Akorn, Inc. Reports Net Sales of $15.4 Million in 2004 Third Quarter with Gross Margin of 44%, Net Income of $2.6 Million, and EBITDA of $2.9 Million

Business Wire, Oct 26, 2004

BUFFALO GROVE, Ill. -- Akorn, Inc. (OTCBB:AKRN.OB) today reported net sales of $15.4 million for the third quarter ended September 30, 2004, an increase of 7% over net sales of $14.3 million in the 2003 third quarter. Gross Profit of $6.8 million or 44% of net sales, for the third quarter 2004 is an increase of 34% over gross profit of $5.1 million in the 2003 third quarter. Net Income of $2.6 million for the third quarter 2004 is positive as compared to a loss of $344,000 in the third quarter 2003. EBITDA of $2.9 million for the third quarter 2004 is an increase of 112% over EBITDA of $1.4 million for the third quarter 2003.

Highlights for the Third Quarter 2004 include:

--The Company completed a $14.1 million capital raise.

--The Company retired its senior bank debt and maintains a $5 million dollar working capital credit facility.

--Completed a Definitive Agreement to enter into a Joint Venture with Strides Arcolab Limited for U.S. Hospital Injectable Drug Products.

--Entered into an Option Agreement to License a Patent from the University of Texas M.D. Anderson Cancer Center.

--Signed a Purchase and Supply Agreement with FDC Limited for U.S. Ophthalmic Drug products.

--Resolved an Arbitration Dispute with AEG Partners LLC resulting in a one-time gain of $373,000.

--Sold Akorn's equity position in Novadaq Technologies resulting in a one-time gain of $1.3 million.

Arthur S. Przybyl, President and Chief Executive Officer stated, "We are pleased with our third quarter results. Financially, the Company's balance sheet is greatly improved from a year ago and our capital raise has resulted in a current asset to current liability ratio of approximately 2:1. We have over $5 million in cash in addition to a working capital revolver of $5 million. On a year to date basis, after absorbing non-cash asset impairment charges of $1.8 million, we have generated operating income that approximates breakeven. Our third quarter net income includes one time gains of $1.3 million from the sale of equity in Novadaq Technologies and $373,000 from the resolution of an arbitration dispute with AEG Partners LLC. Our third quarter revenues were strong in all three of our core businesses: ophthalmic, injectable and contract manufacturing, and we have employed a low cost sales and marketing model to leverage future new product introductions.

We continue to lay the foundation for our future growth through additional strategic alliances that can complement our internal product pipeline and continue to pursue compliance efforts at our Decatur manufacturing facility. Our three strategic alliances with Strides Arcolab Limited, Serum Institute of India and FDC Limited have targeted a combined total of 45 ANDA's for Phase I product development."

Use of Non-GAAP Measures -- Consolidated EBITDA:

Consolidated EBITDA is a non-GAAP financial measure consisting of earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with accounting principles generally accepted in the United States and may be different from non-GAAP financial measures used by other companies. Akorn believes that this non-GAAP financial measure may be useful to investors as it is aware that certain of its significant stockholders utilize these measures to evaluate its financial performance. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this earnings announcement to their most directly comparable GAAP financial measures as provided with the financial statements included in this press release and are encouraged to review the definition of Consolidated EBITDA contained herein and the description of the reconciling items provided at the end of this press release.

Supplemental Financial Information

The following table presents a reconciliation of net income as determined by GAAP to consolidated EBITDA for the three months ended September 30, 2004 and September 30, 2003:

(Unaudited)
                                                Three Months Ended
                                                   September 30,

                                                 2004        2003
                                                  (in thousands)

GAAP net income (loss)                           $2,587      ($343)

 Income tax benefit                                 (44)         -

 Interest expense, net                              996        626

 Gain related to disputed settlements            (1,582)         -

 Depreciation and amortization                      986      1,102

Consolidated EBITDA                              $2,943     $1,385

The following table presents a reconciliation of net income as determined by GAAP to consolidated EBITDA for the nine months ended September 30, 2004 and September 30, 2003:

(Unaudited)
                                                  Nine Months Ended
                                                    September 30,

                                                  2004       2003
                                                   (in thousands)

GAAP net income (loss)                          ($2,212)   ($4,358)

 Income tax benefit                                 (42)      (171)

 Interest expense, net                            3,709      1,883

 Gain related to disputed settlements            (1,582)        -

 Depreciation and amortization                    4,903      3,375

Consolidated EBITDA                              $4,776       $729