Akorn, Inc. (
Another essential cog in the new healthcare machine will be the
availability of low-cost generic medicine for common conditions and
perhaps even more importantly for specialized niche care.
It is extremely important to keep the production of critical
drugs flowing into the hands of consumers in need. Companies like
Akorn that have a diverse business model, years of experience and a
strong line of drugs and pharmaceutical products that are in demand
will benefit from increases in coverage and health awareness.
Company Description & Developments
Akorn, Inc. is a niche generic pharmaceutical company that
develops, manufactures and markets pharmaceutical products in the
areas of ophthalmology, antidotes, anti-infectives in addition to
controlled substances for pain management and anesthesia around the
world since 1971.
Akorn's customer base is well diversified from physicians to
clinics and long term care facilities, retail pharmacies and even
other pharmaceutical companies. To keep focused on their different
lines, the company is divided into three segments, Specialty
Therapeutics and Injectable Pharmaceuticals, Ophthalmologic
Pharmaceuticals and Contract Manufacturing.
On January 17th, AKRS announced that their revenues would exceed
prior estimates for 2011 and anticipated full-year results above
the upper end of its prior outlook for both revenues and adjusted
EBITDA of approximately $41 million to $43 million, with revenue
projections between $130 million and $132 million on gross margins
of approximately 57%.
This came on the heels of news that Akorn's wholly-owned
subsidiary, Oak Pharmaceuticals, acquired three off-patent,
branded, hospital-based injectables from the US subsidiary of H.
Lundbeck A/S. That acquisition will also immediately
contribute directly to their bottom line.
The company also intends to expand its sales force and
re-organize them into two distinct focus areas, Ophthalmics and
Hospital Injectables. Expansion plans include increased investments
in R&D to accelerate product development.
All in all the news flow and earnings momentum has been very
positive for the stock. Subsequently, shares of the drug
maker are sharing in that impetus.
Akorn is a small-cap (1.14 billion) company that is trading at
about 54 times trailing earnings (P/E). This makes it a bit
expensive when you compare it to the broad market average.
Looking forward, Zacks Consensus Estimates are calling for that
number to drop closer to 30 with no change in price over the next
Akorn became a Zacks Rank 1 strong buy on January 20th.
The pharmaceutical company reported a quarterly sales increase
of 14% at their last earnings report. Annual sales were up
70% compared to Q32010 with total sales of roughly 86.4 million in
FY2010. AKRX earnings leapt from a 28 cent loss to a 22 cent
profit from FY2009 to FY2010. Akorn is expected to earn $0.29
in FY2011 according to the Zacks Consensus Estimate.
Since AKRS is a small cap, only 2 analysts cover the stock, but
both raised estimates higher for the coming quarters as well as
FY2011 and FY2012 in the past month. Akorn will report Q42011
results on February 28th. Expectations are for Akorn to
generate $0.08 in income this quarter. Of the 2 analysts who
cover AKRX, the consensus is for the company to grow earnings by
32% in the current year (FY2011) and roughly 36% in
In terms of the magnitude of analyst estimate trends, we are
seeing all of the consensus estimates higher than they were 90 days
ago for the current and next quarters as well as FY2011and
Akorn beat estimates last quarter by 60% and has averaged to
beat estimates by over 64% during the past year.
Market Performance & Technicals
Akorn's chart are almost perfectly what we call "bottom left to top
right" indicating steady upward price movement over the past
year. The stock has been making new 52 week highs almost
weekly since May of 2010 and trades decent volume for a small
Akorn has remained above its 50 day moving average for most of
the year and has not dipped below its 200 day at all in that
time. The averages currently stand at $11.00 (50 day) and
$8.52 (200 day).
The trend remains bullish and the momentum continues for
AKRX. The broad market seems to be the only thing that could
disrupt Akorn's assent. A disappointing earnings report could
also have the same effect. AKRX has exceeded the S&P
500's performance by over 122% in the past year and over 12% in the
past 3 months alone. This is no doubt a true momentum
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He
is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
AKORN INC (
): Free Stock Analysis Report
To read this article on Zacks.com click here.