Q2 2008 Akorn, Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day everyone and welcome to the Akorn, Incorporated Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the President and CEO, Mr. Arthur Przybyl. Please go ahead, Sir.

ART PRZYBYL, PRESIDENT, CEO, AKORN INC.: Thank you. Good afternoon, ladies and gentlemen, and welcome to Akorn's Conference Call. My name is Art Przybyl, and presenting our financial position today is Jeff Whitnell, our Chief Financial Officer. We will hold a brief question and answer period at the end of the presentation.

Our second quarter results met our expectations. We continue to demonstrate our improving business model. Total revenue for the second quarter was $21.2 million, an increase of approximately 82% over the prior year period. At the same time, gross profit for the quarter was $4.8 million, an increase of 67% over the prior year period.

The increase in gross profit is due primarily to tetanus diphtheria vaccine sales, which contributed an incremental $1.8 million as compared to the prior year period. Not including vaccines, gross margin for our business improved from 24.8% to 27.1% as compared to the prior year period.

In our ophthalmic business segment, revenues increased by 10% over the prior year period. Historically, since 2005, ophthalmic business revenues have consistently generated approximately $20 million annually. Revenue growth in this segment is dependent on new product introductions and their FDA approval.

Currently, we have 13 ophthalmic products under development. Of these, seven are on file with the FDA, and six are under development. Our most important ophthalmic product is our internally developed, new drug application for a new ocular topical anesthetic, Akten. When approved, we believe Akten represents a $225 million market opportunity for us, and a significant short-term revenue opportunity. Recently, we received an approval letter for Akten, and expect to launch Akten in the second half of 2008.

In our hospital drugs and injectable business segment, revenues decreased by 6% as compared to the prior year period. Historically, since 2005, hospital drugs and injectable business segment revenues, excluding dTpa sales to HHS, have grown from approximately $14 million in 2005 to $20 million in 2007. Revenue growth in this segment is also dependent on new product introductions and their FDA approval. Currently, we have 32 hospital drug and injectable products under development. Of those, 10 are on file with the FDA, and 22 are under development.

In this business segment, there are three significant short-term catalysts for revenue growth in the second half of 2008. We're awaiting FDA approvals for an oral generic Vancomycin and an injectable Schedule II narcotic. We also continue to model the potential for a forward …