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Akorn to Buy Hi-Tech Pharma

Zacks Equity Research

Akorn, Inc. (AKRX) and Hi-Tech Pharmacal Co., Inc. (HITK) recently entered into an agreement according to which Hi-Tech will be acquired by Akorn for $43.50 per share or $640 million in cash.

The offer price reflects a 23.5% premium on the closing price on the day before the acquisition was announced.

Hi-Tech focuses on specialty manufacturing and marketing of prescription, over-the-counter and nutritional products.

Hi-Tech’s specialty lies in manufacturing liquid and semi-solid dosage forms. It also produces and markets a range of oral solutions and suspensions, as well as topical ointments and creams, nasal sprays, otics, sterile ophthalmics and sterile ointment and gels products.  

Akorn expects the acquisition to provide annual run-rate synergies of $15-$20 million within 12 months after the acquisition is completed. Post acquisition, annual revenues are expected to exceed $500 million. It is expected that the deal will be accretive to Akorn’s non-GAAP adjusted earnings per share immediately upon completion. Akorn expects the transaction to close in the first quarter of 2014.

The acquisition will broaden Akorn’s product portfolio and substantially increase its retail presence in prescription as well as OTC products.

Akorn, which is currently the third largest U.S. generic ophthalmic player, will experience pipeline expansion through this acquisition. Post acquisition, the combined unit will have 73 abbreviated new drug applications (ANDAs) filed with the U.S. Food and Drug Administration (:FDA) of which 57 belongs to Akorn and 18 will come from Hi-Tech.

Akorn currently carries a Zacks Rank #2 (Buy), while Hi-Tech carries a Zacks Rank #5 (Strong Sell). A stock that is worth considering is Gilead Sciences Inc. (GILD) with a Zacks Rank #1 (Strong Buy).

Another acquisition agreement announced recently is that of Sangamo Biosciences Inc. (SGMO) and privately-held biotech company Ceregene, Inc.

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