Why Akorn Shares Were Crushed
May 7th 2013 1:24PM
Updated May 7th 2013 2:35PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Akorn -- a hybrid generic and branded drug developer -- shed as much as 15% of their value after the company reported disappointing first-quarter results.
So what: For the quarter, revenue rose 43% to $73.9 million as EPS more than tripled to $0.10 from the year-ago period despite a 680 basis point drop in gross margin to 53%. Although revenue was more or less in-line with estimates, EPS fell $0.03 shy of forecasts. Akorn blamed the unplanned shutdown of its Somerset, N.J., facility for production delays and slower sales of drugs launched recently for the weakened results. Looking ahead, Akorn lowered its full-year revenue guidance to a range of $305 million to $315 million and EPS to $0.53-$0.55 as compared to current Street estimates of $333.6 million in revenue and $0.61 in EPS.
Now what: Akorn certainly delivered some pretty uninspiring results, so it's pretty easy to see why shareholders are a bit disappointed today. However, I feel Akorn is one of the better risk-versus-reward pharmaceutical companies you can buy. As a hybrid, it can take advantage of the stability and demand of generic sales while also enjoying the exclusivity and high margins associated with branded drugs. Considering that the Somerset shutdown was weather-related and not under Akorn's control, I can't exactly fault the company for that. With some 39 drugs expected to come to market between this year and 2015, I see plenty of upside potential for Akorn.
Craving more input? Start by adding Akorn to your free and personalized watchlist so you can keep up on the latest news with the company.
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The article Why Akorn Shares Were Crushed originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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