AKORN CASH POSITION SUPPORTED WITH $2.5 MIL. LOAN FROM JOHN KAPOOR TRUST
AKORN CASH POSITION SUPPORTED WITH $2.5 MIL. LOAN FROM JOHN KAPOOR TRUST, which is headed by the founder of the ophthalmic products firm. Kapoor started Akorn with money from the sale of Lyphomed to Fujisawa and is Akron's chairman. "The two-year loan bears interest at a current rate of 10% and will be used to retire existing debt and provide needed working capital," Akorn said Aug. 24. Akorn took a $5 mil. charge against earnings for its fiscal third quarter (ended March 30) associated with the shutdown of its Walnut manufacturing subsidiary in July 1991 due to regulatory problems. Akorn subsequently acquired Taylor Pharmacal to take over Walnut's manufacturing function ("The Pink Sheet" April 27, T&G-2). Taylor subsequently received an FDA warning letter citing good manufacturing practices violations on some of its contract manufacturing work ("The Pink Sheet" Aug. 24, T&G-3). In addition to making the $2.5 mil. loan, the Kapoor trust has agreed to exercise 1.7 mil. warrants to purchase Akorn shares for $1.50 each prior to November 1993. "Akorn will use the proceeds of $2.5 mil. to retire the loan unless it has previously been paid," the company said. Subject to shareholder approval, Akorn will grant a new warrant to the Kapoor trust for an additional 1 mil. shares exercisable at $2 per share for the next five years. Kapoor currently owns about 22% of the company. Kapoor grossed about $150 mil. from the sale of Lyphomed to Fujisawa that was concluded in April 1990. The Japanese company filed suit against Kapoor on Aug. 17, alleging that Kapoor defrauded them in the sale ("The Pink Sheet" Aug. 24, T&G-2). Fujisawa has withdrawn nine Lyphomed products since March due to discrepancies in the original ANDA submissions, which Fujisawa maintains were the fault of Kapoor and his management team. Lyphomed announced a recall of 108 lots of 18 different injectable drugs due to possible low fill volume on Aug. 31. The recall follows recalls of 30 lots of 10 products conducted since March for the same problem. The company noted that it has now added a new VP-manufacturing and a new director of quality assurance. In addition to the withdrawn products, Lyphomed now faces the loss of major contracts with Voluntary Hospitals of America. VHA said Aug. 26 that it has cancelled the contracts effective Oct. 12 "due to quality control and regulatory assurance problems with the Lyphomed product line." Lyphomed said it will "do everything it can" to get the VHA business back. VHA is an alliance of almost 900 hospitals across the U.S. On Aug. 17, Unimed, another Kapoor company, announced a $2.9 mil. restructuring for its fiscal third quarter, ended June 30. The restructuring coincided with the establishment of a new management team and the "adoption of a new marketing focus stressing the quality of life for immuno-compromised patients afflicted by cancer and AIDS." The new management team includes two former Lyphomed execs. Senior VP-Sales and Marketing Scott Broder was formerly VP-sales and marketing at Lyphomed. Chief Financial Officer David Riggs was formerly treasurer and director of planning at Lyphomed. As part of the changes, which took effect May 1, Kapoor assumed the titles of chairman and CEO of Unimed. Commenting on the changes, Kapoor said: "The immediate aim of the new management team is to concentrate on ending the string of loss years and achieving profitability at the earliest possible moment. The new marketing concept will emphasize nutritional management, as well as relief of oral cavity distress. Both of these areas are significant concerns for cancer and AIDS patients." Unimed markets Marinol (dronabinol) as an antiemetic for chemotherapy patients. The company said it filed an NDA supplement for use of Marinol as an appetite stimulant for prevention of weight loss in AIDS patients on Aug. 18. Unimed reported a $3.3 mil. loss for the third quarter and $4.2 mil. for the nine months.
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