Akorn Expands into Niche Generics with $640M Buy of Hi-Tech Pharmacal

27-Aug-2013 - Last updated on 28-Aug-2013 at 07:33 GMT

Akorn on Tuesday announced it will acquire specialty pharma manufacturer Hi-Tech Pharmacal for $640M in cash to expand its reach into niche generics.

Under the terms of the agreement, contract Akorn will pay $43.50 per share of Hi-Tech stock, which represents a 23.5% premium over the closing price on Monday. The acquisition is expected to close in the first quarter of 2014 and Akorn expects to achieve between $15m and $20m in annual run-rate synergies within 12 months of close.

The purchase strengthens Akorn’s position as the third largest US generic ophthalmic company and broadens its arsenal to include other generics and niche dosage forms such as oral liquids, topical creams and ointments, nasal sprays and otics. More than 80% of Long Island, NY-based Hi-Tech’s revenue is generated through generic drugs and Akorn will add 18 ANDAs (abbreviated new drug applications) to its list of 57 ANDAs.

The combined company is expected to have annual revenues in excess of $500 million, Akorn said.

Manufacturing Potential

The acquisition will expand Akorn’s manufacturing capabilities beyond sterile ophthalmics and injectables to non-sterile nasal sprays, oral liquids, topical solutions, gels, creams, ointments and unit dose cups.

Hi-Tech also has the ability to manufacture ophthalmic suspensions, which Akorn does not currently have the ability to do, Raj Rai, Akorn’s CEO, said in a conference call on Tuesday.

“So that’s a benefit to develop more suspension products,” he said, noting that the rest of the Hi-Tech manufacturing operations are “quite similar to what Akorn currently has” at its Somerset, NJ, facility.

Hi-Tech has two manufacturing facilities in Long Island, NY, one non-sterile and one sterile, with some redundant capabilities, Rai added, noting the expansion into non-sterile niche dosage forms will be key.

Akorn will look “to capitalize on the manufacturing capabilities of Hi-Tech to further expand our presence in the private label OTC business,” Rai said.

Akorn estimates that the acquisition could open the company up to a manufacturing market for nasal sprays, otics, oral liquids and topicals that’s worth more than $10B combined.