Editors Note:

When buying a drug stock look for the one with the strongest portfolio of existing drugs plus a strong pipeline of new drugs. That makes Akorn a demanding play compared to the rest of the generic sector.



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AKRX - Akorn Inc - Company Description

Akorn, Inc. is a specialty generic pharmaceutical company that develops, manufactures, and markets generic and branded prescription pharmaceuticals, as well as private-label over-the-counter (OTC) consumer health products and animal health pharmaceuticals in the United States and internationally. It operates in two segments, Prescription Pharmaceuticals and Consumer Health. The Prescription Pharmaceuticals segment markets generic and branded ophthalmics, injectables, oral liquids, otics, topicals, inhalants, and nasal sprays. This segment's generic products include Atropine Sulfate Ophthalmic Solution; Clobetasol Propionate Ointment; Dehydrated Alcohol Injection; Ephedrine Sulfate Injection; Hydralazine Hydrochloride Injection; Lidocaine Ointment; Methylene Blue Injection; Myorisan Soft Gelatin Capsules; Nembutal Sodium Solution; and Progesterone Capsules. The Consumer Health segment markets branded and private label animal health products, as well as OTC products for the treatment of dry eye under the TheraTears brand name. This segment also markets other OTC consumer health products, including Mag-Ox, a magnesium supplement, as well as the Diabetic Tussin line of cough and cold products.

Akorn has hundreds of existing products and 86 drugs with applications pending with the FDA. Those applications include 27 ophthalmic drugs, 12 topical drugs and 34 injectable drugs with a target market of $9.2 billion. Six of the applications have already been tentatively approved and 50 are currently being approved. At least 25 will be approved by 2017 and they expect to file an additional 20 applications this year. Akorn is targeting generic applications on the highest volume branded prescription drugs. They exclusively file Para IV applications. The first generic company to submit a substantially completed ANDA (Abbreviated New Drug Application) is given marketing exclusivity for the first 180 days on the market. There is no competition in that period and they can get a head start on prescriptions in that period. Most patients never change from the original generic they are assigned.

Revenue rose from $318 million in 2013 to $985 million in 2015. In 2016, the company expects to earn $1.08 billion. The company's guidance is for 80% earnings growth in 2016.

Earnings August 8th.

Shares of Akorn closed at a 7 month high on Wednesday at $31.80. The current uptrend began with the post Brexit low at $26. Resistance is $38.50.

Buy Sept $35 call, currently $1.20, initial stop loss $29.75.


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