GlobeNewswire Inc | Aug 7, 2020 04:25PM EDT

August 07, 2020

LAKE FOREST, Ill., Aug. 07, 2020 (GLOBE NEWSWIRE) -- Akorn, Inc. (The OTC Pink Market: AKRXQ), a leading specialty pharmaceutical company, today announced its financial results for the second quarter of 2020.

Second Quarter 2020 Results and Recent Developments

-- Net revenue was $120 million, down $58 million, 32% from the prior year quarter -- Net loss was $69 million, compared to $112 million loss in the prior year quarter -- Adjusted EBITDA was $(2) million, compared to $36 million in the prior year quarter -- Filed for Chapter 11 bankruptcy protection on May 20, 2020, and executed a Restructuring Support Agreement with lenders serving as the stalking horse bidder in the Company's sale process

Summary Financial Results for the Quarter Ended June 30, 2020

Akorn's reported net revenue was $120.3 million for the three month period ended June30, 2020, representing a decrease of $57.8 million, or 32.4%, as compared to net revenue of $178.1 million for the three month period ended June 30, 2019. The decrease in net revenue resulted from a $54.9 million decline in organic revenue, and a $5.6 million, decline in revenue from discontinued products, partially offset by a $2.8 million increase in net revenue from new products. The $54.9 million decline in organic revenue was due an unfavorable volume impact of approximately $52.3 million, or 30.7% and an unfavorable price variance of approximately $2.6 million, or 1.5%. The $52.3 million volume decline was principally a result of lower demand due to the COVID-19 pandemic, which caused significant disruption to healthcare practices limiting patient access to treatments, particularly in the areas of ophthalmology and acute care.

Gross profit for the quarter ended June30, 2020, was $31.1 million, or 25.8% of net revenue, compared to $68.0 million, or 38.2% of net revenue, in the corresponding prior year quarter. The decrease in the gross profit percentage was principally due to the impacts of the COVID-19 pandemic, which included unfavorable volume and product mix, unfavorable manufacturing variances, along with increased employee retention costs.

GAAP net (loss) for the second quarter of 2020, was $(68.7) million, or $(0.51) per diluted share, compared to GAAP net (loss) of $(111.6) million, or $(0.89) per diluted share, for the same quarter of 2019. After a net adjustment of $41 million to net income for non-GAAP items, adjusted diluted earnings per share for the second quarter of 2020 was $(0.21), compared to $0.09 in the same quarter of 2019, after a net adjustment of $123 million to net income for non-GAAP items. See "Non-GAAP Financial Measures" below.

Earnings before interest, taxes, depreciation and amortization (EBITDA), which is a non-GAAP measure, was $(48.1) million for the second quarter of 2020, compared to $(75.4) million for the second quarter of 2019. Adjusted EBITDA, which is also a non-GAAP measure used by management to evaluate the performance of the Akorn business, was $(1.9) million for the second quarter of 2020, compared to $36.1 million for the second quarter of 2019. See "Non-GAAP Financial Measures" below.

Summary Financial Results for the Six Months Ended June 30, 2020

Akorn's reported net revenue was $325.0 million for the six month period ended June30, 2020, representing a decrease of $18.9 million, or 5.5%, as compared to net revenue of $343.9 million for the six month period ended June 30, 2019. The decrease in net revenue in the period was primarily due to a $44.9 million decline in organic revenue, partially offset by an increase of $16.3 million from discontinued products, and an increase of $9.7 million from new product revenue. The $44.9 million decrease in organic revenue was due to approximately $65.2 million, or 20.2%, of volume declines partially offset by $20.3 million, or 6.3%, of favorable price variance. The $65.2 million volume decline was principally a result of lower demand due to the COVID-19 pandemic, which caused significant disruption to healthcare practices limiting patient access to treatments, particularly in the areas of ophthalmology and acute care. The $16.3 million increase in discontinued products revenue was driven by approximately $35.9 million of net revenue generated during the three month period ended March 31, 2020, from a sale of remaining inventory of an unapproved product that has since been discontinued.

Gross profit for the six month period ended June30, 2020, was $125.6 million, or 38.6% of net revenue, compared to $121.5 million, or 35.3% of net revenue, in the corresponding prior year period. The increase in the gross profit percentage was principally due to favorable price and product mix, which was driven by sales of an unapproved product that was discontinued in the first quarter of 2020, and decreased costs associated with FDA compliance related activities. These factors were mostly offset by the impacts of the COVID-19 pandemic in the second quarter 2020, which included unfavorable volume and product mix, and unfavorable manufacturing variances.

GAAP net (loss) for the six month period ended June30, 2020, was $(325.4) million, or $(2.49) per diluted share, compared to GAAP net (loss) of $(193.8) million, or $(1.54) per diluted share, for the same period of 2019. After a net adjustment of $343.8 million to net income for non-GAAP items, adjusted diluted earnings per share for the six month period ended June30, 2020 was $0.14, compared to $0.10 in the same period of 2019, after a net adjustment of $206.5 million to net income for non-GAAP items. See "Non-GAAP Financial Measures" below.

Goodwill impairments during the six month period ended June30, 2020 were $267.9 million, an increase of $251.9 million, over the corresponding prior year amount of $16.0 million. The $251.9 million increase in impairments was from events that occurred that created significant uncertainty in our business and caused a significant decline in the Companys enterprise value.

EBITDA, which is a non-GAAP measure, was $(290.1) million for the six month period ended June30, 2020, compared to $(123.1) million for the same period of 2019. Adjusted EBITDA, which is also a non-GAAP measure used by management to evaluate the performance of the Akorn business, was $57.3 million for the six month period ended June30, 2020, compared to $59.5 million for the period of 2019. See "Non-GAAP Financial Measures" below.

About Akorn:Akorn, Inc. is a specialty pharmaceutical company engaged in the development, manufacture and marketing of multisource and branded pharmaceuticals. Akorn has manufacturing facilities located in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland and Paonta Sahib, India that manufacture ophthalmic, injectable and specialty sterile and non-sterile pharmaceuticals. Additional information is available on Akorns website at www.akorn.com.

Non-GAAP Financial Measures:

To supplement Akorns financial results presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP (also referred to as adjusted or non-GAAP adjusted) financial measures in this press release and the accompanying tables, including (1) EBITDA, (2) adjusted EBITDA, (3) adjusted net (loss) income, (4) adjusted diluted earnings per share, (5) net debt, and (6) net debt to adjusted EBITDA ratio. These non-GAAP measures adjust for certain specified items that are described in this release. The Company believes that each of these non-GAAP financial measures is helpful in understanding its past financial performance and potential future results. The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for or superior to comparable GAAP measures.

Akorns management uses these measures in analyzing its business and financial condition. Akorns management believes that the presentation of these and other non-GAAP financial measures provide investors greater transparency into Akorns ongoing results of operations allowing investors to better compare the Companys results from period to period.

Investors should note that these non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with the Companys results of operations as determined in accordance with GAAP. Investors should also note that these non-GAAP financial measures have no standardized meaning prescribed by GAAP and; therefore, have limits in their usefulness to investors. In addition, from time-to-time in the future there may be other items that the Company may exclude for purposes of its non-GAAP financial measures; likewise, the Company may in the future cease to exclude items that it has historically excluded for purposes of its non-GAAP financial measures. Because of the non-standardized definitions, the non-GAAP financial measures as used by Akorn in this press release and the accompanying tables may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by the Companys competitors and other companies.

Set forth below is the definition of each non-GAAP financial measure as used by the Company in this press release and a full reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measures.

EBITDA, as defined by the Company, represents net loss before net interest expense, (benefit) provision for income taxes and depreciation and amortization.

Adjusted EBITDA, as defined by the Company, is calculated as follows:

Net (loss), (minus) plus

Interest (expense), net(Benefit) provision for income taxesDepreciation and amortizationNon-cash expenses, such as impairment of goodwill, impairment of intangible assets, impairment of fixed assets and other, gain on disposal of fixed assets, share-based compensation expense, and amortization of deferred financing costsOther adjustments, such as legal settlements and various merger and acquisition-related expenses, employee retention and other compensation, legal and financial advisory fees, data integrity investigations & assessment, India costs (excluding depreciation and interest), bankruptcy, FDA compliance related expenses, other settlements and fees and Fresenius transaction & Securities Class Action Litigation.

Adjusted EBITDA is deemed by the Company to be a useful performance indicator because it includes an add back of non-cash or non-recurring operating expenses that have no impact on continuing cash flows as well as other items that are not expected to recur and therefore are not reflective of continuing operating performance.

Adjusted net (loss) income, as defined by the Company, is calculated as follows:

Net (loss), (minus) plus

Amortization expenseNon-cash expenses, such as impairment of goodwill, impairment of intangible assets, impairment of fixed assets and other, gain on disposal of fixed assets, share-based compensation expense, and amortization of deferred financing costsOther adjustments, such as merger and acquisition-related expenses, employee retention and other compensation, legal and financial advisory fees, data integrity investigations & assessment, India costs (excluding depreciation and interest), bankruptcy, FDA compliance related expenses, other settlements and fees and Fresenius transaction & Securities Class Action LitigationLess an estimated tax (benefit) provision, net of the benefit from utilizing net operating loss carry-forwards effected for the adjustments noted above.

Adjusted diluted earnings per share, as defined by the Company, is equal to adjusted net (loss) income divided by the actual or anticipated diluted share count for the applicable period.

The Company believes that adjusted net income and adjusted diluted earnings per share are meaningful financial indicators, to both Company management and investors, in that they exclude non-cash income and expense items that have no impact on current or future cash flows, as well as other income and expense items that are not expected to recur and therefore are not reflective of continuing operating performance.

Net debt, as defined by the Company, is gross debt including Akorns term loan and debtor-in-possession financing less cash and cash equivalents.

Net debt to adjusted EBITDA ratio, as defined by the Company, is net debt divided by the trailing twelve months adjusted EBITDA.

The shortcomings of non-GAAP financial measures as performance measures are that they provide a view of the Companys results of operations without including all events during a period. For example, adjusted EBITDA does not take into account the impact of capital expenditures on either the liquidity or the financial performance of the Company and likewise omits share-based compensation expenses, which may vary over time and may represent a material portion of overall compensation expense. Adjusted net (loss) income does not take into account non-cash expenses that reflect the amortization of past expenditures, or include share-based compensation, which is an important and material element of the Company's compensation package for its directors, officers and other key employees. Due to the inherent limitations of non-GAAP financial measures, investors should consider non-GAAP measures only as a supplement to, and not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. Investors and other readers are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable GAAP measures as presented in this press release.

Cautionary Note Regarding Forward-Looking Statements

This press release includes statements that may constitute forward-looking statements, including those regarding the effects of COVID-19, as well as the Companys long-term business plan and outlook, financial performance, the voluntary cases under chapter 11 (Chapter 11) of title 11 of the United States Code (the Bankruptcy Code) of Akorn, Inc. and its U.S. direct and indirect subsidiaries, the Companys ability to continue operating in the ordinary course while the Chapter 11 cases are pending, and the Company's ability to complete the sale of some or all of its assets pursuant to Section 363 of the Bankruptcy Code (the Sale). When used in this release, the words will, expect, continue, believe, seek, anticipate, estimate, intend, could, would, strives and similar expressions are generally intended to identify forward-looking statements. These statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). A number of important factors could cause actual results of the Company and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to: (i) the Companys ability to consummate the Sale; (ii) potential adverse effects of the Chapter 11 cases on the Companys liquidity and results of operations; (iii) the Companys ability to obtain timely approval by the Court with respect to the motions filed in the Chapter 11 cases; (iv) objections that could protract the Chapter 11 Cases; (v) employee attrition and the Companys ability to retain senior management and other key personnel due to the distractions and uncertainties; (vi) the Companys ability to comply with the restrictions imposed by the terms and conditions of the DIP Facility and other financing arrangements; (vii) the Companys ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities as a result of the Chapter 11 cases; (viii) the effects of the Chapter 11 cases on the Company and on the interests of various constituents, including holders of the Companys common stock; (ix) the Courts rulings on the outcome of the Chapter 11 cases generally; (x) the length of time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 cases; (xi) risks associated with third party motions in the Chapter 11 cases, which may interfere with the Companys ability to consummate the Sale or an alternative transaction; (xii) increased administrative and legal costs related to the Chapter 11 process; potential delays in the Chapter 11 process due to the effects of the COVID-19 virus; (xiii) other litigation and inherent risks involved in a bankruptcy process; and (xiv) such other risks and uncertainties outlined in the risk factors detailed in Part I, Item 1A, Risk Factors, of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (as filed with the SEC on February 26, 2020), Part II, Item 1A, Risk Factors, of the Companys Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 2020 (as filed with the SEC on May 11, 2020) and June 30, 2020 (as filed with the SEC on August 7, 2020) and other risk factors identified from time to time in the Companys filings with the SEC. Readers should carefully review these risk factors, and should not place undue reliance on the Companys forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this release. The Company undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

AKORN, INC.(Debtor-in-possession)CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (In Thousands, Except Per Share Data)(Unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Revenues, net $ 120,310 $ 178,057 $ 325,003 $ 343,928 Cost of sales(exclusive ofamortization ofintangibles, 89,258 110,073 199,407 222,431 included withinoperating expensesbelow)GROSS PROFIT 31,052 67,984 125,596 121,497 Selling, generaland administrative 70,921 61,042 135,977 133,540 expensesResearch anddevelopment 9,457 9,495 19,268 18,209 expensesAmortization of 6,152 9,950 12,294 21,015 intangiblesImpairment of ? ? 267,923 15,955 goodwillImpairment of 400 394 400 10,748 intangible assetsLitigationrulings, ? 74,469 (7,470 ) 74,879 settlements andcontingenciesTOTAL OPERATING 86,930 155,350 428,392 274,346 EXPENSESOPERATING (LOSS) (55,878 ) (87,366 ) (302,796 ) (152,849 ) Amortization ofdeferred financing ? (5,655 ) (8,629 ) (6,959 ) costsInterest expense, (32,674 ) (17,341 ) (57,038 ) (31,668 ) netReorganization (5,809 ) ? (5,809 ) ? items, netOthernon-operating (65 ) 245 (326 ) 598 (expense) income,net(LOSS) BEFORE (94,426 ) (110,117 ) (374,598 ) (190,878 ) INCOME TAXESIncome tax(benefit)/ (25,764 ) 1,482 (49,209 ) 2,902 provision NET (LOSS) $ (68,662 ) $ (111,599 ) $ (325,389 ) $ (193,780 ) Net (Loss) perCommon Share, $ (0.51 ) $ (0.89 ) $ (2.49 ) $ (1.54 ) basic and diluted SHARES USED INCOMPUTING NET (LOSS) PER COMMONSHARE:WEIGHTED AVERAGE 133,423 126,043 130,535 125,806 BASIC AND DILUTED COMPREHENSIVE (LOSS):Net (loss) $ (68,662 ) $ (111,599 ) $ (325,389 ) $ (193,780 ) Unrealized holdinggain/(loss) onavailable-for-salesecurities, net oftax of $(1) and $1for the threemonth periods 4 (3 ) 3 (3 ) ended June 30,2020 and 2019, and$(1) and $1 forthe six monthperiods ended June30, 2020 and 2019,respectively.Foreign currency 646 1,380 122 956 translation gainPension liabilityadjustment gain,net of tax of $(29) and $(48) forthe three monthperiods ended June30, 2020 and 2019, 115 190 229 74 and $(58) and $(19) for the sixmonth periodsended June 30,2020 and 2019,respectively.COMPREHENSIVE $ (67,897 ) $ (110,032 ) $ (325,035 ) $ (192,753 ) (LOSS)

AKORN, INC.(Debtor-in-possession)CONDENSED CONSOLIDATED BALANCE SHEETS(In Thousands, Except Share Data)

June 30, 2020 December 31, (Unaudited) 2019ASSETS CURRENT ASSETS Cash and cash equivalents $ 83,130 $ 144,804 Trade accounts receivable, net 131,332 134,173 Inventories, net 185,181 170,047 Income taxes receivable 50,204 1,211 Prepaid expenses and other current assets 31,693 29,812 TOTAL CURRENT ASSETS 481,540 480,047 PROPERTY, PLANT AND EQUIPMENT, NET 281,682 295,533 OTHER LONG-TERM ASSETS Goodwill ? 267,923 Intangible assets, net 203,107 215,801 Right-of-use assets, net - Operating leases 21,404 22,445 Other non-current assets 14,031 6,890 TOTAL OTHER LONG-TERM ASSETS 238,542 513,059 TOTAL ASSETS $ 1,001,764 $ 1,288,639 LIABILITIES AND SHAREHOLDERS? (DEFICIT) EQUITYCURRENT LIABILITIES Trade accounts payable $ 31,786 $ 44,958 Accrued royalties 1,968 5,956 Accrued compensation 20,438 13,005 Debtor-in-possession financing 30,000 ? Current portion of long-term debt (net of 855,246 843,328 deferred financing costs)Accrued administrative fees 23,612 31,725 Current portion of accrued legal fees and 4,364 23,673 contingenciesCurrent portion of lease liability - 132 2,290 Operating leasesAccrued expenses and other liabilities 22,466 20,652 TOTAL CURRENT LIABILITIES 990,012 985,587 LIABILITIES SUBJECT TO COMPROMISE 76,516 ? LONG-TERM LIABILITIES Deferred tax liability ? 225 Uncertain tax liabilities 2,741 2,633 Long-term lease liability - Operating leases 269 22,021 Long-term portion of accrued legal fees and ? 33,000 contingenciesPension obligations and other liabilities 10,925 10,881 TOTAL LONG-TERM LIABILITIES 13,935 68,760 TOTAL LIABILITIES 1,080,463 1,054,347 SHAREHOLDERS? (DEFICIT) EQUITY Preferred stock, $1 par value - 5,000,000shares authorized; no shares issued or ? ? outstanding at June 30, 2020 and December 31,2019.Common stock, no par value ? 150,000,000shares authorized; 133,407,696 and126,145,832 shares issued and outstanding at 607,565 595,521 June 30, 2020 and December 31, 2019,respectively.(Accumulated deficit) (659,327 ) (333,938 ) Accumulated other comprehensive (loss) (26,937 ) (27,291 ) TOTAL SHAREHOLDERS? (DEFICIT) EQUITY (78,699 ) 234,292 TOTAL LIABILITIES AND SHAREHOLDERS? EQUITY $ 1,001,764 $ 1,288,639

AKORN, INC.(Debtor-in-possession)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)(Unaudited)

Six Months Ended June 30, 2020 2019OPERATING ACTIVITIES: Net (loss) $ (325,389 ) $ (193,780 ) Adjustments to reconcile consolidated net(loss) to net cash (used in) operating activities:Depreciation and amortization 27,493 36,123 Amortization of debt financing costs 8,629 6,959 Debt financing costs (debtor-in-possession) 1,950 ? Impairment of intangible assets 400 10,748 Goodwill impairment 267,923 15,955 Fixed asset impairment and other 13,638 10,227 Non-cash stock compensation expense 7,778 10,308 Non-cash interest expense 3,289 913 Deferred income taxes, net (225 ) 366 Other (83 ) (29 ) Changes in operating assets and liabilities: Other non-current assets (7,347 ) 440 Trade accounts receivable 2,929 (19,496 ) Inventories, net (14,882 ) 11,186 Prepaid expenses and other current assets (1,893 ) 4,985 Income taxes receivable (48,993 ) 992 Trade accounts payable (1,749 ) 2,078 Accrued legal fees and contingencies (10,734 ) 68,662 Uncertain tax liabilities 108 2,526 Accrued expenses and other liabilities 6,099 1,526 NET CASH (USED IN) OPERATING ACTIVITIES $ (71,059 ) $ (29,311 ) INVESTING ACTIVITIES: Proceeds from disposal of assets 386 ? Payments for intangible assets ? (87 ) Purchases of property, plant and equipment (18,944 ) (16,863 ) NET CASH (USED IN) INVESTING ACTIVITIES $ (18,558 ) $ (16,950 ) FINANCING ACTIVITIES: Stock compensation plan withholdings for (98 ) (269 ) employee taxesProceeds from borrowing (debtor-in-possession) 30,000 ? Debt financing costs (debtor-in-possession) (1,950 ) ? Lease payments (10 ) (338 ) NET CASH PROVIDED BY / (USED IN) FINANCING $ 27,942 $ (607 ) ACTIVITIESEffect of exchange rate changes on cash and (66 ) 141 cash equivalents(DECREASE) IN CASH AND CASH EQUIVALENTS $ (61,741 ) $ (46,727 ) Cash, cash equivalents, and restricted cash at 145,607 225,794 beginning of periodCASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT $ 83,866 $ 179,067 END OF PERIODSUPPLEMENTAL DISCLOSURES: Amount paid for interest $ 56,216 $ 34,179 Amount (received) for income taxes, net $ (65 ) $ (14,859 ) Additional capital expenditures included in $ 2,698 $ 3,277 accounts payableCommon shares issued to settle shareholder $ 4,364 $ ? litigationStandstill Agreement related non-cash interest $ 3,289 $ ?

Reconciliation of GAAP Net (Loss) to Non-GAAP EBITDA and Adjusted EBITDA (Debtor-in-possession)(In Thousands)(Unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019NET (LOSS) $ (68,662 ) $ (111,599 ) $ (325,389 ) $ (193,780 ) ADJUSTMENTS TO ARRIVE AT EBITDA: Interest expense, 32,674 17,341 57,038 31,668 net Depreciation 7,462 7,419 15,189 15,057 expense Amortization 6,157 9,955 12,304 21,066 expense Income tax (25,764 ) 1,482 (49,209 ) 2,902 (benefit)/provisionEBITDA (48,133 ) (75,402 ) (290,067 ) (123,087 ) NON-CASH AND OTHERNON-RECURRING INCOME AND EXPENSES Impairment of ? ? 267,923 15,955 goodwill Employee retention and other 8,926 2,545 19,475 5,438 compensation^(A) Legal and financial 8,896 4,290 18,552 10,038 advisory fees Impairment of fixed 13,638 138 13,638 10,227 assets and other Amortization of deferred financing ? 5,654 8,629 6,959 costs Non-cash stock compensation 4,347 5,588 7,778 10,308 expense FDA compliance related expenses^ 1,645 11,851 6,314 22,841 (A) Reorganization 5,809 ? 5,809 ? items, net Fresenius transaction & 1,263 1,739 2,539 3,445 Securities Class Action Litigation India costs (excluding 1,210 1,447 2,257 3,714 depreciation and interest)^(A) Other settlements 14 ? 1,156 ? and fees Impairment of 400 393 400 10,748 intangible assets Data integrity investigations & 4 3,380 357 8,020 assessment Merger and acquisition-related 47 9 79 6 expenses (Gain) on disposal ? 2 (82 ) (30 ) of fixed assets Litigation rulings, settlements and ? 74,469 (7,470 ) 74,879 contingenciesADJUSTED EBITDA $ (1,934 ) $ 36,103 $ 57,287 $ 59,461

(A) Certain 2019 information has been recast to conform with 2020 presentation. See the related tables below.

Reconciliation of GAAP Net (Loss) to non-GAAP Adjusted Net (Loss) Income and Adjusted Diluted Earnings Per Share(Debtor-in-possession)(In Thousands, Except Per Share Data)(Unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Net (Loss) $ (68,662 ) $ (111,599 ) $ (325,389 ) $ (193,780 ) Income tax (25,764 ) 1,482 (49,209 ) 2,902 (benefit)/provision (LOSS) BEFORE $ (94,426 ) $ (110,117 ) $ (374,598 ) $ (190,878 ) INCOME TAXES ADJUSTMENTS TOARRIVE AT ADJUSTED NET INCOME:Impairment of ? ? 267,923 15,955 goodwill (5)Impairment of fixed 13,638 138 13,638 10,227 assets (7)Amortization 6,157 9,955 12,304 21,066 expense (4)Amortization ofdeferred financing ? 5,654 8,629 6,959 costs (6)Non-cash stockcompensation 4,347 5,588 7,778 10,308 expense (1, 2, 3)Impairment ofintangible assets 400 393 400 10,748 (5)(Gain) on disposal ? 2 (82 ) (30 ) of fixed assets (1)Employee retentionand other 8,926 2,545 19,475 5,438 compensation^(A)(1, 2, 3)Legal and financial 8,896 4,290 18,552 10,038 advisory fees (1)FDA compliancerelated expenses^ 1,645 11,851 6,314 22,841 (A) (2,3)Reorganization 5,809 ? 5,809 ? items, net (1)Freseniustransaction &Securities Class 1,263 1,739 2,539 3,445 Action Litigation(1)India costs(excluding 1,210 1,447 2,257 3,714 depreciation andinterest)^(A) (1,3)Other settlements 14 ? 1,156 ? and fees (1,3)Data integrityinvestigations & 4 3,380 357 8,020 assessment (1)Merger &acquisition-related 47 9 79 6 expenses (1)Litigation rulings,settlements and ? 74,469 (7,470 ) 74,879 contingencies (8)ADJUSTED (LOSS)INCOME BEFORE $ (42,070 ) $ 11,343 $ (14,940 ) $ 12,736 INCOME TAX ADJUSTMENTS TO (14,398 ) ? (33,323 ) ? INCOME (BENEFIT)TOTAL ADJUSTEDINCOME TAX $ (14,398 ) $ ? $ (33,323 ) $ ? (BENEFIT) ADJUSTED NET (LOSS) $ (27,672 ) $ 11,343 $ 18,383 $ 12,736 INCOME ADJUSTED DILUTED $ (0.21 ) $ 0.09 $ 0.14 $ 0.10 EARNINGS PER SHARE (A) Certain 2019information hasbeen recast to conform with 2020presentation. (1) - Excluded from SG&A expenses(2) - Excluded from R&D expenses(3) - Excluded from Cost of sales(4) - Excluded fromAmortization of intangibles(5) - Excluded fromImpairment of goodwill,intangible assets(6) - Excluded fromAmortization of deferred financingcosts(7) - Excluded fromImpairment of fixed assets(8) - Excluded fromLitigation rulings, settlements andcontingencies

AKORN, INC.Reconciliation of GAAP Debt to Non-GAAP Net Debt and Net Debt to Adjusted EBITDA Ratio(In Thousands, Except Net Debt to Adjusted EBITDA Ratio)

June 30, 2020GAAP Debt $ 855,246 Debtor-in-possession financing 30,000 Total term loans outstanding $ 885,246 Cash and cash equivalents 83,130 Net debt $ 802,116 Adjusted EBITDA, trailing twelve months ended $ 121,514 Net debt to adjusted EBITDA ratio 6.6

Reconciliation 2019 of GAAP Net (Loss) Income to Non-GAAP EBITDA and Recast Adjusted EBITDA(In Thousands)(Unaudited)

Three Months Ended Year Ended March 31, June 30, 2019 September December 31, 2019 2019 30, 2019 2019NET (LOSS) $ (82,181 ) $ (111,599 ) $ 47,670 $ (80,660 ) $ (226,770 ) ADJUSTMENTS TO ARRIVE AT EBITDA: Interest expense, 14,327 17,341 18,982 18,703 69,353 net Depreciation 7,639 7,419 7,734 7,683 30,475 expense Amortization 11,111 9,954 9,380 9,380 39,825 expense Income tax 1,420 1,482 (66,257 ) 2,347 (61,008 ) (benefit)/provisionEBITDA (47,684 ) (75,403 ) 17,509 (42,547 ) (148,125 ) NON-CASH AND OTHERNON-RECURRING INCOME AND EXPENSES Impairment of 15,955 ? ? ? 15,955 goodwill Amortization of deferred financing 1,304 5,654 8,581 16,014 31,554 costs Non-cash stock compensation 4,720 5,589 5,726 5,246 21,281 expense Impairment of fixed 10,089 138 158 29,509 39,894 assets and other Impairment of 10,354 393 ? 18,750 29,498 intangible assets (Gain) on disposal (32 ) 2 ? (2 ) (32 ) of fixed assets Employee retention and other 2,893 2,545 3,411 2,665 11,515 compensation Legal and financial 5,748 4,290 1,511 4,877 16,425 advisory fees FDA compliance 10,991 11,851 4,566 7,738 35,145 related expenses Fresenius transaction & 1,706 1,740 2,689 1,817 7,952 Securities Class Action Litigation India costs (excluding 2,267 1,446 1,431 1,264 6,408 depreciation and interest) Data integrity investigations & 4,640 3,380 2,660 1,327 12,006 assessment Merger and acquisition-related (3 ) 9 21 6 33 expenses Litigation rulings, settlements and 410 74,469 (11,625 ) (19,075 ) 44,179 contingenciesADJUSTED EBITDA $ 23,358 $ 36,103 $ 36,638 $ 27,589 $ 123,688 Note: FDA compliance related expenses and India costs (excluding depreciationand interest) are now included as adjustments to EBITDA to conform to currentyear presentation. In addition, expense related to the 2019 Cash LTIP programis included as adjustments to EBITDA to conform to current year presentationand is included within Employee retention and other compensation.

Reconciliation of 2019 GAAP Net (Loss) Income to non-GAAP Recast Adjusted Net Income and Recast Adjusted Diluted Earnings Per Share(In Thousands, Except Per Share Data)(Unaudited)

Three Months Ended Year Ended March 31, June 30, 2019 September 30, December 31, 2019 2019 2019 2019Net (Loss) $ (82,181 ) $ (111,599 ) $ 47,670 $ (80,660 ) $ (226,770 ) Income tax 1,420 1,482 (66,257 ) 2,347 (61,008 ) (benefit)/provision (LOSS) BEFORE $ (80,761 ) $ (110,117 ) $ (18,587 ) $ (78,313 ) $ (287,778 ) INCOME TAXES ADJUSTMENTS TOARRIVE AT ADJUSTED NET INCOME:Impairment of 15,955 ? ? ? 15,955 goodwill (5)Amortization ofdeferred financing 1,304 5,654 8,581 16,014 31,554 costs (6)Amortization 11,111 9,954 9,380 9,380 39,825 expense (4)Non-cash stockcompensation 4,720 5,589 5,726 5,246 21,281 expense (1, 2, 3)Impairment of fixed 10,089 138 158 29,509 39,894 assets (7)Impairment ofintangible assets 10,354 393 ? 18,750 29,498 (5)(Gain) on disposal (32 ) 2 ? (2 ) (32 ) of fixed assets (1)Employee retentionand other 2,893 2,545 3,411 2,665 11,515 compensation (1, 2,3)Legal and financial 5,748 4,290 1,511 4,877 16,425 advisory fees (1)FDA compliancerelated expenses 10,991 11,851 4,566 7,738 35,145 (2,3)Freseniustransaction &Securities Class 1,706 1,740 2,689 1,817 7,952 Action Litigation(1)India costs(excluding 2,267 1,446 1,431 1,264 6,408 depreciation andinterest) (1,3)Data integrityinvestigations & 4,640 3,380 2,660 1,327 12,006 assessment (1)Merger &acquisition-related (3 ) 9 21 6 33 expenses (1)Litigation rulings 410 74,469 (11,625 ) (19,075 ) 44,179 and settlements (8)ADJUSTED INCOME $ 1,392 $ 11,343 $ 9,922 $ 1,203 $ 23,860 BEFORE INCOME TAX ADJUSTED NET INCOME $ 1,392 $ 11,343 $ 9,922 $ 1,203 $ 23,860 ADJUSTED DILUTED $ 0.01 $ 0.09 $ 0.08 $ 0.01 $ 0.19 EARNINGS PER SHARE Note: FDA compliance related expenses and India costs (excluding depreciationand interest) are now included as adjustments to EBITDA to conform to currentyear presentation. In addition, expense related to the 2019 Cash LTIP programis included as adjustments to EBITDA to conform to current year presentationand is included within Employee retention and other compensation. (1) - Excluded from SG&A expenses(2) - Excluded from R&D expenses(3) - Excluded from Cost of sales(4) - Excluded fromAmortization of intangibles(5) - Excluded fromImpairment of goodwill,intangible assets(6) - Excluded fromAmortization of deferred financingcosts(7) - Excluded fromImpairment of fixed assets(8) - Excluded fromLitigation rulings, settlements andcontingencies

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