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Akorn Provides Financial Guidance For 2013

Frequently Asked Questions

Q: When will Q4 2012 results be released?

A: We are reaffirming our 2012 guidance, and will discuss the actual results at our year-end conference call on February 26, 2013.

Q: What are the growth drivers for 2013?

A: Akorn expects growth primarily from the recently launched products: Latanoprost Ophthalmic Solution, Progesterone Capsules, Pantoprazole Injection and Tetanus-diphtheria Vaccine.

Q: Will Akorn be able to maintain the expected 2012 gross margins of approximately 58% in 2013?

A: Overall gross margins for 2013 are expected to be in the range of 54-56% as a result of growth from lower margin new products that are either partnered with shared economics, in-licensed or are contract manufactured for Akorn.

Q: Are there any margin improvement opportunities in the future?

A: Yes. The vast majority of Akorn’s active pipeline will be manufactured by Akorn with no partnering or shared economics and as a result are expected to have significantly higher margins than the products contributing to growth in 2013. Additionally, we expect improvement in the margins on our more competitive products once we achieve US FDA approval of our Indian manufacturing site.

Q: Why is Akorn projecting a substantial increase in R&D costs?

A: There are three primary factors contributing to the increased costs: 1) the Generic Drug User Fee Act (“GDUFA”) fees associated with the projected 25 abbreviated new drug application (“ANDA”) filings for 2013; 2) the cost of bio-equivalence (“BE”) studies associated with high-value products; and 3) the increased internal R&D costs due to the build out and staffing of a new, larger R&D facility designed to accommodate our plans to complete 35-40 ANDA filings per year and expand into the development of specialty formulations such as carbapenems, hormones and oncolytics.

Q: Can you provide some specific guidance on expected new product approvals/launches?

A: The following table shows, by segment and current product status, the number and total IMS market size of products/ANDAs expected to launch each year.
  IMS Market Size of Expected Launch Products
        Expected # of Products*   (in millions)**
Segment   Product Status   2013   2014   2015   2013   2014   2015
Ophthalmic   Brand   0   2   2   $0   $235   $130
  Generic   3   7   1   $120   $115   $0
Injectable   Brand   1   5   5   $70   $520   $280
  Generic   2   1   2   $55   $40   $15
Other   Brand   0   2   0   $0   $415   $0
  Generic   1   3   2   $5   $345   $695
Total       7   20   12   $250   $1,670   $1,120
*We have generally used a standard 30 months from filing date to determine launch timing of our pipeline products. Based on the guidance provided by the FDA, we should not expect GDUFA fees to yield a reduction in FDA review time until after 2015. Also note that we have excluded from our analysis products which are not yet filed, as well as filed products where the product patents extend beyond this forecast horizon.
**The IMS market size is based on the trailing 12 months ended September 30, 2012, excluding any trade and customary allowances and discounts. The IMS market size is not a forecast of our future sales of the applicable products.

Q: Why are capital expenditures increasing over the level projected for 2012?

A: The expansion projects for our India facilities are expected to cost in the range of $25-30 million over two years, of which approximately $15 million is expected for 2013. These investments include the build out of the oncology facility as well as expansion of the other injectable facilities to add lyophilization capability, incremental filling lines and automation.

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