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Here's Why Akorn Stock Rose as Much as 14.4% Today

Maxx Chatsko, The Motley Fool

What happened

Shares of Akorn (NASDAQ: AKRX) jumped over 14% on Monday after the company announced multiple regulatory approvals. The specialty generic-pharmaceutical leader said Abbreviated New Drug Applications (ANDAs) have been accepted by the U.S. Food and Drug Administration for its fluticasone propionate nasal spray and loteprednol etabonate ophthalmic suspension. 

The former is a common allergy medication sold under brand names such as Flonase. The latter is used to treat eye redness, itching, and watering, and is sold under brand names like Alrex and Lotemax. Akorn can now sell identical formulations under its own generic brands and begin capturing market share for each.

As of 12:23 p.m. EDT, the stock had settled to a 8.7% gain.

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So what

Considering the recent turbulence at Akorn, earning marketing approvals is key to growing revenue (which has fallen each year since 2016) and regaining the trust of both investors and customers. That said, analysts are much more excited about the nasal spray than the eye drops. Total annual U.S. sales of loteprednol etabonate ophthalmic suspension were just $89 million in the 12 months ending February 2019, according to the press release.

The market for fluticasone propionate nasal spray is considerably larger. Annual U.S. sales for branded and generic formulations were estimated at $343 million when Perrigo entered the market with its own generic product in mid-2016. 

Of course, a larger market opportunity also attracts more competition. GlaxoSmithKline, the owner of the market-leading Flonase brand, has identified "competitive pressures" as a key reason for stagnant and declining sales in recent years. It generates over $200 million in annual revenue from the Flonase franchise, but has spent nearly that much in advertising since the product first launched in 2015. 

Now what

If Akorn can successfully carve out a significant market share for its generic fluticasone propionate nasal spray, then it could help to reverse a multiyear slide in revenue. But it's going to be very difficult considering the business is going up against well-funded peers with an established market presence. Individual investors yearning for more information will need to wait for the next quarterly earnings conference call on May 7.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.