##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED September 30, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER: 001-32360
 AKORN, INC.
 (Exact Name of Registrant as Specified in its Charter)
 LOUISIANA
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    72-0717400
(I.R.S. Employer
Identification No.)1925 W FIELD CT STE 300
LAKE FOREST, ILLINOIS
(Address of Principal Executive Offices)
    
    60045
(Zip Code)
 (847) 279-6100
(Registrants telephone number, including area code)
  Yes þ No o
  o o
  Large accelerated filero
Accelerated filerþ
Non-accelerated filero(Do not check if a smaller reporting company)
Smaller reporting companyo
  Yes o No þ




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##### 



PagePART I. FINANCIAL INFORMATIONITEM 1. Financial Statements.Condensed Consolidated Balance Sheets-September 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations-Three and nine months ended September 30,
2009 and 2008
    
    
    4Condensed Consolidated Statement of Shareholders Equity- Nine months ended September 30,
2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows- Nine months ended September 30, 2009 and 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    20ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    27ITEM 4. Controls and Procedures.
    
    
    27PART II. OTHER INFORMATIONITEM 1. Legal Proceedings.
    
    
    29ITEM 1A. Risk Factors.
    
    
    29ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    29ITEM 3. Defaults Upon Senior Securities.
    
    
    30ITEM 4. Submission of Matters to a Vote of Security Holders.
    
    
    30ITEM 5. Other Information.
    
    
    30ITEM 6. Exhibits.
    
    
    31EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 AKORN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
 SEPTEMBER 30,
    
    
    DECEMBER 31,2009
    
    
    2008(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    2,018
    
    
    $
    1,063Trade accounts receivable (less allowance for doubtful accounts
of $2 and $22, respectively)
    
    
    11,360
    
    
    
    6,529Other receivable
    
    
    
    
    
    
    1,221Inventories
    
    
    17,409
    
    
    
    30,163Prepaid expenses and other current assets
    
    
    485
    
    
    
    1,770TOTAL CURRENT ASSETS
    
    
    31,272
    
    
    
    40,746PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    32,169
    
    
    
    34,223OTHER LONG-TERM ASSETSIntangibles, net
    
    
    5,033
    
    
    
    6,017Deferred financing costs, net
    
    
    4,060
    
    
    
    272Other
    
    
    1,892
    
    
    
    1,071TOTAL OTHER LONG-TERM ASSETS
    
    
    10,985
    
    
    
    7,360TOTAL ASSETS
    
    $
    74,426
    
    
    $
    82,329LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESTrade accounts payable
    
    $
    4,458
    
    
    $
    8,795Accrued compensation
    
    
    1,469
    
    
    
    1,070Accrued expenses and other liabilities
    
    
    3,856
    
    
    
    2,906Short term subordinated debt  related party
    
    
    
    
    
    
    5,332Revolving line of credit  related party
    
    
    7,509
    
    
    
    Warrants liability  related party
    
    
    6,654
    
    
    
    Supply agreement termination costs
    
    
    1,500
    
    
    
    TOTAL CURRENT LIABILITIES
    
    
    25,446
    
    
    
    18,103LONG-TERM LIABILITIESLease incentive obligation
    
    
    1,350
    
    
    
    1,484Product warranty liability
    
    
    1,299
    
    
    
    1,299Subordinated note  related party
    
    
    5,853
    
    
    
    TOTAL LONG-TERM LIABILITIES
    
    
    8,502
    
    
    
    2,783TOTAL LIABILITIES
    
    
    33,948
    
    
    
    20,886SHAREHOLDERS EQUITYCommon stock, no par value  150,000,000 shares authorized;
90,340,678 and 90,072,662 shares issued and outstanding at
September 30, 2009 and December 31, 2008, respectively
    
    
    173,304
    
    
    
    170,617Warrants to acquire common stock
    
    
    1,821
    
    
    
    2,731Accumulated deficit
    
    
    (134,647
    )
    
    
    (111,905
    )TOTAL SHAREHOLDERS EQUITY
    
    
    40,478
    
    
    
    61,443TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    74,426
    
    
    $
    82,329
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AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
 THREE MONTHS ENDED
    
    
    NINE MONTHS ENDEDSEPTEMBER 30,
    
    
    SEPTEMBER 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    19,371
    
    
    $
    31,874
    
    
    $
    57,711
    
    
    $
    67,562Cost of sales
    
    
    16,686
    
    
    
    21,968
    
    
    
    47,997
    
    
    
    49,082GROSS PROFIT
    
    
    2,685
    
    
    
    9,906
    
    
    
    9,714
    
    
    
    18,480Selling, general and administrative expenses
    
    
    5,187
    
    
    
    6,199
    
    
    
    18,016
    
    
    
    18,370Supply agreement termination expenses
    
    
    
    
    
    
    
    
    
    
    5,929
    
    
    
    Amortization of intangibles
    
    
    320
    
    
    
    339
    
    
    
    1,234
    
    
    
    1,016Research and development expenses
    
    
    1,013
    
    
    
    1,143
    
    
    
    3,681
    
    
    
    4,744TOTAL OPERATING EXPENSES
    
    
    6,520
    
    
    
    7,681
    
    
    
    28,860
    
    
    
    24,130OPERATING (LOSS) INCOME
    
    
    (3,835
    )
    
    
    2,225
    
    
    
    (19,146
    )
    
    
    (5,650
    )Write-off and amortization of deferred financing
costs
    
    
    (187
    )
    
    
    
    
    
    
    (1,739
    )
    
    
    Interest expense, net
    
    
    (441
    )
    
    
    (295
    )
    
    
    (1,095
    )
    
    
    (579
    )Equity in earnings of unconsolidated joint venture
    
    
    484
    
    
    
    447
    
    
    
    672
    
    
    
    447Change in fair value of warrants liability
    
    
    (1,122
    )
    
    
    
    
    
    
    (1,432
    )
    
    
    Other income (expense)
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    (177
    )(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (5,101
    )
    
    
    2,401
    
    
    
    (22,740
    )
    
    
    (5,959
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3NET (LOSS) INCOME
    
    $
    (5,101
    )
    
    $
    2,401
    
    
    $
    (22,742
    )
    
    $
    (5,962
    )NET (LOSS) INCOME PER SHARE:BASIC
    
    $
    (0.06
    )
    
    $
    0.03
    
    
    $
    (0.25
    )
    
    $
    (0.07
    )DILUTED
    
    $
    (0.06
    )
    
    $
    0.03
    
    
    $
    (0.25
    )
    
    $
    (0.07
    )SHARES USED IN COMPUTING NET (LOSS) INCOME PER
SHARE:BASIC
    
    
    90,303
    
    
    
    89,250
    
    
    
    90,209
    
    
    
    89,169DILUTED
    
    
    90,303
    
    
    
    90,065
    
    
    
    90,209
    
    
    
    89,169
  4




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AKORN, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
UNAUDITED
(In Thousands)
 Warrants toacquireCommon Stock
    
    
    Common
    
    
    AccumulatedNine Months Ended September 30, 2009
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Deficit
    
    
    TotalBALANCES AT DECEMBER 31, 2008
    
    
    90,073
    
    
    $
    170,617
    
    
    $
    2,731
    
    
    $
    (111,905
    )
    
    $
    61,443Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,742
    )
    
    
    (22,742
    )Employee stock purchase plan issuances
    
    
    122
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149Amortization of deferred compensation
related to restricted stock awards
    
    
    146
    
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    286Restricted stock awards vested net of
amounts withheld for payment of
employee tax liability
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    (47
    )Stock-based compensation expense
    
    
    
    
    
    
    1,389
    
    
    
    
    
    
    
    
    
    
    
    1,389Expiration of stock warrants
    
    
    
    
    
    
    910
    
    
    
    (910
    )
    
    
    
    
    
    
    BALANCES AT SEPTEMBER 30, 2009
    
    
    90,341
    
    
    $
    173,304
    
    
    $
    1,821
    
    
    $
    (134,647
    )
    
    $
    40,478
 Warrants toacquireCommon Stock
    
    
    Common
    
    
    AccumulatedNine Months Ended September 30, 2008
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Deficit
    
    
    TotalBALANCES AT DECEMBER 31, 2007
    
    
    88,901
    
    
    $
    165,829
    
    
    $
    2,795
    
    
    $
    (103,966
    )
    
    $
    64,658Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,962
    )
    
    
    (5,962
    )Exercise of warrants into common stock
    
    
    50
    
    
    
    101
    
    
    
    (64
    )
    
    
    
    
    
    
    37Exercise of stock options
    
    
    217
    
    
    
    608
    
    
    
    
    
    
    
    
    
    
    
    608Employee stock purchase plan issuances
    
    
    31
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149Amortization of deferred compensation
related to restricted stock awards
    
    
    
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    492Restricted stock awards vested net of
amounts withheld for payment of
employee tax liability
    
    
    66
    
    
    
    (158
    )
    
    
    
    
    
    
    
    
    
    
    (158
    )Stock-based compensation expense
    
    
    
    
    
    
    1,329
    
    
    
    
    
    
    
    
    
    
    
    1,329BALANCES AT SEPTEMBER 30, 2008
    
    
    89,265
    
    
    $
    168,350
    
    
    $
    2,731
    
    
    $
    (109,928
    )
    
    $
    61,153
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AKORN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
 NINE MONTHSENDED SEPTEMBER 302009
    
    
    2008OPERATING ACTIVITIESNet loss
    
    $
    (22,742
    )
    
    $
    (5,962
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    4,118
    
    
    
    3,348Write-off and amortization of deferred financing fees
    
    
    1,739
    
    
    
    Non-cash stock compensation expense
    
    
    1,675
    
    
    
    1,821Non-cash supply agreement termination expense
    
    
    1,051
    
    
    
    Non-cash change in fair value of warrants liability
    
    
    1,432
    
    
    
    Gain on disposal of assets
    
    
    
    
    
    
    (25
    )Equity in earnings of unconsolidated joint venture
    
    
    (672
    )
    
    
    (447
    )Changes in operating assets and liabilities:Trade accounts receivable
    
    
    (4,831
    )
    
    
    (11,620
    )Inventories
    
    
    12,754
    
    
    
    2,662Prepaid expenses and other current assets
    
    
    1,228
    
    
    
    252Other long-term assets
    
    
    
    
    
    
    1,246Supply agreement termination liabilities
    
    
    1,500
    
    
    
    Trade accounts payable
    
    
    (4,337
    )
    
    
    (6,651
    )Accrued expenses and other liabilities
    
    
    1,736
    
    
    
    1,081NET CASH USED IN OPERATING ACTIVITIES
    
    
    (5,349
    )
    
    
    (14,295
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (922
    )
    
    
    (2,742
    )Purchase of product licensing rights
    
    
    (250
    )
    
    
    Proceeds from sale of fixed assets
    
    
    
    
    
    
    74NET CASH USED IN INVESTING ACTIVITIES
    
    
    (1,172
    )
    
    
    (2,668
    )FINANCING ACTIVITIESRepayment of long-term debt
    
    
    
    
    
    
    (208
    )Restricted cash for revolving credit agreement
    
    
    
    
    
    
    (2,050
    )Loan origination fees  new revolving line of credit & subordinated note
    
    
    (1,356
    )
    
    
    Proceeds from line of credit
    
    
    7,509
    
    
    
    5,727Proceeds from warrants exercised
    
    
    
    
    
    
    37Proceeds from subordinated note
    
    
    
    
    
    
    5,000Proceeds under stock option and stock purchase plans
    
    
    1,323
    
    
    
    599NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    7,476
    
    
    
    9,105INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    955
    
    
    
    (7,858
    )Cash and cash equivalents at beginning of period
    
    
    1,063
    
    
    
    7,948CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    2,018
    
    
    $
    90SUPPLEMENTAL DISCLOSURESAmount paid for interest
    
    $
    387
    
    
    $
    534Amount paid for income taxes
    
    $
    3
    
    
    $
    3
  6




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NOTE A  BUSINESS AND BASIS OF PRESENTATION
 Business:
 Basis of Presentation
 NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates:
 Chargebacks:
  7




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Sales Returns:
  NOTE C  STOCK-BASED COMPENSATION
    THREE MONTHS
    
    THREE MONTHSENDED
    
    ENDEDSEPTEMBER 30, 2009
    
    SEPTEMBER 30, 2008Expected volatility
    
    
    81
    %
    
    
    48
    %Expected life (in years)
    
    
    3.9
    
    
    
    4.0Risk-free interest rate
    
    
    2.5
    %
    
    
    3.1
    %Dividend yield
    
    
    
    
    
    
    Fair value per stock option
    
    $
    0.81
    
    
    $
    1.79Forfeiture rate
    
    
    13
    %
    
    
    10
    %
  8




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Weighted AverageNumber of
    
    Weighted
    
    Remaining
    
    AggregateShares
    
    Average
    
    Contractual Term
    
    Intrinsic Value(in thousands)
    
    Exercise Price
    
    (Years)
    
    (in thousands)Outstanding at December 31, 2008
    
    
    3,684
    
    
    $
    5.20
    
    
    
    2.56
    
    
    $
    44Granted
    
    
    1,213
    
    
    
    1.08Exercised
    
    
    Forfeited
    
    
    (1,769
    )
    
    
    5.06Outstanding at September 30, 2009
    
    
    3,128
    
    
    
    3.68
    
    
    
    2.99
    
    
    $
    401Exercisable at September 30, 2009
    
    
    1,557
    
    
    
    5.01
    
    
    
    1.83
    
    
    $
    18
    Number of Shares
    
    Weighted Average(in thousands)
    
    Grant Date Fair ValueNonvested at December 31, 2008
    
    
    125
    
    
    $
    5.74Granted
    
    
    185
    
    
    
    1.59Vested
    
    
    (202
    )
    
    
    3.55Nonvested at September 30, 2009
    
    
    108
    
    
    
    2.73
 NOTE D  REVENUE RECOGNITION
    NOTE E  ACCOUNTS RECEIVABLE ALLOWANCES
  9




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SEPTEMBER 30,
    
    
    DECEMBER 31,2009
    
    
    2008Gross accounts receivable
    
    $
    17,140
    
    
    $
    18,723Less:Allowance for doubtful accounts
    
    
    (2
    )
    
    
    (22
    )Returns reserve
    
    
    (2,456
    )
    
    
    (2,539
    )Discount and allowances reserve
    
    
    (297
    )
    
    
    (322
    )Chargeback and rebates reserves
    
    
    (3,025
    )
    
    
    (9,311
    )Net trade accounts receivable
    
    $
    11,360
    
    
    $
    6,529
  ® ®
   NOTE F  INVENTORIES
  SEPTEMBER 30,
    
    
    DECEMBER 31,2009
    
    
    2008Finished goods
    
    $
    8,120
    
    
    $
    21,000Work in process
    
    
    1,901
    
    
    
    1,802Raw materials and supplies
    
    
    7,388
    
    
    
    7,361$
    17,409
    
    
    $
    30,163
 10




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NOTE G  PROPERTY, PLANT AND EQUIPMENT
  SEPTEMBER 30,
    
    
    DECEMBER 31,2009
    
    
    2008Land
    
    $
    396
    
    
    $
    396Buildings and leasehold improvements
    
    
    20,027
    
    
    
    19,607Furniture and equipment
    
    
    46,661
    
    
    
    46,29767,084
    
    
    
    66,300Accumulated depreciation
    
    
    (35,250
    )
    
    
    (32,710
    )31,834
    
    
    
    33,590Construction in progress
    
    
    335
    
    
    
    633Property, plant, and equipment, net
    
    $
    32,169
    
    
    $
    34,223
 NOTE H  FINANCING ARRANGEMENTS
 Subordinated Note Payable
    Credit Facility
  11




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Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock)
  Series B Warrants
 13




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NOTE I  COMMON STOCK ISSUANCE
  NOTE J  EARNINGS PER COMMON SHARE
    THREE MONTHS ENDED SEPTEMBER 30,
    
    NINE MONTHS ENDED SEPTEMBER 30,2009
    
    2008
    
    2009
    
    2008Basic Shares
    
    
    90,303
    
    
    
    89,250
    
    
    
    90,209
    
    
    
    89,169Effect of Dilutive Securities:Warrants
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    Options
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    Fully Diluted Shares
    
    
    90,303
    
    
    
    90,065
    
    
    
    90,209
    
    
    
    89,169
 NOTE K  INDUSTRY SEGMENT INFORMATION
   14




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THREE MONTHS ENDED SEPTEMBER 30,
    
    
    NINE MONTHS ENDED SEPTEMBER 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUESOphthalmic
    
    $
    4,803
    
    
    $
    5,121
    
    
    $
    12,867
    
    
    $
    15,362Hospital Drugs & Injectables
    
    
    3,220
    
    
    
    6,293
    
    
    
    11,054
    
    
    
    16,226Biologics & Vaccines
    
    
    9,421
    
    
    
    17,879
    
    
    
    27,950
    
    
    
    29,698Contract Services
    
    
    1,927
    
    
    
    2,581
    
    
    
    5,840
    
    
    
    6,276Total revenues
    
    $
    19,371
    
    
    $
    31,874
    
    
    $
    57,711
    
    
    $
    67,562GROSS PROFITOphthalmic
    
    $
    1,406
    
    
    $
    1,553
    
    
    $
    1,957
    
    
    $
    4,363Hospital Drugs & Injectables
    
    
    39
    
    
    
    2,384
    
    
    
    1,149
    
    
    
    4,813Biologics & Vaccines
    
    
    1,041
    
    
    
    5,290
    
    
    
    6,073
    
    
    
    7,444Contract Services
    
    
    199
    
    
    
    679
    
    
    
    535
    
    
    
    1,860Total gross profit
    
    
    2,685
    
    
    
    9,906
    
    
    
    9,714
    
    
    
    18,480Operating expenses
    
    
    6,520
    
    
    
    7,681
    
    
    
    28,860
    
    
    
    24,130Operating (loss) income
    
    
    (3,835
    )
    
    
    2,225
    
    
    
    (19,146
    )
    
    
    (5,650
    )Interest & other
(expense)/income
    
    
    (1,266
    )
    
    
    176
    
    
    
    (3,594
    )
    
    
    (309
    )(Loss)/ income before
income taxes
    
    $
    (5,101
    )
    
    $
    2,401
    
    
    $
    (22,740
    )
    
    $
    (5,959
    )
  NOTE L  COMMITMENTS AND CONTINGENCIES
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NOTE M  CUSTOMER AND SUPPLIER CONCENTRATION
     NOTE N  RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value
Measurements
 Non-Controlling
Interests in Consolidated Financial Statements an amendment of ARB No. 51
 Business Combinations
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Determination
of the Useful Life of Intangible Assets)
  Subsequent Events
 The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles
 NOTE O  UNCONSOLIDATED JOINT VENTURE
    NOTE P  SEVERANCE CHARGES
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NOTE Q  SUBSEQUENT EVENTS
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Item 2.
 AKORN, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE RESULTS
  
    
    our ability to comply with all of the requirements of the U.S. Food and Drug
Administration (FDA), including current Good Manufacturing Practices regulations;
    
    our ability to avoid defaults under debt covenants;
    
    our ability to obtain regulatory approvals for products manufactured in our new
lyophilization facility;
    
    our ability to generate cash from operations sufficient to meet our working capital
requirements;
    
    our ability to obtain additional funding or financing to operate and grow our business;
    
    the effects of federal, state and other governmental regulation on our business;
    
    our success in developing, manufacturing, acquiring and marketing new products;
    
    our ability to make timely payments to our Td vaccine supplier;
    
    the success of our strategic partnerships for the development and marketing of new
products;
    
    our ability to bring new products to market and the effects of sales of such products on
our financial results;
    
    the effects of competition from generic pharmaceuticals and from other pharmaceutical
companies;
    
    availability of raw materials needed to produce our products; and
    
    other factors referred to in this Form 10-Q, our Form 10-K and our other SEC filings.
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RESULTS OF OPERATIONS
 THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2008
  THREE MONTHS ENDED SEPTEMBER 30,2009
    
    
    2008Ophthalmic
    
    $
    4,803
    
    
    $
    5,121Hospital Drugs & Injectables
    
    
    3,220
    
    
    
    6,293Biologics & Vaccines
    
    
    9,421
    
    
    
    17,879Contract Services
    
    
    1,927
    
    
    
    2,581Total revenues
    
    $
    19,371
    
    
    $
    31,874
        NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2008
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NINE MONTHS ENDED SEPTEMBER 302009
    
    
    2008Ophthalmic
    
    $
    12,867
    
    
    $
    15,362Hospital Drugs & Injectables
    
    
    11,054
    
    
    
    16,226Biologics & Vaccines
    
    
    27,950
    
    
    
    29,698Contract Services
    
    
    5,840
    
    
    
    6,276Total revenues
    
    $
    57,711
    
    
    $
    67,562
  ® ®
        FINANCIAL CONDITION AND LIQUIDITY
 Overview
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Credit Facility
     23




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Subordinated Debt
   24




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Series B Warrants
  CONTRACTUAL OBLIGATIONS
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CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 Non-Controlling Interests in
Consolidated Financial Statements an amendment of ARB No. 51
 Business Combinations
 Determination of the
Useful Life of Intangible Assets)
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Subsequent
Events
 The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
 OFF-BALANCE SHEET ARRANGEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
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Changes in Internal Control Over Financial Reporting
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
     
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Nominee
    
    Votes For
    
    Votes WithheldJohn N. Kapoor, Ph.D.
    
    
    48,868,056
    
    
    
    231,478Jerry N. Ellis
    
    
    46,735,387
    
    
    
    2,364,147Ronald M. Johnson
    
    
    46,739,320
    
    
    
    2,360,214Subhash Kapre, Ph.D.
    
    
    41,451,341
    
    
    
    7,648,193Brian Tambi
    
    
    48,886,720
    
    
    
    212,814Steven J. Meyer
    
    
    48,887,111
    
    
    
    212,423Alan Weinstein
    
    
    48,887,178
    
    
    
    212,356Randall J. Wall
    
    
    48,887,428
    
    
    
    212,106
    
 ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
 W
 ExhibitNo.
    
    Description(4.1)
    
    Common Stock Purchase Warrant dated August 17, 2009, in favor of EJ Funds LP.
(Incorporated by reference to Exhibit 10.2 of a Form 8-K filed on August 21, 2009.)(4.2)
    
    Common Stock Purchase Warrant dated August 17, 2009, in favor of John N. Kapoor Trust
Dated 9/20/89. (Incorporated by reference to Exhibit 10.4 of a Form 8-K filed on
August 21, 2009.)(10.1)
    
    Amended and Restated Credit Agreement dated August 17, 2009, by and among the
Company, Akorn (New Jersey), Inc., a wholly owned subsidiary of the Company, other
persons party thereto that are designated as credit parties, EJ Funds LP, and the
other financial institution from time to time party thereto. (Incorporated by
reference to Exhibit 10.1 of a Form 8-K filed on August 21, 2009.)(10.2)
    
    Amended and Restated Subordinated Note dated August 17, 2009, made by the Company and
Akorn (New Jersey), Inc., in favor of John N. Kapoor Trust Dated 9/20/89.
(Incorporated by reference to Exhibit 10.3 of a Form 8-K filed on August 21, 2009.)(10.3)
    
    Registration Rights Agreement made and entered into as of August 17, 2009 by and
among the Company, John N. Kapoor Trust Dated 9/20/89 and EJ Funds LP. (Incorporated
by reference to Exhibit 10.5 of a Form 8-K filed on August 21, 2009.)(10.4)
    
    Amended and Restated Subordination Agreement dated as of August 17, 2009 by and among
John N. Kapoor Trust Dated 9/20/89, the Company, Akorn (New Jersey), Inc. and EJ
FUNDS LP. (Incorporated by reference to Exhibit 10.6 of a Form 8-K filed on August
21, 2009.)(31.1)*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a).(31.2)*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a).(32.1)*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.(32.2)*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.
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SIGNATURES
  AKORN, INC./s/ Timothy A. DickTimothy A. DickSr. Vice President, Chief Financial Officer
(Duly Authorized and Principal Financial Officer)  32