While Akorn works to revive its fortunes, the FDA hits it with another warning letter
Akorn just can’t dig itself out of its hole.
The specialty generic drugmaker has received yet another warning letter from the FDA this year. Without disclosing any specifics, the Lake Forest, Illinois-based drugmaker on Wednesday said the US regulator had issued the letter, citing an inspection of its Somerset, New Jersey manufacturing facility in July and August of 2018. The company’s shares $AKRX dipped about 1.7% to $4.65 before the bell.
Earlier this year in January, Akorn received a warning letter related to another plant — one in Decatur, Illinois — following an inspection in April and May last year. The FDA detailed standard manufacturing violations, including poor aseptic and sanitization practices. Then in February, the company’s Amityville, New York facility was hit with a Form 483, which highlighted records were not kept for the maintenance, cleaning, sanitizing and inspection of equipment.
Akorn has a checkered past. Apart from previously restating its financial statements, in April 2018, dialysis provider Fresenius $FRE walked away from $4 billion takeover of Akorn, citing an investigation that found Akorn had materially breached the FDA’s data integrity requirements. In its January warning letter, the FDA said it had concerns that Akorn’s quality system does not “ensure the accuracy and integrity of data to support the safety, effectiveness, and quality of the drugs you manufacture”.
In consequence of the Fresenius termination, Akorn has since appointed Douglas Boothe as its new chief, as well as a fresh batch of executives. In March this year, Akorn held its first post-earnings conference call in two years, after reporting a weak fourth quarter. Revenue declined 18% to $153 million due to competition to key products and supply shortfalls.
“Beyond competition to key products, AKRX’s woes have been exacerbated by multiple manufacturing deficiencies in the past year. As such, the company experienced plant shutdowns for remediation, which have resulted in 1) unabsorbed overhead costs, 2) shortfalls in supply, and 3) penalties for failure to supply to customers. And in addressing the data integrity issues brought forth by FRE, R&D resources were diverted and only 2 ANDAs were filed in 2018,” Jefferies analysts highlighted in a note.
But things improved in the first quarter, and the company’s net loss narrowed. In a concurrent filing in May, Akorn said it is negotiating a standstill agreement with its lenders as it works to address its manufacturing and financial woes. Specific milestones must be met during this period — if they are not, or a new deal is not agreed to by November 15 — Akorn could be declared in default.
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