þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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LOUISIANA
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72-0717400
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification No.)
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1925 W. Field Court, Suite 300
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||
Lake Forest, Illinois
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60045
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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3
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4
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5
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6
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7
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24
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31
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31
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32
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32
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32
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32
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32
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32
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33
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EX-4.1:
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EX-10.1:
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EX-31.1:
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EX-31.2:
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EX-32.1:
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EX-32.2:
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EX-101:
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THREE MONTHS ENDED
SEPTEMBER 30,
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NINE MONTHS ENDED
SEPTEMBER 30,
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|||||||||||||||
2011
|
2010
|
2011
|
2010
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|||||||||||||
Revenues
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$ | 36,703 | $ | 21,659 | $ | 94,295 | $ | 62,364 | ||||||||
Cost of sales
|
14,725 | 10,244 | 40,181 | 32,658 | ||||||||||||
GROSS PROFIT
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21,978 | 11,415 | 54,114 | 29,706 | ||||||||||||
Selling, general and administrative expenses
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9,006 | 5,380 | 23,539 | 16,130 | ||||||||||||
Research and development expenses
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3,109 | 1,790 | 7,763 | 5,103 | ||||||||||||
Amortization of intangibles
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509 | 256 | 1,074 | 1,242 | ||||||||||||
TOTAL OPERATING EXPENSES
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12,624 | 7,426 | 32,376 | 22,475 | ||||||||||||
OPERATING INCOME
|
9,354 | 3,989 | 21,738 | 7,231 | ||||||||||||
Interest expense, net
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(1,882 | ) | (227 | ) | (2,481 | ) | (751 | ) | ||||||||
Write-off and amortization of deferred financing costs
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(165 | ) | (274 | ) | (1,761 | ) | (820 | ) | ||||||||
Equity in earnings of unconsolidated joint venture
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— | 502 | 14,530 | 1,335 | ||||||||||||
Change in fair value of warrants liability
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— | — | — | (8,881 | ) | |||||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
7,307 | 3,990 | 32,026 | (1,886 | ) | |||||||||||
Income tax (benefit) provision
|
(6,217 | ) | — | (5,254 | ) | 37 | ||||||||||
NET INCOME (LOSS)
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$ | 13,524 | $ | 3,990 | $ | 37,280 | $ | (1,923 | ) | |||||||
NET INCOME (LOSS) PER SHARE:
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||||||||||||||||
BASIC
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$ | 0.14 | $ | 0.04 | $ | 0.39 | $ | (0.02 | ) | |||||||
DILUTED
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$ | 0.13 | $ | 0.04 | $ | 0.36 | $ | (0.02 | ) | |||||||
SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE:
|
||||||||||||||||
BASIC
|
94,650 | 93,770 | 94,477 | 92,440 | ||||||||||||
DILUTED
|
104,188 | 100,765 | 103,524 | 92,440 |
Common Stock
|
Warrants to
Acquire
Common
|
Accumulated
|
||||||||||||||||||
Nine Months Ended September 30, 2011
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Shares
|
Amount
|
Stock
|
Deficit
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Total
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|||||||||||||||
BALANCES AT DECEMBER 31, 2010
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93,975
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$
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182,466
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$
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19,673
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$
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(115,387
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)
|
$
|
86,752
|
||||||||||
Net income
|
—
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—
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—
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37,280
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37,280
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|||||||||||||||
Net proceeds from exercise of warrants
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365
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3,454
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(1,727)
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—
|
1,727
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|||||||||||||||
Stock option exercises
|
198
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398
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—
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—
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398
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|||||||||||||||
Employee stock purchase plan issuances
|
129
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220
|
—
|
—
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220
|
|||||||||||||||
Amortization of deferred compensation related to restricted stock awards
|
15
|
13
|
—
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—
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13
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|||||||||||||||
Equity portion of convertible notes offering
|
—
|
20,470
|
—
|
—
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20,470
|
|||||||||||||||
Stock-based compensation expense
|
—
|
3,754
|
—
|
—
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3,754
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|||||||||||||||
BALANCES AT SEPTEMBER 30, 2011
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94,682
|
$
|
210,775
|
$
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17,946
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$
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(78,107
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)
|
$
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150,614
|
||||||||||
Warrants to
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||||||||||||||||||||
acquire
|
||||||||||||||||||||
Common Stock
|
Common
|
Accumulated
|
||||||||||||||||||
Nine Months Ended September 30, 2010
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Shares
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Amount
|
Stock
|
Deficit
|
Total
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|||||||||||||||
BALANCES AT DECEMBER 31, 2009
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90,390
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$
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174,027
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$
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1,821
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$
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(137,211
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)
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$
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38,637
|
||||||||||
Net loss
|
—
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—
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—
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(1,923
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)
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(1,923
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)
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|||||||||||||
Net proceeds from common stock and warrant offering
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3,243
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4,969
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—
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—
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4,969
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|||||||||||||||
Reclassification of warrants from current liability to equity
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—
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—
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17,946
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—
|
17,946
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|||||||||||||||
Stock option exercises
|
113
|
202
|
—
|
—
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202
|
|||||||||||||||
Employee stock purchase plan issuances
|
47
|
150
|
—
|
—
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150
|
|||||||||||||||
Amortization of deferred compensation related to restricted stock awards
|
30
|
51
|
—
|
—
|
51
|
|||||||||||||||
Stock-based compensation expense
|
—
|
1,944
|
—
|
—
|
1,944
|
|||||||||||||||
BALANCES AT SEPTEMBER 30, 2010
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93,823
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$
|
181,343
|
$
|
19,767
|
$
|
(139,134
|
)
|
$
|
61,976
|
||||||||||
NINE MONTHS ENDED
SEPTEMBER 30,
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||||||||
2011
|
2010
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net income (loss)
|
$ | 37,280 | $ | (1,923 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
3,701 | 3,885 | ||||||
Write-off and amortization of deferred financing costs
|
1,761 | 820 | ||||||
Non-cash stock compensation expense
|
3,767 | 1,995 | ||||||
Non-cash change in fair value of warrants liability
|
— | 8,881 | ||||||
Amortization of debt discount – convertible notes
|
1,195 | — | ||||||
Equity in earnings of unconsolidated joint venture
|
(14,530 | ) | (1,335 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
Trade accounts receivable
|
(7,980 | ) | (2,534 | ) | ||||
Inventories
|
(8,164 | ) | (4,934 | ) | ||||
Deferred tax assets, net
|
(6,688 | ) | — | |||||
Prepaid expenses and other current assets
|
(216 | ) | 1,494 | |||||
Supply agreement termination liabilities
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— | (1,500 | ) | |||||
Trade accounts payable
|
4,828 | 2,253 | ||||||
Accrued expenses and other liabilities
|
1,024 | (5 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
15,978 | 7,097 | ||||||
INVESTING ACTIVITIES:
|
||||||||
Payments for acquisitions and equity investments
|
(36,734 | ) | — | |||||
Purchases of property, plant and equipment
|
(10,124 | ) | (2,644 | ) | ||||
Distribution from unconsolidated joint venture
|
3,881 | 1,107 | ||||||
Purchase of product licensing rights
|
(5,678 | ) | — | |||||
NET CASH USED IN INVESTING ACTIVITIES
|
(48,655 | ) | (1,537 | ) | ||||
FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of convertible notes
|
120,000 | — | ||||||
Debt financing costs
|
(4,683 | ) | — | |||||
Repayments of line of credit
|
— | (3,000 | ) | |||||
Net proceeds from common stock offering and warrant exercises
|
1,727 | 4,969 | ||||||
Proceeds under stock option and stock purchase plans
|
618 | 352 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
117,662 | 2,321 | ||||||
INCREASE IN CASH AND CASH EQUIVALENTS
|
84,985 | 7,881 | ||||||
Cash and cash equivalents at beginning of period
|
41,623 | 1,617 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 126,608 | $ | 9,498 | ||||
SUPPLEMENTAL DISCLOSURES
|
||||||||
Amount paid for interest
|
$ | 11 | $ | 744 | ||||
Amount paid for income taxes
|
$ | 1,718 | $ | 96 |
June 28,
2010
|
||||
Expected Volatility
|
79.7% | |||
Expected Life (in years)
|
3.8 – 4.1 | |||
Risk-free interest rate
|
1.8% | |||
Dividend yield
|
— |
Granted To:
|
Warrant Identification
|
Grant Date
1
|
Warrants
Granted
|
Exercise
Price
|
Fair Value (000’s)
June 28, 2010
|
|||||||||
EJ Funds
|
Modification Warrant
|
April 15, 2009
|
1,939,639 | $ | 1.11 | $ | 4,829 | |||||||
Kapoor Trust
|
Reimbursement Warrant
|
April 15, 2009
|
1,501,933 | $ | 1.11 | 3,740 | ||||||||
EJ Funds
|
Restatement Warrants
2
|
August 17,2009
|
1,650,806 | $ | 1.16 | 4,127 | ||||||||
Kapoor Trust
|
Subordinated Note Warrants
3
|
August 17,2009
|
2,099,935 | $ | 1.16 | 5,250 | ||||||||
7,192,313 | $ | 17,946 |
1
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The expiration date on all Kapoor Warrants is five (5) years after Grant Date.
|
2
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Restatement Warrants refers to warrants granted to EJ Funds in connection with modification to the credit agreement originally entered into between the Company and General Electric Credit Corporation (“GE Capital”) on January 7, 2009 and subsequently assigned from GE Capital to EJ Funds on March 31, 2009 (the “Credit Agreement”) to increase the total loan commitment under the Credit Agreement from $5,650,000 to $10,000,000.
|
3
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Subordinated Note Warrants refers to warrants granted to the Kapoor Trust on August 17, 2009 in connection with refinancing the subordinated note for $5,000,000 issued on July 28, 2008 (the “Subordinated Note”) to extend its term for an additional five years and increase the principal from $5,000,000 to $5,853,267 to include accrued interest through the refinancing date, August 17, 2009.
|
THREE MONTHS
|
THREE MONTHS
|
|||||||
ENDED
|
ENDED
|
|||||||
SEPTEMBER 30, 2011
|
SEPTEMBER 30, 2010
|
|||||||
Expected volatility
|
75
|
%
|
80
|
%
|
||||
Expected life (in years)
|
3.8
|
3.8
|
||||||
Risk-free interest rate
|
1.4
|
%
|
1.6
|
%
|
||||
Dividend yield
|
—
|
—
|
||||||
Fair value per stock option
|
$
|
3.80
|
$
|
2.09
|
||||
Forfeiture rate
|
8
|
%
|
8
|
%
|
Number of
Options
(in thousands)
|
Weighted
Average
Exercise Price
|
Weighted Average
Remaining
Contractual Term
(Years)
|
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding at December 31, 2010
|
7,960 | $ | 1.87 | 3.93 | $ | 33,452,000 | ||||||||||
Granted
|
2,029 | 6.64 | ||||||||||||||
Exercised
|
(198 | ) | 2.00 | |||||||||||||
Forfeited
|
(132 | ) | 2.30 | |||||||||||||
Outstanding at September 30, 2011
|
9,659 | $ | 2.86 | 3.48 | $ | 47,702,000 | ||||||||||
Exercisable at September 30, 2011
|
3,417 | $ | 1.81 | 3.10 | $ | 20,465,000 |
Number of Shares
|
Weighted Average
|
|||||||
(in thousands)
|
Grant Date Fair Value
|
|||||||
Non-vested at December 31, 2010
|
28
|
$
|
1.89
|
|||||
Granted
|
—
|
—
|
||||||
Forfeited
|
—
|
—
|
||||||
Vested
|
(15
|
)
|
2.34
|
|||||
Non-vested at September 30, 2011
|
13
|
$
|
1.34
|
|||||
SEPTEMBER 30,
|
DECEMBER 31,
|
|||||||
2011
|
2010
|
|||||||
Gross accounts receivable
|
$
|
31,970
|
$
|
17,603
|
||||
Less:
|
||||||||
Chargeback and rebates reserves
|
(4,747
|
)
|
(2,522
|
)
|
||||
Returns reserve
|
(6,506
|
)
|
(3,463
|
)
|
||||
Discount and allowances reserve
|
(650
|
)
|
(345
|
)
|
||||
Allowance for doubtful accounts
|
(206
|
)
|
(3
|
)
|
||||
Net trade accounts receivable
|
$
|
19,861
|
$
|
11,270
|
||||
SEPTEMBER 30,
2011
|
DECEMBER 31,
2010
|
|||||||
Raw materials and supplies
|
$ | 16,785 | $ | 10,924 | ||||
Work in process
|
4,880 | 2,058 | ||||||
Finished goods
|
8,823 | 5,935 | ||||||
Total
|
$ | 30,488 | $ | 18,917 | ||||
SEPTEMBER 30,
|
DECEMBER 31,
|
|||||||
2011
|
2010
|
|||||||
Land
|
$
|
396
|
$
|
396
|
||||
Buildings and leasehold improvements
|
20,295
|
20,096
|
||||||
Furniture and equipment
|
50,236
|
48,743
|
||||||
Sub-total
|
70,927
|
69,235
|
||||||
Accumulated depreciation
|
(42,288
|
)
|
(39,661
|
)
|
||||
28,639
|
29,574
|
|||||||
Construction in progress
|
11,861
|
3,157
|
||||||
Property, plant and equipment, net
|
$
|
40,500
|
$
|
32,731
|
||||
SEPTEMBER 30,
|
JUNE 1,
|
|||||
2011
|
2011
|
|||||
Carrying amount of equity component
|
$ |
21,301
|
$
|
21,383
|
||
Carrying amount of the liability component
|
99,893
|
98,617
|
||||
Unamortized discount of the liability component
|
20,107
|
21,383
|
||||
Unamortized deferred financing costs
|
3,636
|
3,770
|
Three months ended
September 30, 2011
|
Nine months ended
September 30, 2011
|
|||||||
Interest expense at 3.50% coupon rate
|
$ | 1,050 | $ | 1,400 | ||||
Debt discount amortization
|
909 | 1,195 | ||||||
Deferred financing cost amortization
|
165 | 216 | ||||||
$ | 2,124 | $ | 2,811 |
THREE MONTHS ENDED
SEPTEMBER 30,
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net income (loss)
|
$ | 13,524 | $ | 3,990 | $ | 37,280 | $ | (1,923 | ) | |||||||
Net income (loss) per share:
|
||||||||||||||||
Basic
|
$ | 0.14 | $ | 0.04 | $ | 0.39 | $ | (0.02 | ) | |||||||
Diluted
|
$ | 0.13 | $ | 0.04 | $ | 0.36 | $ | (0.02 | ) | |||||||
|
||||||||||||||||
Shares used in computing net income (loss) per share:
|
||||||||||||||||
Weighted average basic shares outstanding
|
94,650 | 93,770 | 94,477 | 92,440 | ||||||||||||
Dilutive securities:
|
||||||||||||||||
Stock options and unvested RSAs
|
3,393 | 2,164 | 3,091 | — | ||||||||||||
Stock warrants
|
6,145 | 4,831 | 5,956 | — | ||||||||||||
Total dilutive securities
|
9,538 | 6,995 | 9,047 | — | ||||||||||||
Weighted average diluted shares outstanding
|
104,188 | 100,765 | 103,524 | 92,440 | ||||||||||||
THREE MONTHS ENDED
SEPTEMBER 30,
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Stock options
|
1,860 | 1,984 | 1,421 | 7,781 | ||||||||||||
Stock warrants
|
— | 1,509 | — | 8,701 | ||||||||||||
THREE MONTHS ENDED
SEPTEMBER 30,
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||
REVENUES
|
|||||||||||||||
Ophthalmic
|
$ |
19,730
|
$ |
7,842
|
$ |
48,972
|
$ |
22,812
|
|||||||
Hospital drugs & injectables
|
13,816
|
8,178
|
34,615
|
21,298
|
|||||||||||
Contract services
|
3,157
|
5,639
|
10,708
|
13,073
|
|||||||||||
Biologics & vaccines
|
—
|
—
|
—
|
5,181
|
|||||||||||
Total revenues
|
$ |
36,703
|
$ |
21,659
|
$ |
94,295
|
$ |
62,364
|
|||||||
GROSS PROFIT
|
|||||||||||||||
Ophthalmic
|
$ |
12,821
|
$ |
4,938
|
$ |
30,899
|
$ |
13,075
|
|||||||
Hospital drugs & injectables
|
7,206
|
4,478
|
18,162
|
9,865
|
|||||||||||
Contract services
|
1,951
|
1,999
|
5,053
|
4,704
|
|||||||||||
Biologics & vaccines
|
—
|
—
|
—
|
2,062
|
|||||||||||
Total gross profit
|
21,978
|
11,415
|
54,114
|
29,706
|
|||||||||||
Operating expenses
|
12,624
|
7,426
|
32,376
|
22,475
|
|||||||||||
Operating income
|
9,354
|
3,989
|
21,738
|
7,231
|
|||||||||||
Other (expense) income, net
|
(2,047
|
)
|
1
|
10,288
|
(9,117
|
)
|
|||||||||
Income (loss) before income taxes
|
$ |
7,307
|
$ |
3,990
|
$ |
32,026
|
$ |
(1,886
|
)
|
PURCHASE PRICE:
|
Estimate
June 30, 2011
|
Q3 2011 Activity
and Adjustments
|
Estimate
Sept.30, 2011
|
|||||||||
Cash paid
|
$ | 26,011 | $ | 723 | $ | 26,734 | ||||||
Estimated additional consideration due
|
904 | (723 | ) | 181 | ||||||||
Assumed liabilities
|
3,376 | (30 | ) | 3,346 | ||||||||
Total purchase price
|
$ | 30,291 | $ | (30 | ) | $ | 30,261 | |||||
ALLOCATION OF PURCHASE PRICE:
|
||||||||||||
Accounts receivable, net
|
$ | 611 | — | $ | 611 | |||||||
Inventories, net
|
4,376 | (969 | ) | 3,407 | ||||||||
Prepaid expenses and other current assets
|
805 | — | 805 | |||||||||
Property and equipment
|
250 | — | 250 | |||||||||
Goodwill
|
14,749 | (2,961 | ) | 11,788 | ||||||||
Trademarks and technology
|
9,500 | — | 9,500 | |||||||||
Customer relationships
|
— | 3,900 | 3,900 | |||||||||
Total allocation of purchase price
|
$ | 30,291 | $ | (30 | ) | $ | 30,261 | |||||
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
|
||||||||||||||||
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues
|
$ | — | $ | 3,874 | $ | 6,332 | $ | 12,017 | ||||||||
Cost of sales
|
— | 2,564 | 3,534 | 8,270 | ||||||||||||
Gross profit
|
— | 1,310 | 2,798 | 3,747 | ||||||||||||
Operating expenses
|
— | 306 | 497 | 1,074 | ||||||||||||
Operating income
|
— | 1,004 | 2,301 | 2,673 | ||||||||||||
Gain from Pfizer ANDA Sale
|
— | — | 24,160 | — | ||||||||||||
Income before income taxes
|
— | 1,004 | 26,461 | 2,673 | ||||||||||||
Income tax provision
|
— | — | — | 4 | ||||||||||||
Net income
|
$ | — | $ | 1,004 | $ | 26,461 | $ | 2,669 | ||||||||
Allocation of net income to members:
|
||||||||||||||||
Akorn, Inc.
|
— | 502 | 14,530 | 1,335 | ||||||||||||
Strides
|
— | 502 | 11,931 | 1,334 | ||||||||||||
Total
|
$ | — | $ | 1,004 | $ | 26,461 | $ | 2,669 |
CONDENSED BALANCE SHEETS
|
||||||||
(IN THOUSANDS)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
ASSETS:
|
||||||||
Cash
|
$ | 820 | $ | 1,205 | ||||
Trade accounts receivable, net
|
— | 2,701 | ||||||
Inventories, net
|
— | 2,239 | ||||||
Total assets
|
$ | 820 | $ | 6,145 | ||||
LIABILITY AND MEMBERS’ EQUITY:
|
||||||||
Trade accounts payable and other accrued liabilities
|
$ | 495 | $ | 75 | ||||
Accounts payable – members
|
2 | 1,870 | ||||||
Deferred gain on Pfizer ANDA Sale
|
— | 24,160 | ||||||
Total liabilities
|
497 | 26,105 | ||||||
Members’ equity (deficit), net of advances
|
323 | (19,960 | ) | |||||
Total liabilities & members’ equity
|
$ | 820 | $ | 6,145 |
●
|
Our ability to generate cash from operations sufficient to meet our working capital requirements;
|
●
|
Our ability to sustain positive relationships with our major customers;
|
●
|
The effects of federal, state and other governmental regulation on our business;
|
●
|
Our success in developing, manufacturing, acquiring and marketing new products;
|
●
|
The success of our strategic partnerships for the development and marketing of new products;
|
●
|
Our ability to comply with all of the requirements of the U.S. Food and Drug Administration (“FDA”), including current Good Manufacturing Practices regulations;
|
●
|
Our ability to bring new products to market and the effects of sales of such products on our financial results;
|
●
|
The effects of competition from generic pharmaceuticals and from other pharmaceutical companies;
|
●
|
Our ability to effectively integrate acquired businesses;
|
●
|
Our ability to raise funds to pay interest on our outstanding convertible senior notes or repurchase the Notes upon a fundamental change;
|
●
|
Our ability to obtain additional funding or financing to operate and grow our business;
|
●
|
Availability of raw materials needed to produce our products; and
|
●
|
Other factors referred to in this Form 10-Q, our Form 10-K and our other Securities and Exchange Commission (“SEC”) filings.
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||||||||||||||
Amount
|
% of
Revenue
|
Amount
|
% of
Revenue
|
Amount
|
% of
Revenue
|
Amount
|
% of
Revenue
|
|||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Ophthalmic
|
$ | 19,730 | 53.8 | % | $ | 7,842 | 36.2 | % | $ | 48,972 | 51.9 | % | $ | 22,812 | 36.6 | % | ||||||||||||||||
Hospital drugs & injectables
|
13,816 | 37.6 | % | 8,178 | 37.8 | % | 34,615 | 36.7 | % | 21,298 | 34.1 | % | ||||||||||||||||||||
Contract services
|
3,157 | 8.6 | % | 5,639 | 26.0 | % | 10,708 | 11.4 | % | 13,073 | 21.0 | % | ||||||||||||||||||||
Biologics & vaccines
|
— | — | % | — | — | % | — | — | % | 5,181 | 8.3 | % | ||||||||||||||||||||
Total revenues
|
36,703 | 100.0 | % | 21,659 | 100.0 | % | 94,295 | 100.0 | % | 62,364 | 100.0 | % | ||||||||||||||||||||
Gross profit and gross margin:
|
||||||||||||||||||||||||||||||||
Ophthalmic
|
12,821 | 65.0 | % | 4,938 | 63.0 | % | 30,899 | 63.1 | % | 13,075 | 57.3 | % | ||||||||||||||||||||
Hospital drugs & injectables
|
7,206 | 52.2 | % | 4,487 | 54.8 | % | 18,162 | 52.6 | % | 9, 865 | 46.3 | % | ||||||||||||||||||||
Contract services
|
1,951 | 61.8 | % | 1,999 | 35.4 | % | 5,053 | 42.7 | % | 4,704 | 36.0 | % | ||||||||||||||||||||
Biologics & vaccines
|
— | — | % | — | — | % | — | — | % | 2,062 | 39.8 | % | ||||||||||||||||||||
Total gross profit
|
21,978 | 59.9 | % | 11,415 | 52.7 | % | 54,114 | 57.4 | % | 29,706 | 47.6 | % | ||||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||||||
SG&A expenses
|
9,006 | 24.5 | % | 5,380 | 24.8 | % | 23,539 | 25.0 | % | 16,130 | 25.8 | % | ||||||||||||||||||||
R&D expenses
|
3,109 | 8.5 | % | 1,790 | 8.3 | % | 7,763 | 8.2 | % | 5, 103 | 8.2 | % | ||||||||||||||||||||
Amortization of intangibles
|
509 | 1.4 | % | 256 | 1.2 | % | 1,074 | 1.1 | % | 1,242 | 2.0 | % | ||||||||||||||||||||
Operating income
|
$ | 9,354 | 25.5 | % | $ | 3,989 | 18.4 | % | $ | 21,738 | 23.1 | % | $ | 7,231 | 11.6 | % | ||||||||||||||||
Other (expense) income, net
|
(2,047 | ) | (5.6 | %) | 1 | — | % | 10,288 | 10.9 | % | (9,117 | ) | (14.6 | %) | ||||||||||||||||||
Income (loss) before income taxes
|
7,307 | 19.9 | % | 3,990 | 18.4 | % | 32,026 | 34.0 | % | (1,886 | ) | (3.0 | %) | |||||||||||||||||||
Income tax (benefit) provision
|
(6,217 | ) | (16.9 | %) | — | — | % | (5,254 | ) | (5.5 | %) | 37 | 0.1 | % | ||||||||||||||||||
Net income (loss)
|
$ | 13,524 | 36.8 | % | $ | 3,990 | 18.4 | % | $ | 37,280 | 39.5 | % | $ | (1,923 | ) | (3.1 | %) |
Three months ended
September 30, 2011
|
Nine months ended
September 30, 2011
|
|||||||
Interest expense at 3.50% coupon rate
|
$ | 1,050 | $ | 1,400 | ||||
Debt discount amortization
|
909 | 1,195 | ||||||
Deferred financing cost amortization
|
165 | 216 | ||||||
$ | 2,124 | $ | 2,811 |
Exhibit
|
||
No.
|
Description
|
|
2.1
|
Business Transfer Agreement dated as October 6, 2011 among Akorn, Inc., Akorn India Private Limited, Kilitch Drugs (India) Limited (“KDIL”), and members of the promoter group of KDIL, incorporated by reference to Exhibit 2.1 to Akorn, Inc’s report on Form 8-K filed on October 6, 2011. (Schedules and certain exhibits have been omitted pursuant to Item 601(b)(2) of Regulations S-K)
.
|
|
10.1
|
Loan and Security Agreement dated as of October 7, 2011 among Akorn, Inc., a Louisiana corporation, and its
domestic subsidiaries, with certain financial institutions as lenders (“Lenders”), and Bank of America, N.A. as agent
(“Agent”) for the Lenders, incorporated by reference to Exhibit 10.1 to Akorn, Inc’s report on Form 8-K filed on October 13, 2011.
|
|
10.2*
|
Series A-2 Preferred Stock Purchase Agreement dated as of August 1, 2011 by and between Akorn, Inc. and Aciex Therapeutics, Inc.
|
|
10.3*
|
Amendment #1 to Series A-2 Preferred Stock Purchase Agreement dated as of September 30, 2011 by and between Akorn, Inc. and Aciex Therapeutics, Inc.
|
|
31.1*
|
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1*
|
Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2*
|
Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101*
|
The financial statements and footnotes from the Akorn, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed on November 9, 2011, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Shareholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.
|
AKORN, INC.
|
||
/s/ TIMOTHY A. DICK
|
||
Timothy A. Dick
|
||
Chief Financial Officer
|
Page | |||
1.
|
Purchase and Sale of Series A-2 Preferred Stock.
|
1
|
|
1.1
|
Sale and Issuance of Series A-2 Preferred Stock.
|
1
|
|
1.2
|
Closing; Delivery.
|
1
|
|
1.3
|
Defined Terms Used in this Agreement.
|
1
|
|
2.
|
Representations and Warranties of the Company.
|
2
|
|
2.1
|
Organization, Good Standing and Qualification.
|
3
|
|
2.2
|
Capitalization.
|
3
|
|
2.3
|
Subsidiaries.
|
4
|
|
2.4
|
Authorization.
|
4
|
|
2.5
|
Valid Issuance of Securities.
|
4
|
|
2.6
|
Governmental Consents and Filings.
|
4
|
|
2.7
|
Litigation.
|
4
|
|
2.8
|
Intellectual Property.
|
5
|
|
2.9
|
Compliance with Other Instruments
|
7
|
|
2.10
|
Agreements; Actions.
|
7
|
|
2.11
|
Disclosure
|
8
|
|
2.12
|
Related-Party Transactions.
|
8
|
|
2.13
|
Rights of Registration and Voting Rights
|
8
|
|
2.14
|
Title to Property and Assets.
|
8
|
|
2.15
|
Financial Statements.
|
8
|
|
2.16
|
Changes.
|
9
|
|
2.17
|
Company Employee Plans
|
10
|
|
2.18
|
Tax Returns and Payments.
|
11
|
|
2.19
|
Insurance.
|
11
|
|
2.20
|
Labor Agreements and Actions.
|
11
|
|
2.21
|
Confidential Information and Invention Assignment Agreements.
|
11
|
|
2.22
|
Permits.
|
12
|
|
2.23
|
Corporate Documents.
|
12
|
|
2.24
|
83(b) Elections.
|
12
|
|
2.25
|
Real Property Holding Corporation.
|
12
|
|
2.26
|
Environmental and Safety Laws.
|
12
|
|
3.
|
Representations and Warranties of the Purchaser
|
13
|
|
3.1
|
Authorization.
|
13
|
|
3.2
|
Purchase Entirely for Own Account
|
13
|
|
3.3
|
Disclosure of Information.
|
13
|
|
3.4
|
Restricted Securities.
|
13
|
|
3.5
|
No Public Market.
|
14
|
|
3.6
|
Legends.
|
14
|
|
3.7
|
Accredited Investor.
|
14
|
|
3.8
|
No Brokers; No General Solicitation
|
14
|
Page | |||
4.
|
Conditions of the Purchaser’s Obligations at Closing
|
14
|
|
4.1
|
Representations and Warranties.
|
14
|
|
4.2
|
Performance.
|
15
|
|
4.3
|
Material Adverse Effect.
|
15
|
|
4.4
|
Compliance Certificate.
|
15
|
|
4.5
|
Qualifications.
|
15
|
|
4.6
|
Board of Directors.
|
15
|
|
4.7
|
Amended Investors’ Rights Agreement.
|
15
|
|
4.8
|
Amended Right of First Refusal and Co-Sale Agreement.
|
15
|
|
4.9
|
Amended Voting Agreement.
|
15
|
|
4.10
|
Secretary’s Certificate.
|
15
|
|
4.11
|
Reserved Employee Shares.
|
15
|
|
4.12
|
Proceedings and Documents.
|
16
|
|
4.13
|
License Agreement.
|
16
|
|
4.14
|
Manufacturing Agreement.
|
16
|
|
5.
|
Conditions of the Company’s Obligations at Closing.
|
16
|
|
5.1
|
Representations and Warranties.
|
16
|
|
5.2
|
Performance.
|
16
|
|
5.3
|
Qualifications.
|
16
|
|
5.4
|
License Agreement.
|
16
|
|
5.5
|
Manufacturing Agreement.
|
16
|
|
6.
|
Miscellaneous.
|
16
|
|
6.1
|
Use of Proceeds Covenant.
|
16
|
|
6.2
|
Survival of Warranties.
|
16
|
|
6.3
|
Transfer; Successors and Assigns.
|
17
|
|
6.4
|
Governing Law.
|
17
|
|
6.5
|
Counterparts.
|
17
|
|
6.6
|
Titles and Subtitles
|
17
|
|
6.7
|
Notices
|
17
|
|
6.8
|
Finder’s Fee.
|
17
|
|
6.9
|
Attorney’s Fees.
|
18
|
|
6.10
|
Amendments and Waivers.
|
18
|
|
6.11
|
Severability.
|
18
|
|
6.12
|
Delays or Omissions.
|
18
|
|
6.13
|
Entire Agreement.
|
18
|
|
6.14
|
Confidentiality.
|
18
|
|
6.15
|
Mediation; Dispute Resolution.
|
19
|
|
6.16
|
Waiver of Jury Trial
|
19
|
COMPANY:
|
|
ACIEX THERAPEUTICS, INC.
|
|
By:
/s/ Tom Cavanagh
|
|
Name: Tom Cavanagh
|
|
Title: President
|
|
Address: 82 Flanders Road, Suite 102,
|
|
Westborough, MA 01581 | |
PURCHASER:
|
|
AKORN, INC.
|
|
By:
/s/ Raj Rai
|
|
Name: Raj Rai
|
|
Title: CEO
|
|
Address: 1925 West Field Court,
|
|
Lake Forest, IL 60045
|
Exhibit A-1 -
|
Form of License Agreement
|
Exhibit A-2 -
|
Form of Manufacturing Agreement
|
Exhibit B -
|
Form of Amended Certificate of Incorporation
|
Exhibit C -
|
Form of Amended Investors’ Rights Agreement
|
Exhibit D -
|
Form of Amended Right of First Refusal and Co-Sale Agreement
|
Exhibit E -
|
Form of Amended Voting Agreement
|
Exhibit C-1
|
Form of Amendment No. 1 to Amended Investors’ Rights Agreement
|
Exhibit D
|
Form of Amended Right of First Refusal and Co-Sale Agreement
|
Exhibit D-1
|
Form of Amendment No. 1 to Amended Right of First Refusal and Co-Sale Agreement
|
Exhibit E
|
Form of Amended Voting Agreement
|
Exhibit E-1
|
Form of Amendment No. 1 to Amended Voting Agreement
|
Exhibit F
|
Form of Rescission Agreement”
|
COMPANY:
|
|
ACIEX THERAPEUTICS, INC.
|
|
By: ____________________________
|
|
Name: Tom Cavanagh
|
|
Title: President
|
|
Address: 82 Flanders Road, Suite 102,
Westborough, MA 01581
|
|
PURCHASER:
|
|
AKORN, INC.
|
|
By: ____________________________
|
|
Name: Raj Rai
|
|
Title: Chief Executive Officer
|
|
Address: 1925 West Field Court,
|
|
Lake Forest, IL 60045
|
/s/ RAJAT RAI
|
||
Rajat Rai
|
||
Chief Executive Officer
|
/s/ TIMOTHY A. DICK
|
||
Timothy A. Dick
|
||
Chief Financial Officer
|
/s/ RAJAT RAI
|
||
Rajat Rai
|
||
Chief Executive Officer
|
/s/ TIMOTHY A. DICK
|
||
Timothy A. Dick
|
||
Chief Financial Officer
|