Why Akorn Is in Trouble With the FDA Again

Akorn Inc. (NASDAQ: AKRX) shares dipped on Tuesday after the firm announced that it received a warning letter from the U.S. Food and Drug Administration (FDA). Specifically, this letter is related to the inspection of its Somerset, New Jersey, manufacturing facility in July and August of 2018.

This is the second FDA warning that Akorn has received recently. The first came earlier this year in regards to the firm’s manufacturing facility in Decatur, Illinois, after Akorn did not resolve previously highlighted violations, such as failure to follow procedures to prevent contamination of drugs produced at the plant.

While FDA warning letters can carry some heavy weight, in terms of affecting share prices, Akorn seems to be taking this one in stride.

RBC Capital Markets analyst Randall Stanicky said this warning letter likely would require Akorn to carry out inspections but should not have an impact of production at the facility.

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Douglas Boothe, Akorn’s president and CEO, commented:

Akorn is committed to resolving the warning letter in a comprehensive and effective manner. Earlier this year, Akorn launched a companywide action plan to improve the timing and effectiveness of our operations, quality systems and compliance enhancement initiatives, with an emphasis on transparency and quality. We believe the execution of this action plan, which has already begun to yield tangible results, will strengthen and further standardize our quality systems across the entire Akorn network.

Excluding Tuesday’s move, Akorn had outperformed the broad markets, with its stock up nearly 40% year to date. In the past 52 weeks, the stock actually was down closer to 70%.

Shares of Akorn were down about 3% at $4.57 on Tuesday, in a 52-week range of $2.64 to $19.65. The consensus price target is $6.60.

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