
<CURRENT-ASSETS>                            16,920,948
<PP&E>                                      21,248,163
<DEPRECIATION>                             (8,415,506)
<TOTAL-ASSETS>                              31,094,056
<CURRENT-LIABILITIES>                        8,716,885
<BONDS>                                      5,210,451
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                    14,174,475
<OTHER-SE>                                   2,200,308
<TOTAL-LIABILITY-AND-EQUITY>                31,094,056
<SALES>                                     16,519,380
<TOTAL-REVENUES>                            16,519,380
<CGS>                                       10,761,577
<TOTAL-COSTS>                               10,761,577
<OTHER-EXPENSES>                             5,603,509
<LOSS-PROVISION>                                24,000
<INTEREST-EXPENSE>                             243,084
<INCOME-PRETAX>                                 69,729
<INCOME-TAX>                                    25,595
<INCOME-CONTINUING>                             44,134
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    44,134
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>