Akorn Reports Third Quarter 2009 Financial Results; Launches Two New Products: Ketorolac Tromethamine Ophthalmic and Hydralazine HCL

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LAKE FOREST, Ill.--(Business Wire)--
Akorn, Inc. (NASDAQ: AKRX) a specialty pharmaceutical company, today reported
financial results for the third quarter ended September 30, 2009.

Consolidated revenue for the third quarter 2009 was $19.4 million, versus $31.9
million in the third quarter 2008 representing a decrease of approximately 39%.
The decrease was due to lower sales of tetanus-diphtheria ("Td") and flu
vaccines and overall lower sales to wholesalers as part of an effort to reduce
wholesaler inventory levels. Ophthalmic segment revenue decreased by $0.3
million or 6%, primarily due to targeted wholesaler reductions in stocking
levels. Hospital drugs and injectables segment revenue decreased $3.1 million or
49%, reflecting the targeted wholesaler reduction in stocking levels. Vaccine
revenue for this quarter decreased by $8.5 million versus the prior year period
primarily due to stronger third quarter 2008 sales resulting from the
introduction of a single dose vial Td vaccine and a flu vaccine supply shortage
this quarter. As previously disclosed, the Company does not intend to distribute
flu vaccine after the 2009 flu season. Contract manufacturing revenue decreased
by $0.6 million or 25%, mainly due to decreased order volumes on ophthalmic
contract products.

Consolidated gross profit was $2.7 million or 13.9% of revenue for the third
quarter of 2009 as compared to a gross profit of $9.9 million or 31.1% of
revenue in the same period a year ago. The decrease in third quarter 2009 gross
profit compared to the prior year period is primarily due to lower vaccine sales
and an increase in Td vaccine unit cost. Also contributing to the decrease were
the lower hospital drug and injectable and ophthalmic sales and a corresponding
negative impact on manufacturing capacity utilization.

During the third quarter of 2009, the Company recognized equity earnings
totaling $0.5 million from its investment in the Akorn-Strides, LLC joint
venture and marketing fee revenue of $0.3 million for its commission on sales of
joint venture products. The joint venture recognized net sales of approximately
$3.8 million during third quarter 2009. Joint venture sales increased $1.9
million over the second quarter 2009 as a result of a full quarter of sales of
injectable Vancomycin, which launched in June 2009.

The Company`s net loss was approximately $5.1 million in the third quarter 2009
compared to a net profit of $2.4 million in the third quarter 2008. This
reflects the revenue and gross profit decreases and a $1.1 million charge for
the change in the fair value of warrants issued in conjunction with the
Company`s renegotiated revolving line of credit and subordinated debt, offset by
a $1.0 million decrease in selling, general and administrative expense compared
to the prior year period resulting from targeted cost reductions. Adjusted
EBITDA (a non-GAAP financial measure defined below) for third quarter 2009 was a
negative $1.6 million compared with a positive $4.4 million Adjusted EBITDA in
the prior year period.

Third quarter cash flow from operating activities was a use of $0.7 million. The
revolving line of credit ended the quarter with a balance of $7.5 million
compared to $5.5 million on June 30, 2009, while the cash balance ended at $2.0
million on September 30, 2009 compared with $1.0 million on June 30, 2009.

Akorn also announces the launch of the generic version of Acular (Ketorolac
Tromethamine Ophthalmic), a drug with estimated brand sales of $119 million in
2008 according to IMS data. In addition, the company launched Hydralazine
Hydrochloride, an existing generic, with estimated sales of $23 million in 2008
according to IMS data.

Raj Rai, Interim Chief Executive Officer said, "We are very pleased with the
progress we have made this quarter. While we are on track to achieve the
operational objectives we initiated in the second quarter, we are transitioning
the company to generate higher margins from the sale of our core ophthalmic and
hospital products and positive cash flow in the fourth quarter."

Rai further stated, "We are pleased to announce the launch of two new generic
products, Ketorolac Tromethamine and Hydralazine HCL. These products, in
addition to the products launched in the third quarter, will serve as building
blocks to the future growth of the company."

About Akorn, Inc.

Akorn, Inc. manufactures and markets sterile specialty pharmaceuticals. Akorn
has manufacturing facilities located in Decatur, Illinois and Somerset, New
Jersey and markets and distributes an extensive line of hospital and ophthalmic
pharmaceuticals. Additional information is available at the Company`s website at
www.akorn.com.

This press release includes statements that may constitute "forward-looking
statements", including with regard to the company's future operations and its
earnings expectations. 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, which is a non-GAAP financial measure. Since Adjusted EBITDA is
not a GAAP financial measure, it 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 definition of Adjusted EBITDA may
not be comparable to similarly titled non-GAAP financial measures reported by
other companies. For a full reconciliation of Adjusted EBITDA to net income
(loss), please see the attachments to this earnings release.

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

Net income/(loss), plus:

* Interest income/(expense), net
* Provision for income taxes
* Depreciation and amortization
* Non-cash expenses, such as share-based compensation expense and changes in the
fair value of warrants
* Non-recurring operating expenses, such as supply agreement termination
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).

While the Company uses Adjusted EBITDA in managing and analyzing its business
and financial condition and believes it to be useful to investors in their
evaluating the Company`s performance, Adjusted EBITDA has certain shortcomings.
Specifically, Adjusted EBITDA does not take into account the impact of capital
expenditures on the liquidity or 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. Accordingly,
the Company`s management utilizes comparable GAAP financial measures to evaluate
the business in conjunction with Adjusted EBITDA and encourages investors to do
likewise.

AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA

September 30, December 31,
2009 2008
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,018 $ 1,063
Trade accounts receivable (less allowance for doubtful accounts of $2 and $22, respectively) 11,360 6,529
Other receivable - 1,221
Inventories 17,409 30,163
Prepaid expenses and other current assets 485 1,770
TOTAL CURRENT ASSETS 31,272 40,746
PROPERTY, PLANT AND EQUIPMENT, NET 32,169 34,223
OTHER LONG-TERM ASSETS
Intangibles, net 5,033 6,017
Deferred financing costs 4,060 272
Other 1,892 1,071
TOTAL OTHER LONG-TERM ASSETS 10,985 7,360
TOTAL ASSETS $ 74,426 $ 82,329

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 4,458 $ 8,795
Accrued compensation 1,469 1,070
Accrued expenses and other liabilities 3,856 2,906
Short-term subordinated debt - related party - 5,332
Revolving line of credit - related party 7,509 -
Warrants liability - related party 6,654 -
Supply agreement termination costs 1,500 -
TOTAL CURRENT LIABILITIES 25,446 18,103
LONG-TERM LIABILITIES
Lease incentive obligations 1,350 1,484
Product warranty liability 1,299 1,299
Subordinated note - related party 5,853 -
TOTAL LONG-TERM LIABILITIES 8,502 2,783
TOTAL LIABILITIES 33,948 20,886
SHAREHOLDERS' EQUITY
Common stock, no par value -- 150,000,000 shares authorized, 90,340,678 and 90,072,662 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively 173,304 170,617
Warrants to acquire common stock 1,821 2,731
Accumulated deficit (134,647) (111,905)
TOTAL SHAREHOLDERS' EQUITY 40,478 61,443
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 74,426 $ 82,329

AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008

Revenues $ 19,371 $ 31,874 $ 57,711 $ 67,562
Cost of revenue 16,686 21,968 47,997 49,082
GROSS PROFIT 2,685 9,906 9,714 18,480

Selling, general and administrative expenses 5,187 6,199 18,016 18,370
Supply agreement termination expenses - - 5,929 -
Amortization of intangibles 320 339 1,234 1,016
Research and development expenses 1,013 1,143 3,681 4,744
TOTAL OPERATING EXPENSES 6,520 7,681 28,860 24,130

OPERATING INCOME (LOSS) (3,835 ) 2,225 (19,146 ) (5,650 )

Write-off and amortization of deferred financing costs (187 ) - (1,739 ) -
Interest expense, net (441 ) (295 ) (1,095 ) (579 )
Equity in earnings of unconsolidated joint venture 484 447 672 447
Change in fair value of warrants liability (1,122 ) - (1,432 ) -
Other income (expense) - 24 - (177 )
INCOME (LOSS) BEFORE INCOME TAXES (5,101 ) 2,401 (22,740 ) (5,959 )
Income tax provision - - 2 3
NET INCOME (LOSS) $ (5,101 ) $ 2,401 $ (22,742 ) $ (5,962 )

NET INCOME (LOSS) PER SHARE:
BASIC $ (0.06 ) $ 0.03 $ (0.25 ) $ (0.07 )
DILUTED $ (0.06 ) $ 0.03 $ (0.25 ) $ (0.07 )

SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE:
BASIC 90,303 89,250 90,209 89,169
DILUTED 90,303 90,065 90,209 89,169

AKORN, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
IN THOUSANDS (UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008
OPERATING ACTIVITIES
Net income (loss) $ (5,101 ) $ 2,401 $ (22,742 ) $ (5,962 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 1,270 1,126 4,118 3,348
Write-off and amortization of deferred financing fees 187 - 1,739 -
Non-cash stock compensation expense 432 572 1,675 1,821
Non-cash supply agreement termination expense - - 1,051 -
Non-cash change in fair value of warrants liability 1,122 - 1,432 -
Gain on disposal of assets - (25 ) - (25 )
Equity in earnings of unconsolidated joint venture (484 ) (447 ) (672 ) (447 )
Changes in operating assets and liabilities:
Trade accounts receivable (2,316 ) (5,631 ) (4,831 ) (11,620 )
Inventories 7,198 (3,058 ) 12,754 2,662
Prepaid expenses and other current assets 654 112 1,228 252
Other long-term assets - - - 1,246
Supply agreement termination liabilities (3,250 ) - 1,500 -
Trade accounts payable (781 ) 2,988 (4,337 ) (6,651 )
Accrued expenses and other liabilities 332 719 1,736 1,081
NET CASH USED IN OPERATING ACTIVITIES (737 ) (1,243 ) (5,349 ) (14,295 )

INVESTING ACTIVITIES
Purchases of property, plant and equipment (280 ) (1,322 ) (922 ) (2,742 )
Purchase of product licensing rights - - (250 ) -
Proceeds from sale of fixed assets - 74 - 74
NET CASH USED IN INVESTING ACTIVITIES (280 ) (1,248 ) (1,172 ) (2,668 )

FINANCING ACTIVITIES
Repayment of long-term debt - - - (208 )
Restricted cash for revolving credit agreement - - - (2,050 )
Loan origination fees - revolving line of credit & subordinated note (43 ) - (1,356 ) -
Proceeds from (repayments of) line of credit 2,000 (3,931 ) 7,509 5,727
Proceeds from warrants exercised - - - 37
Proceeds from subordinated note - 5,000 - 5,000
Proceeds under stock option and stock purchase plans 59 143 1,323 599
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,016 1,212 7,476 9,105

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 999 (1,279 ) 955 (7,858 )
Cash and cash equivalents at beginning of period 1,019 1,369 1,063 7,948
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,018 $ 90 $ 2,018 $ 90

AKORN, INC.
RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
IN THOUSANDS (UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2009 2008 2009 2008

NET INCOME (LOSS) $ (5,101 ) $ 2,401 $ (22,742 ) $ (5,962 )

ADJUSTMENTS TO ARRIVE AT EBITDA:
Depreciation and amortization 1,270 1,126 4,118 3,348
Interest expense, net 441 295 1,095 579
Income tax provision - - 2 3
EBITDA $ (3,390 ) $ 3,822 $ (17,527 ) $ (2,032 )

NON-RECURRING & NON-CASH OPERATING EXPENSES:
Non-cash stock compensation expense 432 572 1,675 1,821
Change in fair value of warrants liability 1,122 - 1,432 -
Write-off and amortization of deferred financing costs 187 - 1,739 -
Supply agreement termination expense - - 5,929 -
ADJUSTED EBITDA $ (1,649 ) $ 4,394 $ (6,752 ) $ (211 )

Akorn, Inc.
Tim Dick, Chief Financial Officer
(847) 279-6100

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