Akorn jumps as RBC highlights ‘encouraging’ early turnaround signs

RBC Capital’s Stanicky raised his price target for Akorn to $5 after the company’s better than expected first quarter results

Shares of Akorn (AKRX) are on the rise after RBC Capital analyst Randall Stanicky told investors in a research note that the company’s better than expected first quarter results and guidance should help ease uncertainty around risk of further downside. The analyst also pointed out that while there is a “long way to go,” the early turnaround is “encouraging.”

‘ENCOURAGING’ EARLY TURNAROUND: RBC Capital’s Stanicky raised his price target on Akorn to $5 from $4, while applying a Speculative Risk qualifier to his Sector Perform rating on the name. The analyst pointed out that the company delivered better results for the first quarter and guidance than expected, which should help uncertainty around risk of further downside that had weighed on shares. Turnaround efforts are well underway and while the year is back-half weighted, sequential improvements are expected through the balance of the year, he added. There is a “long way to go” to get past manufacturing challenges, address high leverage and rebuild the growth story, but Stanicky believes the early turnaround is “encouraging.” Progress on the Food and Drug Administration action items related to inspections continues with the majority of these efforts to be completed by mid-year, he added. Additionally, the analyst pointed out that pipeline rebuilding efforts are a focus but there remain some important opportunities. The other focus will be around addressing the $832M in outstanding debt, he contended.

TAKEOVER SPECULATION: Back in March, Spanish media group Intereconomia claimed that Baxter (BAX) was in advanced talks to buy Akorn. The report said that Baxter’s offer was expected to be around $1.3B. However, a spokeswoman for Baxter denied that the company was in advanced talks with Akorn and said it had no plans to submit an offer to buy the company. The takeover report came after the collapse of Akorn’s agreement to be acquired by Fresenius SE (FSNUY) at eight times its current share price. Late last year, the Delaware Supreme Court ruled in favor of Frenesius SE, permitting the company to cancel its takeover of Akorn given the latter’s rapid downturn in its generic drug business.

PRICE ACTION: In afternoon trading, shares of Akorn have gained almost 24% to $4.39.

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