NEW YORK (TheStreet) -- Shares of Akorn Inc. (AKRX) are up 4.86% to $36 in pre-market trade after the pharmaceutical company won U.S. antitrust approval to buy specialty prescription drug company VersaPharm on condition it sell its rights to a generic tuberculosis drug, according to the FTC, Reuters reports.
In May, Akorn said it planned to buy VersaPharm for $440 million, citing the privately held company's work in developing and marketing drugs to treat hemophilia and tuberculosis, among other conditions.
The companies agreed to divest Akorn's right to make a generic version of the tuberculosis drug rifampin. VersaPharm is one of three companies that make the drug, the FTC said.
Watson Laboratories, a subsidiary of Actavis (ACT), agreed to buy Akorn's rights to rifampin, the FTC said.
TheStreet Ratings team rates AKORN INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AKORN INC (AKRX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 22.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 237.70% to $23.38 million when compared to the same quarter last year. In addition, AKORN INC has also vastly surpassed the industry average cash flow growth rate of -66.20%.
- The gross profit margin for AKORN INC is rather high; currently it is at 56.91%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.84% trails the industry average.
- Compared to its closing price of one year ago, AKRX's share price has jumped by 139.11%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: AKRX Ratings Report