Akorn Provides Financial Guidance for 2013

  Akorn Provides Financial Guidance for 2013

               -Expects Record Revenue of $325 to $335 million-

             -Reaffirms the previously issued guidance for 2012-

Business Wire

LAKE FOREST, Ill. -- January 17, 2013

Akorn, Inc. (NASDAQ: AKRX), a niche pharmaceutical company, today provided
full year 2013 financial guidance. The Company’s guidance excludes the impact
from any products for which the Company has not yet received FDA approval. The
Company will provide a more detailed update during its year-end 2012
conference call.

2013 Financial Guidance

 Total revenues                             $325 – 335    million
  Total gross margin percentage                54 – 56        %
  SG&A expenses                                $51 – 54       million
  R&D expenses                                 $22 – 26       million
  Intangible asset amortization expense        $7             million
  Income tax rate                              ~ 37           %
  GAAP net income                              $53 – 57       million
  GAAP net income per diluted share            $0.46 – 0.50
  Adjusted net income ^1                       $65 – 69       million
  Adjusted net income per diluted share ^1     $0.57 – 0.61
  Capital expenditures                         ~ $25          million
                                                              

       See Non-GAAP Financial Measures below for the reconciliation of
 ^1  Adjusted net income and Adjusted net income per diluted share to GAAP
       net income and GAAP net income per diluted share.
       

Raj Rai, chief executive officer, commented, “We had a fantastic 2012 as a
result of great execution on many fronts by the entire organization and are
reaffirming our earlier issued guidance. We are excited about the long term
growth prospects of our company given the growing product pipeline and the
incremental manufacturing capacities achieved through our investments in our
plants in the US as well the acquisition of the manufacturing assets in India.
Our focus in 2013 is on accelerating our pipeline development through further
investments in R&D and on preparing our Indian location for US FDA approval.”

Frequently Asked Questions

Q: When will Q4 2012 results be released?

A: We are reaffirming our 2012 guidance, and will discuss the actual results
at our year-end conference call on February 26, 2013.

Q: What are the growth drivers for 2013?

A: Akorn expects growth primarily from the recently launched products:
Latanoprost Ophthalmic Solution, Progesterone Capsules, Pantoprazole Injection
and Tetanus-diphtheria Vaccine.

Q: Will Akorn be able to maintain the expected 2012 gross margins of
approximately 58% in 2013?

A: Overall gross margins for 2013 are expected to be in the range of 54-56% as
a result of growth from lower margin new products that are either partnered
with shared economics, in-licensed or are contract manufactured for Akorn.

Q: Are there any margin improvement opportunities in the future?

A: Yes. The vast majority of Akorn’s active pipeline will be manufactured by
Akorn with no partnering or shared economics and as a result are expected to
have significantly higher margins than the products contributing to growth in
2013. Additionally, we expect improvement in the margins on our more
competitive products once we achieve US FDA approval of our Indian
manufacturing site.

Q: Why is Akorn projecting a substantial increase in R&D costs?

A: There are three primary factors contributing to the increased costs: 1) the
Generic Drug User Fee Act (“GDUFA”) fees associated with the projected 25
abbreviated new drug application (“ANDA”) filings for 2013; 2) the cost of
bio-equivalence (“BE”) studies associated with high-value products; and 3) the
increased internal R&D costs due to the build out and staffing of a new,
larger R&D facility designed to accommodate our plans to complete 35-40 ANDA
filings per year and expand into the development of specialty formulations
such as carbapenems, hormones and oncolytics.

Q: Can you provide some specific guidance on expected new product
approvals/launches?

A: The following table shows, by segment and current product status, the
number and total IMS market size of products/ANDAs expected to launch each
year.

                                               
                                                  IMS Market Size of Expected
                                                   Launch Products
                     Expected # of Products*  (in millions)**
             Current                                             
Segment     Product    2013    2014    2015   2013    2014      2015
             Status
Ophthalmic  Brand      0       2       2      $0      $235      $130
            Generic    3       7       1      $120    $115      $0
Injectable  Brand      1       5       5      $70     $520      $280
            Generic    2       1       2      $55     $40       $15
Other       Brand      0       2       0      $0      $415      $0
            Generic    1       3       2      $5      $345      $695
Total                 7       20      12     $250    $1,670    $1,120

*We have generally used a standard 30 months from filing date to determine
launch timing of our pipeline products. Based on the guidance provided by the
FDA, we should not expect GDUFA fees to yield a reduction in FDA review time
until after 2015. Also note that we have excluded from our analysis products
which are not yet filed, as well as filed products where the product patents
extend beyond this forecast horizon.

**The IMS market size is based on the trailing 12 months ended September 30,
2012, excluding any trade and customary allowances and discounts. The IMS
market size is not a forecast of our future sales of the applicable products.


Q: Why are capital expenditures increasing over the level projected for 2012?

A: The expansion projects for our India facilities are expected to cost in the
range of $25-30 million over two years, of which approximately $15 million is
expected for 2013. These investments include the build out of the oncology
facility as well as expansion of the other injectable facilities to add
lyophilization capability, incremental filling lines and automation.

Q: When will the Akorn India facilities be US FDA approved?

A: As a first step, we have implemented Akorn’s global quality policies at the
Akorn India site. We are now in the process of implementing our plan to
transfer existing or file new products to trigger US FDA facility inspections
by late 2013 or early 2014. The proposed oncology facility and expanded
injectable facility should be completed by late 2014, and we expect the US FDA
to inspect these facilities by late 2015 or early 2016.

About Akorn, Inc.

Akorn, Inc. is a niche pharmaceutical company engaged in the development,
manufacture and marketing of multisource and branded pharmaceuticals. Akorn
has manufacturing facilities located in Decatur, Illinois, Somerset, New
Jersey and Paonta Sahib, India where the Company manufactures ophthalmic and
injectable pharmaceuticals. Additional information is available on the
Company’s website at www.akorn.com.

Forward Looking Statements

This press release includes statements that may constitute "forward-looking
statements", including projections of certain measures of Akorn's results of
operations, projections of sales, projections of certain charges and expenses,
projections related to the number and potential market size of ANDAs and other
statements regarding Akorn's goals, regulatory approvals and strategy. Akorn
cautions that these forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
indicated in the forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Because such statements inherently involve risks and
uncertainties, actual future results may differ materially from those
expressed or implied by such forward-looking statements. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar
meaning in connection with a discussion of future operating or financial
performance. Factors that could cause or contribute to such differences
include, but are not limited to: statements relating to future steps we may
take, prospective products, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of contingencies
such as legal proceedings, and financial results. These cautionary statements
should be considered in connection with any subsequent written or oral
forward-looking statements that may be made by the company or by persons
acting on its behalf and in conjunction with its periodic SEC filings. You are
advised, however, to consult any further disclosures we make on related
subjects in our reports filed with the SEC. In particular, you should read the
discussion in the section entitled "Cautionary Statement Regarding
Forward-Looking Statements" in our most recent Annual Report on Form 10-K, as
it may be updated in subsequent reports filed with the SEC. That discussion
covers certain risks, uncertainties and possibly inaccurate assumptions that
could cause our actual results to differ materially from expected and
historical results. Other factors besides those listed there could also
adversely affect our results.

Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with
generally accepted accounting principles (GAAP), Akorn is also reporting
Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted
share, which are non-GAAP financial measures. Since Adjusted EBITDA, Adjusted
net income and Adjusted net income per diluted share are not GAAP financial
measures, they should not be used in isolation or as a substitute for
consolidated statements of operations and cash flow data prepared in
accordance with GAAP. In addition, Akorn’s definitions of Adjusted EBITDA,
Adjusted net income and Adjusted net income per diluted share may not be
comparable to similarly titled non-GAAP financial measures reported by other
companies. For a full reconciliation of Adjusted EBITDA and Adjusted net
income to GAAP net income, please see the attachments to this press release.

Adjusted EBITDA, as defined by the Company, is calculated as follows:

Net income, plus:

  *Interest income (expense), net
  *Provision for income taxes
  *Depreciation and amortization
  *Non-cash expenses, such as share-based compensation expense, changes in
    the fair value of warrants, and deferred financing cost amortization
  *Other adjustments, which historically have included equity in earnings of
    unconsolidated joint venture related to the sale of the joint venture's
    assets, amortization of the fair value adjustment to inventory acquired
    through business acquisitions, and Kilitch Drugs (India) Limited
    acquisition-related expenses.

The Company believes that Adjusted EBITDA is a meaningful indicator, to both
Company management and investors, of the past and expected ongoing operating
performance of the Company. EBITDA is a commonly used and widely accepted
measure of financial performance. Adjusted EBITDA is deemed by the Company to
be a useful performance indicator because it includes an add back of non-cash
and non-recurring operating expenses which have little to no bearing on cash
flows and may be subject to uncontrollable factors not reflective of the
Company’s true operational performance (i.e. fair value adjustments to the
carrying value of stock warrants liability).

Adjusted net income, as defined by the Company, is calculated as follows:

Net income, plus:

  *Intangible asset amortization, net of tax
  *Non-cash expenses, such as non-cash interest, share-based compensation
    expense, changes in the fair value of warrants, and deferred financing
    cost amortization, all net of tax
  *Other adjustments, such as equity in earnings of unconsolidated joint
    venture related to the sale of the joint venture's assets, amortization of
    the fair value adjustment to inventory acquired through business
    acquisitions, and Kilitch Drugs (India) Limited acquisition related
    expense, all net of tax

Adjusted net income per diluted share is equal to Adjusted net income divided
by the actual or anticipated diluted share count for the applicable period.

The Company believes that Adjusted net income and Adjusted net income per
diluted shares are meaningful financial indicators, to both Company management
and investors, in that they exclude non-cash income and expense items that
have no impact on current or future cash flows, as well as other income and
expense items that are not expected to recur and therefore are not reflective
of continuing operating performance. Adjusted net income and Adjusted net
income per diluted share provide the Company and investors with income figures
that would be expected to be more aligned with cash flows than GAAP net
income, which includes a host of non-cash income and expense items.

While the Company uses Adjusted EBITDA, Adjusted net income and Adjusted net
income per diluted share in managing and analyzing its business and financial
condition and believes these non-GAAP financial measures to be useful to
investors in evaluating the Company’s performance, each of these financial
measures has certain shortcomings. Core business revenue does not provide a
full picture of the Company’s historical revenues. Adjusted EBITDA does not
take into account the impact of capital expenditures on either the liquidity
or the GAAP financial performance of the Company and likewise omits
share-based compensation expenses, which may vary over time and may represent
a material portion of overall compensation expense. Adjusted net income does
not take into account non-cash expenses that reflect the amortization of past
expenditures, or include stock-based compensation, which is an important and
material element of the Company’s compensation package for its directors,
officers and other key employees. Due to the inherent limitations of each of
these non-GAAP financial measures, the Company’s management utilizes
comparable GAAP financial measures to evaluate the business in conjunction
with Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted
share and encourages investors to do likewise.

                                                              
AKORN, INC.
2013 FINANCIAL GUIDANCE
 
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED NET INCOME:
                                                                 
                                                                 
  GAAP NET INCOME                               $53 - 57         million
                                                                 
  ADD:
    Intangible asset amortization expense       7                million
    Share-based compensation expense            7                million
    Non-cash interest expense                   5                million
    Amortization of deferred financing costs    1                million
                                                                 
  SUBTRACT:
    Tax effect of adjustments                   (8           )   million
                                                                 
  ADJUSTED NET INCOME                           $65 - 69        million
                                                                 
  ADJUSTED NET INCOME PER DILUTED SHARE         $0.57 - 0.61 
                                                                 
  SHARES USED IN COMPUTING ADJUSTED NET
    INCOME PER DILUTED SHARE                    114              million
                                                                 
                                                                 
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA:
                                                                 
  GAAP NET INCOME                               $53 - 57         million
                                                                 
  ADJUSTMENTS TO ARRIVE AT EBITDA:
    Depreciation and amortization expense       13               million
    Interest expense, net (cash and non-cash)   9                million
    Income tax provision                        $31 - 34        million
  EBITDA                                        $106 - 113       million
                                                                 
  ADJUSTMENTS TO ARRIVE AT ADJUSTED EBITDA:
    Share-based compensation expense            7                million
    Amortization of deferred financing costs    1               million
  ADJUSTED EBITDA                               $114 - 121      million

Contact:

Akorn, Inc.
Tim Dick, Chief Financial Officer
(847) 279-6150