N a s d a q : A K R X - Akorn Pharmaceuticals

Akorn, Inc.
N a s d a q :
A K R X
Barclays Global Healthcare Conference
March 2014
DISCLAIMER
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This presentation includes certain forward-looking statements regarding our views with respect to our business, operations, current and
future acquisitions, economic model, and our expected performance for future periods, as well as the pharmaceutical industry
conditions. These statements are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from our expectations due to the risks, uncertainties and other factors that affect our business.
These factors include, among others, changing market conditions in the overall economy and the industry; the success of implementing
our corporate strategies; the effects of federal, state and other governmental regulation on our business; current and future litigation;
the success of new acquisitions and new product launches; 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 obtain and
maintain regulatory approvals for our products; and the effects of competition from other generic pharmaceuticals and from other
pharmaceutical companies; loss of key personnel; our ability to obtain additional funding or financing to operate and grow our business;
our liquidity; and other factors detailed in our Annual Report on Form 10-K and our other reports filed from time to time with the
Securities and Exchange Commission (“SEC”).
These factors also include factors specific to our pending acquisition of Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”), including the occurrence
of any event, change or other circumstances that could give rise to the termination of the merger agreement with Hi-Tech; the failure
to satisfy conditions to completion of the merger, including receipt of regulatory approvals; changes in the business or operating
prospects of Hi-Tech; our ability to successfully integrate Hi-Tech businesses and its products; and other factors related to the
acquisitions and integration of Hi-Tech.
If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary
significantly from what we projected. Any forward-looking statement you see or hear during the presentation reflects Akorn, Inc.’s
current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions. You are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.
For more complete information about Akorn, you should read the reports filed by Akorn with the SEC. You may get these documents for
free through EDGAR on the SEC website at www.sec.gov, which you may also access through our website at http://www.akorn.com.
You should also read the reports filed by Hi-Tech with the SEC which are similarly available through EDGAR and Hi-Tech’s website at
http://www.hitechpharm.com.
2
AKORN OVERVIEW
3
COMPANY TRANSFORMATION
Listed
on the NASDAQ
Raj Rai named CEO
2007
2008
2009
2010
Divests Akorn-Strides
JV to focus on
strategic priorities
2011
Revenue
($mm)
2011
2012
2013
ANDA’s filed
1
22
25
12
ANDA’s under review
11
31
55
63
R&D spend
$6.8
$11.6
$15.9
$19.9
Ophthalmics
$32.8
$68.6
$129.7
114.5
Injectables
$28.9
$55.1
$103.8
179.6
Total Revenue
$86.4
$136.9
$256.2
$317.7
Ophthalmics
59.4%
62.8%
56.7%
55.4%
47.5%
54.6%
64.3%
58.2%
49.1%
58.2%
58.0%
54.1%
Total Gross Margin
Enters into an
agreement to
acquire Hi-Tech
2013
Acquires four branded
ophthalmic products
COMPANY PROFILE
2010
Gross Margin Injectables
2012
Acquires AVR to expand
presence in $1.2 billion
OTC eye care market
PROVEN EXECUTION
Pipeline /
R&D
($mm)
Expands manufacturing
footprint to India through
asset acquisition
Acquires three branded
injectable products
from H. Lundbeck
 Fast growing pharmaceutical company with proven
execution of strategic initiatives and focus on niche
dosage forms
 Headquarters:
Lake Forest, IL
Hospital /
Injectables
33%
 R&D:
Ophthalmics
Vernon Hills, IL
21%
$540mm+
Copiague, NY (Hi-Tech)
 Manufacturing:
Somerset, NJ
Amityville, NY (Hi-Tech)
Decatur, IL
Paonta Sahib, India
Revenue
Contract
4%
Hi-Tech
Pharma
42%
Post Hi-Tech deal close
4
MARKET DYNAMICS & OPPORTUNITY
Generic market opportunity remains strong
(generics ~83% of Rx volume)*
Commitment to R&D, recent acquisitions and
focused growth strategy support Akorn’s
position as a key generics player
Elevated scrutiny on both regulatory
environment & approval process
Focus on quality and robust R&D processes
enables continued success and supports future
growth
Over 100 drugs currently on FDA shortage
list, majority are sterile injectables
Akorn produces over a dozen products that
have appeared on the FDA shortage list; the
approval of Akorn India will increase overall
injectable capacities for the U.S. market
Globalization provides new opportunities
in high growth emerging markets
Acquisition of manufacturing assets in India
have positioned Akorn to pursue a global
strategy over the long-term
Pace of consolidation to continue in
specialty pharma & generics
Successful business transformation has
positioned company well to be a key acquirer in
the industry
*Data from IMS - YTD September 2013
5
STRATEGIC GOALS
TODAY
US Generic Ophthalmology Competitive Landscape
# 3 in Sales
and Molecules
US Generic Injectable Competitive Landscape
# 15 in Sales
# 10 in Molecules
3 – 5 YEAR GOALS
IMS Data for 12 months ended 10/31/13. Some data may have been excluded based on company judgment of comparability.





Be #1 in generic ophthalmics
Be a top 5 player in generic injectables
Increase market leadership position for Hi-Tech dosage forms
Expand sales reach to over 30 countries
Become a $1 billion revenue company
6
STRATEGIC EXECUTION
INTEGRATE
Hi-Tech
• Leverage scale
and
diversification
DEVELOP
New
Products
• Continue R&D
investment
• Tap into nonsterile platform
• Strengthen
Hi-Tech’s R&D
pipeline
• Capture
synergies
• Maturing R&D
pipeline
• Private label
opportunity
EXECUTE
India
Strategy
• Obtain
regulatory
approvals in
US and RoW
• Effectively
manage
approval
timelines
BUILD
Brand
Platform
PURSUE
Strategic
M&A
• Maximize value
from recent
acquisitions
• Strategic fit
• Leverage &
expand existing
ophthalmology
sales
infrastructure
• Accretive
• Revenue
enhancing
• Leverage new
manufacturing
capacity
7
INTEGRATE
A UNIQUE COMBINATION
(Pro Forma1)
HCP
7%
Contract
Services
7%
Hospital Drugs
& Injectables
57%
ECR
10%
Ophthalmics
36%
HT Generics
35%
HT Generics
83%
Ophthalmics
21%
Contract
Services
4%
Hospital Drugs
& Injectables
33%
ECR
4%
HCP
3%
Total Sales (LTM 12/31/13)
$318mm
Total Sales (LTM 1/31/14)
$227mm
Total Pro Forma Sales
$540+ mm
Anticipated Transaction Benefits
 Creates a larger, more diversified specialty generics player
 Builds scale, breadth of products and dosage forms, enhances diversification
 Over 130 combined company approved ANDAs/NDAs
 Over $540 million in combined company revenues
 Approximately 40% accretive to non-GAAP earnings with synergies1
 Expect rapid pay-down of debt from strong combined cash flow
1
Pro forma for full year 2013 as if expected synergies were fully realized. Does not include recent branded ophthalmic acquisitions
8
INTEGRATE
NEW MARKET OPPORTUNITIES
Market
Market Size
(IMS $bn)
Akorn
Injectables
$16.5

Ophthalmics
$6.0

Topicals
Hi-Tech
AKORN
(post close)



$9.3


Oral Liquid
$3.5


Nasal Spray
$2.9


Otics
$0.5


Source: IMS Health and company analysis
HI-TECH
AKORN
Sterile Products:
•
•
•
•
Solutions
Ointments
Gels
Injectables
• Liquid
• Lyophilized
Over
$16 billion
in newly
addressable
Non-Sterile
market
opportunity
post deal close
Sterile Products:
• Solutions,
ointments, gels
Non-Sterile Products:
• Nasal sprays
• Oral liquids
• Topical solutions, gels,
creams, ointments
• Unit dose cups
9
INTEGRATE
HI-TECH INTEGRATION PLAN
Deal Close
6 months
12 months
Consolidate corporate functions
Implement Akorn Quality Policy
Optimize capacity across sterile ophthalmic plants (2)
Implement new R&D strategy
Achieve
annual synergy
run-rate
$15 - 20mm
Opportunity for significant cost savings due to overlap with minimal
risk or disruption to business operations
10
DEVELOP
INVESTMENT IN R&D
AKORN R&D SPEND
 Long-term commitment to R&D to support growth
 New R&D Centers
–
–
19,200 ft2 center can house up to
50 scientists
Hi-Tech: 18,000 ft2 center can house up to
50 scientists
Akorn:
($mm)
% of Revenue
$50
9%
$45
8.1%
$40
8.4%
6.3%
6.2%
$35
7.5%
8%
$39-$43
7%
6%
$30
5%
$25
4%
$20
 Filings under review today:
–
–
Akorn: 65 with market value ~ $5.6bn
Hi-Tech: 16 with market value ~ $2.0bn
$15.9
$10
2%
$11.6
$5
1%
$7.0
$0
0%
2010
 Flexible R&D and pipeline strategy selectively
targets Paragraph IV products
–
–
3%
$19.9
$15
2011
2012
2013
2014
NUMBER OF ANDAs FILED
Akorn: 10 PIV Challenges
Hi-Tech: 4 PIV Challenges
25
22
Hi-Tech
Akorn
12
 Goal to increase filings to 35-40 per year by 2015
3
6
2
1
2010
2011
Market value of filings per IMS Health 12 months ended December 2013. Guidance assumes an April 1, 2014 close of the Hi-Tech acquisition.
2012
3
2013
11
MATURING PIPELINE
DEVELOP
A growing number of products have been with the FDA for over 36 months.
Filings shown are Akorn only and do not include any of Hi-Tech’s filings
12
PRIVATE LABEL OPPORTUNITY
DEVELOP
Akorn has established itself as a player in the private label OTC ophthalmic market:
Through Hi-Tech
$500 million
Estimated newly addressable Non-Sterile
OTC market for private label creams,
liquids, nasal sprays
Source: Market value is based on IRI retail sales data and company analysis
13
AKORN INDIA – GLOBAL OPPORTUNITY
EXECUTE
Aggressively Pursue US FDA Approvals • Expand Operations • Expand Globally
Size
CAGR
(2016 Sales - $US bn)
(2012 – 2016)
Global Market
$1,175 – 1,205
3 – 6%
North America
$375 – 405
1 – 4%
Western Europe
$175 – 205
-1 – 2%
Japan
$105 – 135
1 – 4%
$71 – 81
4 – 7%
Asia Pacific
$240 – 270
11 – 14%
15
3
Latin America
$95 – 105
10 – 13%
2
2
MEA & CIS (Main Markets)
$74 – 78
8 – 10%
6
3
Middle East & Africa
$41 – 51
8 – 11%
20
4
Market
Central & Eastern Europe
Source: IMS Market Prognosis, Apr 2012
Approved Registrations
Dossiers
# of Countries
Akorn Domestic Market
14
EXECUTE
INDIA
INDIA REGULATORY APPROVALS
 Increased emphasis on quality in India to
support approval timeline in US and RoW
•
Incremental staffing
•
Training initiatives
•
Compliance management
US FDA TIMELINE
Facility
Inspections
&
Approvals
2013
2014
2015
2016
General Injectable
(NDA product transfer)
 US FDA Filing Timeline
•
Cephalosporin
First filing in Q1’14 – tech transfer of existing
NDA product
(Tech transfer acquired
ANDA product)
•
Followed by three other filings in 2014
(Develop ANDA product)
•
Begin manufacturing for US market in 2015
 Support expansion into higher growth
geographies
•
Carbapenem
Hormone
(Develop ANDA product)
Development
Initiated
Exhibit Batch
Produced
Filing Submitted
to FDA
Approval
Pursue WHO and PIC/S approvals
15
LEVERAGE INDIA INFRASTRUCTURE
EXECUTE
EXPANDED CAPACITY FOR US/ROW MARKETS
18.7 X
1.4 X
2012
2015
2009
400
368
350
Capacity in million units
300
262
300
250
225
200
150
100
50
14
14
Akorn India’s
manufacturing capacity
allows Akorn to become a
significant player in the
$27 billion
addressable global
injectable market
68
37
0
2009
US
2012
India
2015
Total Capacity
16
BRANDED OPHTHALMOLOGY PLATFORM
BUILD
 Plan to utilize and expand sales team to
reinvigorate revenues of four branded
ophthalmic products recently acquired from
Merck and Santen
–
Leverages existing ophthalmic sales force and
physician relationships
–
Elevates Akorn’s reputation with prescribers
–
Creates a prescription branded ophthalmic
strategy
–
Broadens existing platform that includes
TheraTears, Akten, and IC Green
 Platform supports future acquisitions and inlicensing of branded ophthalmic products
 Recent product acquisitions will benefit revenue
by $42 - $47 million and adjusted EPS by $0.12 –
$0.15 per share
17
PURSUE STRATEGIC M&A
PURSUE
M&A STRATEGY
 Continue to seek companies and/or products that build upon our expertise
 Acquire companies and/or products within same or adjacent market space – leverage pipeline,
marketing, distribution channels, etc.
 Acquire companies that provide additional value to supply chain either through capacity or cost benefits
AKORN GROWTH THROUGH M&A ACTIVITY
2011
• Expanded product portfolio and strengthened position in niche area of
OTC ophthalmics with acquisition of Advanced Vision Research
2011
• Accelerated growth rate as a result of acquisition of Nembutal, Diuril and
Cogentin from H. Lundbeck
2012
• Increased capacity for US FDA products & expanded int’l presence with
acquisition of injectable manufacturing assets from Kilitch India
2013
• Hi-Tech acquisition will bring critical mass to generics business and
diversifies product offering and areas of expertise with niche products
2013
• Acquisition of branded ophthalmic products elevates reputation with
prescribers and creates prescription ophthalmic strategy
18
FINANCIAL PERFORMANCE
19
FINANCIAL MOMENTUM
All Value millions, except EPS
REVENUE
ADJUSTED EBITDA
$540-560
$318
$256
$86
$137
ADJUSTED EPS
$179-185
G
U
I
D
A
N
C
E
$96
G
U
I
D
A
N
C
E
$111
$45
$0.76-0.79
$0.52 $0.55
$0.35
$0.16
G
U
I
D
A
N
C
E
$21
2010 2011 2012 2013 2014
2010
54% CAGR (’10-’13)
2011
2012
2013
2014
75% CAGR (’10-’13)
2010 2011 2012 2013 2014
51% CAGR (’10-’13)
Transformation has led to strong and consistent performance
Guidance assumes an April 1, 2014 close of the Hi-Tech acquisition.
20
STRONG BALANCE SHEET & FREE CASH FLOW
Strong Financial Position
Cash from Operations
($mm)
 Improving cash flow generation
 Strong synergy opportunity in Hi-Tech
integration
$70
$57.3
$60
 $600 million Term Loan B; 3.8x leverage at
Hi-Tech close
$50
–
$40
Total leverage objective of 2.0-2.5x
 $150M ABL revolving credit facility
available
$26.2
$30
$20
 Cash position $34mm (as of 12-31-13)
$19.7
$12.3
Capital Priorities
$10
 Invest in business and growth strategy
$0
 Strategic M&A opportunities
2010
2011
2012
2013
 Rapid debt reduction post Hi-Tech close
21
INVESTMENT HIGHLIGHTS
Attractive industry
dynamics
Proven Execution
 Injectable and ophthalmic products represent niche segments
with limited competition and high barriers to entry
 Acquisition of Hi-Tech adds over 50 products in attractive niche
categories
 Generic market opportunity remains strong core business –
Generics make-up ~83% of all Rx volume
 Strong revenue growth and increasing margins, profitability and
cash flow
 Strategic company/product M&A
Investing in infrastructure
improvements
 Increasing capacity and improving efficiency
 Upgrading to comply with ever-changing regulatory environment
 Robust product pipeline and R&D program
Clear strategy for
sustained growth
 Global expansion through Akorn India
 Acquisitions / In-licensing opportunities
22
23
ROBUST R&D PIPELINE DETAILS (US MARKET)
Brand
Generic
Total
Filed
To Be Filed
In Development
Total
Mkt Value Count Mkt Value Count Mkt Value Count Mkt Value Count
$2,966
26
$1,834
10
$2,096
19
$6,896
55
$2,588
39
$20
2
$1,358
33
$3,965
74
$5,553
65
$1,854
12
$3,455
52
$10,862
129
Filed
To Be Filed
In Development
Total
Mkt Value Count Mkt Value Count Mkt Value Count Mkt Value Count
Ophthalmic
Injectable
Other
Total
$1,859
$2,717
$977
24
33
8
$953
$901
-
7
5
0
$561
$2,509
$384
14
36
2
$3,373
$6,127
$1,361
45
74
10
$5,553
65
$1,854
12
$3,455
52
$10,862
129
Market value is based on IMS 12 months ended Dec 2013. Pipeline status is as of February 2014. Akorn only, Hi-Tech’s filings are not included.
24
MATURING PIPELINE
Market value is based on IMS 12 months ended Dec 2013. Filed product count as of February 2014. Akorn only, Hi-Tech’s filings are not included.
25