Drug shortages drive demand surge & expansion at Akorn

Drug shortages have swept across the US and sent hospitals searching for other sources. Akorn said the “unprecedented and daunting problem​” has driven “sudden growth​” in demand for its injectables and pushed existing production capacity to the limit.

“[We have revived] products we could not sell in the past due to economic feasibility​”, Raj Rai, CEO of Akorn, said in a call with investors. Akorn is expanding its Somerset, New Jersey facility but the $52m (€39m) move into India is the big shift.

All five facilities, three of which are still being built, are based at one site in northern India. When all the plants are operational capacity at Akorn will more than double. Rai said Akorn is investing $15m to complete the projects and expects to have all the facilities running by the end of 2012.

None of the plants have US Food and Drug Administration (FDA) approval but, Rai said, they are modern and follow good manufacturing practices (GMP). Akorn will install its quality systems and expects to have FDA approval by early 2014.

After gaining approval Akorn will use the capacity to meet US demand for injectables. Anti-infectives, oncology and cardiac-related injectables are opportunities, Rai said, and the Indian capacity will help Akorn in all three areas.

Addition of 230,000 sq ft of capacity in India is accompanied by expansion in New Jersey and hiring at a plant in Decatur, Illinois. Rai said Akorn can “barely keep up with demand​” and is “hiring as fast as [it] can​”.

International expansion​

Akorn considered outsourcing production, instead of adding in-house capacity, but was put off by bad experiences in the past. Manufacturing plants in the US were also looked at, Rai said, but Akorn was unable to find a suitable site.

Believing building capacity would cost more Akorn looked overseas for extra capacity. Entering India also provides other advantages, such as the opportunity to increase sales in emerging markets.

“The company has just started to aggressively pursue an international strategy​”, Rai said. Akorn will target specific overseas opportunities and could also sell its ophthalmic portfolio globally.

Takeover of a US production site remains a possibility though. Akorn still has some cash available, Rai said, and if an opportunity became available the company would consider making the acquisition.