Akorn, Inc. (AKRX), Hi-Tech Pharmacal Co. (HITK): The New Leader in Ophthalmology

Akorn, Inc. (NASDAQ:AKRX) has filed 57 patents with the FDA seeking awaiting approval, with an estimated market value of $5.4 billion. The acquisition of Hi-Tech Pharmacal Co. (NASDAQ:HITK) has added 18 additional products that are awaiting approval from the FDA and have a market value of $2.6 billion and nearly 25 products currently in the development phase that have a total market of $3.9 billion.

The combined larger scale of operations will result in operational efficiencies accruing to Akorn, and it is expected that the company will be able to materialize annual benefits ranging in between 15 million to 20 million.

Source: Morningstar.

Akorn has financed this deal with borrowings of $600 million from JPMorgan Chase. This has raised the company’s debt-to-equity ratio to 3.2 from 0.5, an exuberant increase of 540%, where the industry norm is a ratio of 0.9. However, this may not be such a big issue in the light of the strong balance sheet and cash profile of the combined company through which Akorn will repay its debt.

Bottom line
After its recent acquisition, Akorn is expected to become the third largest U.S. generic pharmaceutical company in the field of ophthalmology. The company has been working rigorously to achieve its strategic objectives and was able to register a healthy growth in its revenues and profits. In the midst of the rising global demand for ophthalmology, the company has a great future ahead. Hence, this stock seems to uphold upside potential for at least the medium term.

The article The New Leader in Ophthalmology originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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