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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

x  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2015

o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-32360

AKORN, INC.

(Exact name of registrant as specified in its charter)

1925 W. Field Court, Suite 300, Lake Forest, Illinois 60045

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (847) 279-6100

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: (None)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No x

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

The aggregate market value of the voting stock of the registrant held by non-affiliates (affiliates being, for these purposes only, directors, executive officers and holders of more than 5% of the registrant’s common stock) of the registrant as of June 30, 2015, the last day of the registrant’s most recently completed second fiscal quarter, was approximately $3.4 billion based on the closing market price of $43.66 reported on The NASDAQ Global Select Market.

The number of shares of the registrant’s common stock, no par value per share, outstanding as of April 29, 2016 was 119,427,471.

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Forward-Looking Statements and Factors Affecting Future Results

Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our” or other similar terms in this Annual Report on Form 10-K refer to Akorn, Inc. and its wholly owned subsidiaries.

Certain statements in this Form 10-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this document, the words “anticipate,” “believe,” “estimate,” “plan” and “expect” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statements, including statements regarding our intent, beliefs or expectations are not guarantees of future performance. These statements are subject to risks and uncertainties and actual results may differ materially from those in the forward-looking statements as a result of various factors, including but not limited to:

·                  The effects of the restatement and our ability to remediate material weaknesses;

·                  Our ability to continue to comply with all of the requirements of the U.S. Food and Drug Administration, including current Good Manufacturing Practices regulations;

·                  Our ability to obtain and maintain regulatory approvals for our products;

·                  Our success in developing, manufacturing, acquiring and marketing new products;

·                  Our ability to bring new products to market and the effects of sales of such products on our financial results;

·                  Our ability to successfully integrate acquired businesses and products;

·                  The effects of competition from other generic pharmaceuticals and from other pharmaceutical companies;

·                  Availability of raw materials needed to produce our products;

·                  The effects of federal, state and other governmental regulation on our business;

·                  The success of our strategic partnerships for the development and marketing of new products;

·                  The Company may be subject to litigation of a material nature, including but not limited to, the matters discussed in Part II, Item 8 - Note 22 — “Legal Proceedings”;

·                  Our ability to obtain additional funding or financing to operate and grow our business;

·                  Our ability to generate cash from operations sufficient to meet our working capital requirements and satisfy our debt obligations; and

·                  Other factors referred to in this Form 10-K and our other filings with the SEC.

See Item 1A - Risk Factors. As a result, you should not place undue reliance on any forward-looking statements. You should read this report completely with the understanding that our actual results may differ materially from what we expect. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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FORM 10-K TABLE OF CONTENTS

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EXPLANATORY NOTE

Overview

Akorn, Inc. is filing this Annual Report on Form 10-K for the year ended December 31, 2015 which contains consolidated financial statements for the years ended December 31, 2014 and 2013 and quarterly unaudited financial information for the quarter and year to date periods ended March 31, 2014 and 2015, June 30, 2014 and 2015, September 30, 2014 and 2015, and December 31, 2014 and 2015, respectively. The consolidated financial statements for the year ended December 31, 2014 and for the quarter and year to date periods ended March 31, 2014, June 30, 2014 and September 30, 2014 have been restated. The restatement of the consolidated financial statements for the year ended December 31, 2014 and quarter and year to date periods ended March 31, 2014, June 30, 2014 and September 30, 2014 included herein restates and replaces Akorn’s previously issued, audited annual financial statements and previously issued, unaudited quarterly and year to date financial statements and related financial information, which was originally filed on Form10-Q with the Securities and Exchange Commission (“SEC”) on May 12, 2014 and the Form 10-K which was originally filed with the SEC on March 17, 2015 and subsequently amended on Form 10-K/A on April 30, 2015.  The restatements principally adjusts Akorn’s accounting of net revenue and pretax income from continuing operations as a result of identified errors primarily related to understatements of rebates and contractual allowances. Solely for purposes of bringing Akorn’s Registration Statement on Form S-8 current, Akorn may decide to file with the SEC separate Forms 10-Q including the financial statements for the quarter and year to date periods ended March 31, 2015, June 30, 2015 and September 30, 2015, but otherwise the Company does not intend to file the foregoing Forms 10-Q.

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PART I

Item 1. Business

Overview

Akorn, Inc., together with its wholly-owned subsidiaries (collectively “Akorn,” the “Company,” “we,” “our” or “us”) is a specialty generic pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals and branded as well as private-label over-the-counter consumer health products and animal health pharmaceuticals. We are an industry leader in the development, manufacturing and marketing of generic pharmaceutical products in alternative dosage forms. We focus on difficult-to-manufacture sterile and non-sterile dosage forms including, but not limited to, ophthalmics, injectables, oral liquids, otics, topicals, inhalants and nasal sprays.

Akorn is a Louisiana corporation founded in 1971 in Abita Springs, Louisiana. In 1997, we relocated our corporate headquarters to the Chicago, Illinois area and currently maintain our principal corporate offices in Lake Forest, Illinois. We operate pharmaceutical manufacturing facilities in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland; and Paonta Sahib, Himachal Pradesh, India. We also operate a central distribution warehouse in Gurnee, Illinois and additional distribution facilities in Amityville, New York and Decatur, Illinois. Our research and development (“R&D”) centers are located in Vernon Hills, Illinois; Copiague, New York and Warminster, Pennsylvania. We also have other corporate offices in Ann Arbor, Michigan and Gurgaon, Haryana, India.

For further detail concerning our reportable segments please see Part II, Item 8 - Note 14 “Segment Information.”

Our common shares are traded on The NASDAQ Global Select Market under the ticker symbol AKRX. Our principal corporate office is located at 1925 West Field Court Suite 300, Lake Forest, Illinois 60045 with telephone number (847) 279-6100.

Our Strategy

Our strategy is focused on continuing to strengthen our leadership position in the development and marketing of specialized generic and branded pharmaceuticals, over-the-counter (“OTC”) drug products and animal health products. Through an efficient operational model, we strive to maximize shareholder value by quickly adapting to market conditions, patient demands and customer needs.

We believe we can generate growth and maintain attractive margins through: new product launches resulting from research and development successes, improving execution on our core strengths, optimizing our cash flow and leveraging our customer relationships and market leadership. We remain committed to research and development with a focus on our core product areas of ophthalmics, injectables, oral liquids, otics, topicals, inhalants and nasal sprays.

We also seek to grow our business inorganically through strategic mergers, acquisitions, business development and licensing activities that provide the ability to move into new product areas that are strategically attractive to us or continue to build out our product or R&D portfolio in our existing product areas.

Our Competitive Strengths

In order to successfully execute our strategy, we must continue to capitalize on our core strengths:

Research and development expertise in alternative dosage forms. Our R&D efforts are primarily focused on the development of multisource generic products that are in dosage forms other than oral solid dose. We consider dosage forms outside of oral solid dose to be “alternative dosage forms.” These products typically have fewer competitors in mature markets, are more difficult to develop and manufacture and can carry higher profitability over time than oral solid dose products.  The

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alternative dosage form products that we focus on are primarily those that we can manufacture, namely: ophthalmics, injectables, oral liquids, otics, topicals, inhalants and nasal sprays.

Alternative dosage form manufacturing expertise. Our manufacturing network specializes in alternative dosage form products. Four of our five manufacturing facilities are Food and Drug Administration (“FDA”) approved, including:

(1)         Our Decatur, Illinois facility, which specializes in sterile products, primarily injectables;

(2)         Our Somerset, New Jersey facility, which specializes primarily in sterile ophthalmic products;

(3)         Our Amityville, New York facility, which specializes in topical creams, gels and ointments, oral liquids, otic liquids, nasal sprays and unit dose oral liquid products; and

(4)         Our Hettlingen, Switzerland facility, which specializes primarily in sterile ophthalmic products;

All of our FDA approved facilities have been inspected by the FDA since the start of 2014. Our Paonta Sahib, Himachal Pradesh, India facility is not yet FDA approved. The Paonta Sahib facility is a sterile injectable facility with separate areas dedicated to general injectable products, carbapenem injectable products, cephalosporin injectable products and hormonal injectable products. In addition, the cephalosporin area of the facility has the ability to produce non-sterile oral cephalosporin products. We are actively pursuing FDA approval of this facility.

Established portfolio of generic, branded, OTC and animal health products. We market a diverse portfolio of generic prescription pharmaceutical products, branded prescription pharmaceutical products, OTC brands, various formulations of private-label OTC pharmaceutical products and a number of prescription animal health products. For our human prescription products, our diverse portfolio of alternative dosage form products sets us apart from our larger competitors and allows us to provide a single source of these products for our customers. Our OTC and animal health portfolios are largely complementary to our human prescription products, allowing us to leverage our manufacturing and development expertise.

Targeted sales and marketing infrastructure. We maintain a targeted sales and marketing infrastructure to promote our branded, generic, OTC and animal health products. We leverage our sales and marketing infrastructure to not only promote our branded portfolio, but also to sell our multisource generic products directly into physician offices, hospital systems and group purchasing organizations.

Significant management expertise. Our senior management team has a demonstrated track record of building and operating high-growth healthcare and pharmaceutical companies through product development, in-licensing and acquisitions. We added substantial talent to our management team in 2015 including a new Chief Financial Officer, a new head of commercial operations and a new head of pharmaceutical operations, among others.

Our Areas of Focus

Alternative dosage form generics. Our core area of focus is generic prescription pharmaceutical products in alternative dosage forms. We market a portfolio of multisource prescription pharmaceutical products in injectable, ophthalmic, topical, oral and inhaled liquid, nasal spray and otic dosage forms. We also market select oral solid dose formulations.

Specialty brands. Alongside our generic prescription pharmaceutical products, we market a portfolio of branded prescription pharmaceutical products, primarily in the ophthalmology area. While we continue to primarily focus on generic products, our branded portfolio allows us to leverage our sales and manufacturing infrastructure and deepen our relationships with customers.

OTC products. Our Akorn Consumer Health division (“ACH”) markets a portfolio of OTC brands and various formulations of private-label OTC pharmaceutical products. Our flagship OTC brand is TheraTears® Therapy for Your Eyes®, which is a family of therapeutic eye care products including dry eye therapy lubricating eye drops, eyelid and eyelash cleansing foam and eye nutrition supplements. We also market several specialty OTC products including; Zostrix®, Sinus Buster®, MagOx®, Maginex®, Multi-betic®, Diabetic Tussin® and Dia-Derm®.

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Specialized Animal Health Products. We also market a portfolio of branded and generic companion animal prescription pharmaceutical products under the Akorn Animal Health label. Major animal health products include Anased® and VetaKet®, veterinary sedatives; Tolazine® and Yobine®, sedative reversing agents; and Butorphic®, a pain reliever.

Research & Development

We seek to continually grow our business by developing new products.  Internal R&D projects are carried out at our R&D facilities located in Vernon Hills, Illinois, Copiague, New York and Warminster, Pennsylvania. The majority of our product development activity takes place at our R&D facilities, while our manufacturing facilities provide support for the later phases of product development and exhibit batch production.  We believe that having our own dedicated R&D facilities allows us to significantly increase the size of our product pipeline as well as shorten the time between project start and filing with the FDA. We also use outside vendors, such as contract research organizations for some R&D projects to take advantage of external capabilities and cost efficiencies.  As of December 31, 2015, we had 119 full-time employees directly involved in product R&D activities.

In addition to our internal development work, we strategically partner with drug development and contract manufacturing companies (“CMOs”) throughout the world for the development of drug products that we believe will be complementary to our existing product offerings, but for which we may lack the expertise to develop, or the capability, capacity or cost-efficiencies to manufacture.  We may owe payments to these partners from time to time based on their achievement of milestones, up to and including launch of the subject development product.  Our development partners are typically responsible for manufacturing or sourcing of the finished product and may receive a royalty or a profit split from the sales of the product.

R&D costs are expensed as incurred. Such costs amounted to $40.7 million, $31.3 million and $19.9 million for the years ended December 31, 2015, 2014 and 2013, respectively, and include internal R&D expenses, milestone fees paid to our strategic partners and impairment expenses of in-process research and development projects (“IPR&D”) which were abandoned.

During 2015, we submitted 18 new Abbreviated New Drug Application (“ANDA”) filings and one New Drug Application (“NDA”) filing to the FDA. In 2014, we submitted 23 ANDA filings and in 2013 we submitted 15 ANDA filings to the FDA.

Akorn and its partners received 11 ANDA product approvals, two Abbreviated New Animal Drug Application (“ANADA”) approvals, one NDA product approval, one supplemental ANDA approval and two tentative ANDA approvals from the FDA in 2015; 14 ANDA approvals, one NDA approval and two tentative ANDA approvals in 2014 and two ANDA approvals and one tentative ANDA approval in 2013.

As of December 31, 2015, we had 87 ANDA filings under review by the FDA. We plan to continue to regularly submit additional ANDA filings based on perceived market opportunities and our R&D pipeline.

See “Government Regulation” and Item 1A - Risk Factor — “Our growth depends on our ability to timely and efficiently develop and successfully launch and market new pharmaceutical products ahead of our competitors.”

Strategic Mergers and Acquisitions

We regularly evaluate and, where appropriate, execute opportunities to expand through the acquisition of products and companies in areas that we believe offer attractive opportunities for growth. Below is a summary of our recent strategic acquisitions of products and companies. See Item 1A — Risk Factors for a description of risks that accompany our acquisition strategy.

Akorn AG (formerly Excelvision AG). To expand our ophthalmic manufacturing capacity, our Luxembourg subsidiary, Akorn International S.à r.l., entered into a share purchase agreement on July 22, 2014 with Fareva SA to acquire all of the

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issued and outstanding shares of capital stock of Excelvision AG, a Swiss company (“Excelvision AG”) for 21.7 million Swiss Francs (“CHF”), net of certain working capital and inventory amounts. Excelvision AG was a contract manufacturer located in Hettlingen, Switzerland specializing in ophthalmic products. On April 1, 2016 the name of Excelvision AG was changed to Akorn AG.

The acquisition was completed on January 2, 2015 upon payment of the previously-agreed to consideration and subsequent payment of certain working capital amounts, which in aggregate was equivalent to $28.4 million, and was funded through available cash on hand.

VPI Holdings Corp. On August 12, 2014, we completed the acquisition of VersaPharm Incorporated, a Georgia corporation (“VersaPharm”) for a total purchase price of approximately $433.0 million (the “VersaPharm Acquisition”), subject to a net working capital adjustment. On May 9, 2014, the Company had entered into an Agreement and Plan of Merger (the “VP Merger Agreement”) to acquire VPI Holdings Corp. (“VPI”), the parent company of VersaPharm.

VersaPharm was a developer and marketer of multi-source prescription pharmaceuticals. We believe the acquisition complements and expands our product portfolio by diversifying our offering to niche dermatology markets. VersaPharm’s product portfolio, pipeline and development capabilities were complimentary to the Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”) acquisition, described below, through which we acquired manufacturing capabilities needed for many of VersaPharm’s current and pipeline products. The VersaPharm Acquisition also enhanced our new product pipeline as VersaPharm had significant R&D experience and knowledge and numerous IPR&D products which were under active development.

The VersaPharm Acquisition was principally funded through a $445.0 million term loan with certain other lenders with JPMorgan Chase Bank, N.A. acting as the administrative agent (the “Incremental Term Loan”) entered into concurrent with completing the acquisition, and through available cash.

Hi-Tech Pharmacal Co., Inc. On April 17, 2014, we completed the acquisition of Hi-Tech for a total purchase price of approximately $650.0 million (the “Hi-Tech Acquisition”). The acquisition was approved by the shareholders of Hi-Tech on December 19, 2013, and was approved by the FTC on April 11, 2014 following review pursuant to provisions of Hart-Scott Rodino Act (“HSR”).

Hi-Tech was a specialty pharmaceutical company which developed, manufactured and marketed generic and branded prescription and OTC drug products. Hi-Tech specialized in liquid and semi-solid dosage forms and produced and marketed a range of oral solutions and suspensions, topical ointments and creams, nasal sprays, otics, sterile ophthalmics and sterile ointment and gel products. Hi-Tech’s Health Care Products division was a developer and marketer of OTC products, and their ECR Pharmaceuticals subsidiary (“ECR”) marketed branded prescription products. ECR was divested during the year ended December 31, 2014.

The Hi-Tech Acquisition complemented and expanded our manufacturing capabilities and product portfolio by diversifying our offerings to our retail customers beyond ophthalmics to other niche dosage forms such as oral liquids, topical creams and ointments, nasal sprays and otics. The Hi-Tech Acquisition also enhanced our new product pipeline. Further, the Hi-Tech Acquisition added branded OTC products in the categories of cough and cold, nasal sprays and topicals to our TheraTears® brand of eye care products.

The Hi-Tech Acquisition was principally funded through a $600.0 million term loan with certain other lenders with JPMorgan Chase Bank, N.A. acting as the administrative agent (the “Existing Term Loan”) entered into concurrent with completing the acquisition, and through Hi-Tech cash assumed through the acquisition.

Kilitch Drugs (India) Limited. On February 28, 2012, we acquired selected assets of Kilitch Drugs (India) Limited (“Kilitch”) pursuant to a Business Transfer Agreement (“BTA”) between our subsidiary, Akorn India Private Limited (“AIPL”) and Kilitch. The agreement was initially signed on October 6, 2011 (the “Kilitch Acquisition”).  We paid approximately $60.1 million in cash at closing, which included consideration of $55.2 million and acquisition-related costs of $4.9 million.  The

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primary assets acquired were Kilitch’s pharmaceutical manufacturing facility in Paonta Sahib, Himachal Pradesh, India and its ongoing contract manufacturing business, which we now refer to as AIPL.

Pursuant to the BTA, we also acquired selected assets of NBZ Pharma Limited, a company affiliated with Kilitch, from which we acquired the rights to manufacture and distribute certain pharmaceutical products.

We are pursuing FDA approval to manufacture certain products at the Paonta Sahib facility for export to the U.S.  See Item 1A - Risk Factor - “Failure to obtain regulatory certification of our manufacturing facility in India for production of pharmaceutical products for export to the United States, as well as other regulated world markets, could impair our ability to grow and adversely affect our business, financial condition and results of operations” and Item 1A - Risk Factor — “Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and operating results” for more information about risk factors related to our AIPL operations.

Advanced Vision Research, Inc. On May 3, 2011, we acquired AVR Business Trust and its subsidiaries, Advanced Vision Research, Inc. and Advanced Vision Pharmaceuticals, LLC (collectively, “AVR”). AVR is a developer and marketer of a line of OTC eye care products marketed primarily under the TheraTears® brand name.

Business Development and Licensing

Supplemental to our strategic mergers and acquisitions strategy, we also seek to enhance our current generic and branded product lines through the acquisition or licensing of on-market or in-development products that expand or complement our current branded and generic product portfolio. Below is a summary of our recent product acquisition or licensing transactions. See Item 1A - Risk Factors for a description of risks that accompany our business development strategy.

Lloyd Products Acquisition. To expand our animal health product portfolio, our wholly-owned subsidiary, Akorn Animal Health, Inc. entered into a definitive product acquisition agreement on October 2, 2014 with Lloyd, Inc. to acquire certain rights and inventory related to a portfolio of animal health injectable products used in pain management and anesthesia. We acquired the products for $16.1 million, funded through available cash paid at closing, and a contingent payment of $2.0 million paid in 2015.

Xopenex Product Acquisition. To expand our prescription product portfolio of respiratory products, we entered into a definitive product acquisition agreement with Sunovion Pharmaceuticals Inc., on October 1, 2014 to acquire certain rights and inventory related to Xopenex® Inhalation Solution (levalbuterol hydrochloride). The purchase price for the acquisition was $45.0 million, funded through available cash paid at closing, less certain liabilities for product return reserves, rebates, and chargeback reserves, which were assumed by our subsidiary Oak Pharmaceuticals, Inc., subject to a cap. The total cash paid at closing was $41.5 million.

Zioptan Product Acquisition. To expand our branded ophthalmology portfolio, we acquired the rights to the U.S. NDA for Zioptan®, a prescription ophthalmic eye drop indicated for reducing elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertension, from Merck, Sharp and Dohme Corp. (“Merck”) on April 1, 2014. The total consideration at closing was $11.2 million.

Betimol Product Acquisition. To expand our branded ophthalmology portfolio, we acquired the rights to the U.S. NDA for Betimol®, a prescription ophthalmic eye drop for the reduction of eye pressure in glaucoma patients, from Santen Pharmaceutical Co., Ltd., (“Santen”) on January 2, 2014. The total consideration of $12.2 million was equal to approximately 1.5 times our net sales of Betimol® in the first year following the acquisition. We paid a non-refundable amount of $7.5 million upon completing the acquisition and paid the remaining amount of $4.7 million in June 2015. There is also the potential of a $2.0 million increase to the total consideration should net sales of Betimol® exceed a sizable threshold in any one of the first five years following the acquisition, but the Company has not assessed value to this contingent consideration as it is unlikely.

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In connection with the acquisition, we entered into a supply agreement with Santen whereby Santen will continue manufacturing Betimol® for a transitional period.

Merck Products Acquisition.  On November 15, 2013, we acquired three ophthalmic U.S. NDAs from Merck for $52.8 million in cash. The products acquired were:

·                  AzaSite® — (azithromycin ophthalmic solution), a prescription sterile eye drop solution used to treat bacterial conjunctivitis;

·                  Cosopt® — (dorzolamide hydrochloride and timolol maleate ophthalmic solution), a prescription sterile eye drop solution that is used to reduce intraocular pressure in patients with open-angle glaucoma or ocular hypertension; and

·                  Cosopt® PF — (dorzolamide hydrochloride and timolol maleate ophthalmic solution) a preservative-free prescription version of Cosopt®, supplied in sterile, single-use containers.

This acquisition expanded our line of prescription ophthalmic products to include additional branded products.  Upon entering into the product acquisition agreement, we entered into supply agreements with Merck and a third party to ensure continued supply of the three products.  The acquisition included our acquisition of a Merck subsidiary corporation, Inspire Pharmaceuticals, Inc. (“Inspire”), which was and continues to be the holder of the product rights to AzaSite®.

Lundbeck Products Acquisition. On December 22, 2011, we acquired three NDAs from H. Lundbeck A/S (“Lundbeck”), a Denmark corporation.

Our Products

The Company has identified two reportable segments with which we operate our business. These segments include the Prescription Pharmaceuticals Segment and the Consumer Health Segment.

Prescription Pharmaceuticals Segment. Our Prescription Pharmaceuticals segment primarily consists of generic and branded prescription pharmaceuticals in a variety of dosage forms including sterile ophthalmics, injectables and inhalants and non-sterile oral liquids, topicals, nasal sprays and otics. We also market a number of pain management drugs, including drugs subject to the Controlled Substances Act. The segment represented 93.8% of our net sales in 2015. Please see Part II, Item 8 - Note 14 “Segment Information” for further detail of the Prescription Pharmaceuticals segment.

While the majority of net sales within the prescription pharmaceuticals segment are derived from generic products, Akorn markets a line of branded ophthalmic and respiratory products including brands such as Akten®, a topical ocular anesthetic gel, AzaSite®, an antibiotic used to treat bacterial conjunctivitis, Cosopt®, Cosopt® PF, Betimol® and Zioptan®, which are used in the treatment of glaucoma and Xopenex® Inhalation Solution, used in the treatment or prevention of bronchospasm.

The largest generic products, in terms of net revenue, in our Prescription Pharmaceuticals segment are listed alphabetically below.

Atropine Sulfate Ophthalmic Solution. We received approval of our NDA for Atropine Sulfate Ophthalmic Solution, USP, 1% in July 2014. We had previously been marketing this product as an unapproved product.  Following our NDA approval, competitors marketing unapproved products discontinued distribution of their products.

Clobetasol Propionate Ointment. We acquired Clobetasol Propionate Ointment through the Hi-Tech Acquisition. In the acquisition the Company also acquired other dosage forms of Clobetasol Propionate including a gel, cream, emollient cream and a topical solution.

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Dehydrated Alcohol Injection. We began marketing our Dehydrated Alcohol Injection, USP in 5 mL single-dose vials in 1997. Our Dehydrated Alcohol Injection is not an FDA approved product and to date our product has not been found by the FDA to be safe and effective.

Ephedrine Sulfate Injection. We began marketing Ephedrine Sulfate Injection, USP 50 mg/mL in 1 mL single-dose ampules in 1997. Our Ephedrine Sulfate Injection is not an FDA approved product and to date our product has not been found by the FDA to be safe and effective. In 2015, we filed a New Drug Application seeking approval of our Ephedrine Sulfate Injection.

Hydralazine Hydrochloride Injection. We began marketing Hydralazine Hydrochloride Injection, USP, 20 mg/mL in 1 mL single-dose vials following FDA approval in 2009.

Lidocaine Ointment. We acquired marketing rights to Lidocaine Ointment USP, 5% through the Hi-Tech Acquisition.  Beyond Lidocaine Ointment, we also market other Lidocaine-containing products including Lidocaine Hydrochloride Jelly USP 2% and Lidocaine Hydrochloride Oral Topical Solution USP, 2%.

Methylene Blue Injection. We began marketing Methylene Blue Injection, USP, 10 mg/mL in 1 mL and 10 mL vials in 2009. Our Methylene Blue Injection is not an FDA approved product and to date our product has not been found by the FDA to be safe and effective.

Myorisan™ Soft Gelatin Capsules. We acquired Myorisan™ (isotretinoin capsules, USP) in 10 mg, 20 mg and 40 mg strengths through the VersaPharm Acquisition. We subsequently received approval for the 30 mg strength in 2015.

Nembutal® Sodium Solution. We acquired Nembutal® Sodium Solution from the Lundbeck Acquisition. Nembutal® Sodium Solution (pentobarbital) is a Schedule II controlled drug.

Progesterone Capsules. Under a license from another manufacturer, we began marketing progesterone capsules in 100 mg and 200 mg strengths in 2012.

Most of the products discussed above have several generic equivalent competitors. Additional competition may emerge over time which could materially affect future revenues and profits. In addition, future revenues and profits may be affected by events outside of our control including; disputes with partners, inability to timely source finished product from contract manufacturers or raw material suppliers and a failure to maintain or secure customer contracts at favorable terms. For further discussion of the risks associated with our products or operations please see Item 1A — Risk Factors.

Consumer Health Segment. Our Consumer Health segment primarily consists of branded and private-label OTC products and animal health products dispensed by veterinary professionals. Our branded and private-label OTC products are primarily focused on ophthalmics including a leading dry eye treatment TheraTears® Therapy for Your Eyes®. We also market other OTC consumer health products including Mag-Ox®, a magnesium supplement, and the Diabetic Tussin® line of cough and cold products. Please see Part II, Item 8 - Note 14 “Segment Information” for further detail of the Consumer Health segment.

Our animal health portfolio is focused on products complementary to our human health prescription portfolio, leveraging our R&D and manufacturing capabilities for alternate dosage form products. Major products within our animal health portfolio include Anased® and VetaKet® veterinary sedatives; Tolazine® and Yobine®, sedative reversing agents; and Butorphic®, a pain reliever.

Sales and Marketing

We rely on our sales and marketing teams to help us maintain and, where possible, increase market share for our products.  Our sales organization is structured as follows:

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(1) field sales teams focused on branded prescription pharmaceutical products;

(2) field sales teams focused on institutional markets;

(3) inside sales team focused on customers in smaller markets, and;

(4) national accounts sales team focused on wholesalers, distributors, retail pharmacy chain and group purchasing organizations (“GPOs”).

Our field sales representatives promote ophthalmic products directly to retinal surgeons and ophthalmologists, and other pharmaceutical products directly to local hospitals in order to support compliance and pull-through against existing contracts. Our inside sales team augments our outside sales teams to sell products in markets where field sales would not be cost effective. Our national accounts sales team seeks to establish and maintain contracts with wholesalers, distributors, retail pharmacy chains and GPOs. As of the year ended December 31, 2015, we utilized a sales force of 88 field and inside sales representatives to promote our product portfolio. To support our sales efforts, we also have a customer service team and a marketing department focused on promoting and raising awareness about our product offerings.

Competition

Prescription Pharmaceuticals. The sourcing, marketing and manufacturing of pharmaceutical products is highly competitive, with many established manufacturers, suppliers and distributors actively engaged in all phases of the business. We compete principally on quality of our products and services, reliability of our supply, breadth of our portfolio, depth of our customer relationships and price. Many of our competitors have substantially greater financial and other resources, including greater sales volume, larger sales forces and greater manufacturing capacity. See Item 1A - Risk Factor - “Our industry is very competitive. Additionally, changes in technology could render our products obsolete” for more information.

Generic Pharmaceuticals. Companies that compete with our generic pharmaceuticals portfolio include Allergan plc (through their Actavis generics subsidiary), Apotex Inc., Fresenius Kabi AG, Hikma Pharmaceuticals plc, Novartis International AG (through their Sandoz  and Alcon subsidiaries), Perrigo Company plc, Pfizer Inc., Mylan N.V., Taro Pharmaceutical Industries Ltd. and Valeant Pharmaceuticals International, Inc. (principally through their Bausch + Lomb subsidiary), among others.

Branded Pharmaceuticals. Companies that compete with our branded pharmaceuticals portfolio include Allergan plc, Novartis International AG (through their Alcon subsidiary), Pfizer Inc. and Valeant Pharmaceuticals International, Inc. (through their Bausch + Lomb subsidiary), among others. Additionally, potential generic entrants with equivalent products referencing our branded products present an additional competitive threat.

Consumer Health. Like our Prescription Pharmaceuticals segment, the sourcing, manufacturing and marketing of Consumer Health products is highly competitive, with many established manufacturers, suppliers and distributors actively engaged in all phases of the business. With the Company’s relatively small OTC and animal health product portfolio many of our competitors have substantially greater financial and other resources, including greater sales volume, larger sales forces and greater manufacturing capacity. Within this market, we compete primarily on product offering, as well as price and service.

The companies that compete with our Consumer Health segment include both generic and name brand companies such as Allergan plc, Johnson & Johnson, Perrigo Company plc., Pfizer Inc., and Valeant Pharmaceuticals International, Inc., among others.

Seasonality

The majority of our products do not experience significant seasonality.  We do market certain prescription pharmaceutical and consumer health products for the treatment of allergies that typically generate consumer demand in the warmer months as well as cough and cold products which typically generate higher consumer demand in the colder months, but we do not believe these products materially impact our overall sales trends. Additionally, we market various antidote products through our

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Prescription Pharmaceuticals segment, the sales of which are largely timed to the expiration of existing stock held by our customers.

Major Customers

In 2015, 2014 and 2013, a high percentage of our sales were to the three large wholesale drug distributors noted below.  These three wholesale drug distributors account for a large portion of our gross sales, net revenues and accounts receivable in both of our segments. The three large wholesale drug distributors are:

·                  AmerisourceBergen Corporation (“Amerisource”);

·                  Cardinal Health, Inc. (“Cardinal”); and

·                  McKesson Corporation (“McKesson”).

On a combined basis, these three wholesale drug distributors accounted for approximately 77.8% of our total gross sales and 70.0% of our net revenue in the year ended December 31, 2015, and 82.8% of our gross accounts receivable as of December 31, 2015. The difference between gross sales and net revenue is that gross sales is calculated before allowances for chargebacks, rebates, promotions and product returns (See Part II, Item 8 — Note 3 “Summary of Significant Accounting Policies” for more information).

The table below presents the percentages of our total gross sales, net revenue and gross trade accounts receivable attributed to each of these three wholesale drug distributors as of and for the years ended December 31, 2015, 2014 and 2013, respectively:

Amerisource, Cardinal and McKesson are key distributors of our products, as well as a broad range of healthcare products for many other companies. None of these distributors is an end user of our products. Generally speaking, if sales to any one of these distributors were to diminish or cease, we believe that the end users of our products would likely find little difficulty obtaining our products from another distributor. However, the loss of one or more of these distributors, together with a delay or inability to secure an alternative distribution source for end users, could have a material negative impact on our revenue, business, financial condition and results of operations.

We consider our business relationships with Amerisource, Cardinal and McKesson to be in good standing and we currently have fee for services contracts with each of them. However, a change in purchasing patterns, a decrease in inventory levels, an increase in returns of our products, delays in purchasing products and delays in payment for products by one or more of these distributors could have a material negative impact on our revenue, business, financial condition and results of operations. See Item 1A - Risk Factor — “We depend on a small number of distributors, the loss of any of which could have a material adverse effect” for more information.

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Backorders

As of December 31, 2015, we had approximately $9.6 million of products on backorder as compared to approximately $19.2 million of backorders as of December 31, 2014 and $3.9 million as of December 31, 2013. We generally expect to fulfill all open backorders during 2016.

Foreign Sales

During 2015, 2014 and 2013, approximately $37.0 million, $16.6 million, and $27.3 million of our net revenue, respectively, was related to sales to customers in foreign countries.  The increase in foreign revenues in 2015 comparison to 2014 is primarily the result of the January 2, 2015 acquisition of our Akorn AG plant in Switzerland, which generated $27.5 million of revenue in the year, while the decline in foreign revenues in 2014 in comparison to 2013 is primarily the result of reduced sales generated by AIPL, our subsidiary in India. Of our total foreign sales in 2015, 2014 and 2013, $2.3 million, $7.2 million and $15.8 million, respectively, were generated by AIPL, which sold product to customers in India and other unregulated world markets. The declining revenue generated by AIPL through the respective periods is principally the result of our decision to reduce revenues associated with comparatively low-margin contract manufacturing to focus on achieving U.S. FDA site approval.

Our worldwide business is subject to risks of currency fluctuations, governmental actions and other governmental proceedings abroad. We do not regard these risks as a deterrent to further expansion of our operations abroad. However, we closely review our methods of operations and seek to adopt strategies responsive to changing economic and political conditions.

Suppliers

We require raw materials and components to manufacture and package pharmaceutical products. The principal components of our products are active and inactive pharmaceutical ingredients and certain packaging materials. Many of these materials are available from only a single source and, in the case of many of our products, only one supplier of raw materials has been identified and qualified. Because FDA approval of drugs requires manufacturers to specify their proposed suppliers of active ingredients and certain packaging materials in their applications, FDA approval of any new supplier would be required if such active ingredients or such packaging materials were no longer available from the specified supplier. The qualification of a new supplier could delay our development and marketing efforts. If for any reason we are unable to obtain sufficient quantities of any of the raw materials or components required to produce and package our products, we may not be able to manufacture our products as planned. In addition, certain of the pharmaceutical products that we market are manufactured by third parties that serve as our only supplier of those products.  Any delays or failure of a contract manufacturing partner to supply finished goods timely or in adequate volume could impede our marketing of those products.

No supplier represented 10% or more of our purchases in the years ended December 31, 2015, 2014 or 2013.  See Item 1A - Risk Factor — “Many of the raw materials and components used in our products come from a single source” for more information.

Manufacturing

We operate manufacturing facilities in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland and Paonta Sahib, Himachal Pradesh, India. See Item 2 - Properties, for more information. Through these manufacturing facilities we manufacture a diverse assortment of sterile and non-sterile pharmaceutical products including oral liquids and suspensions, otics, nasal sprays, liquid injectables, lyophilized injectables, topical gels, creams and ointments; and ophthalmic solutions and ointments for both our reportable segments.

Somerset — sterile ophthalmic solutions, ointments and gels

Decatur — sterile liquid and lyophilized injectables and sterile ophthalmic solutions

Amityville — sterile ophthalmic solutions, sterile gels, and non-sterile nasal sprays, topical ointments and creams, oral syrups and solutions, and liquid unit dose cups

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Hettlingen — sterile ophthalmic solutions, suspensions, gels and ointments

Paonta Sahib — sterile liquid injectables including cephalosporins, carbapenems, hormones and general injectables, as well as oral cephalosporins

Patents, Trademarks, Licenses and Proprietary Property

We consider the protection of our patents, trademarks and proprietary rights important to maintaining and growing our business.

Patents. We have sought, and intend to continue to seek, patent protection in the United States and selected foreign countries where deemed appropriate and advantageous to us. The importance of these patents does not vary among our business segments.

As of December 31, 2015, we have 12 issued U.S. patents, three U.S. patent applications pending, six foreign-issued patents and 19 foreign patent applications pending. The following table details information as of December 31, 2015 regarding US and foreign patents owned by the Company and its subsidiaries on currently marketed products.

Trademarks. Through our acquisitions, we have increased the number and importance of trademarks related to our products and product lines.  We also acquired rights to the trade names for the branded, prescription ophthalmic products AzaSite®, Betimol®, Cosopt® PF, and Zioptan®, the respiratory product Xopenex®, as well as OTC products such as TheraTears®, MagOx®, Multi-betic® and Zostrix®. We are committed to maintaining and defending these trade names as they are important in supporting the success and growth of our business. In addition, we maintain and defend trademarks related to a number of internally-developed products, as well as others licensed from third parties.

Other Proprietary Property. We also rely upon trade secrets, unpatented proprietary know-how and continuing technological innovation to maintain and develop our competitive position. We enter into confidentiality agreements with certain of our employees pursuant to which such employees agree to assign to us any inventions relating to our business made by them while in our employ. However, there can be no assurance that others may not acquire or independently develop similar technology or, if patents are not issued with respect to products arising from research, that we will be able to maintain information pertinent to such research as proprietary technology or trade secrets. See Item 1A - Risk Factor — “Our patents and proprietary rights may not adequately protect our products and processes” and “Third parties may claim that we infringe their proprietary rights and may prevent or delay us from manufacturing and selling some of our new products” for more information.

Government Regulation

Pharmaceutical manufacturers and distributors are subject to extensive regulation by government agencies, including the FDA, the Drug Enforcement Administration (“DEA”), the FTC and other federal, state and local agencies. The development, testing, manufacturing, processing, quality, safety, efficacy, packaging, labeling, recordkeeping, distribution, storage and advertising of our products, and disposal of waste products arising from such activities, are subject to regulation by the FDA, DEA, FTC, the Consumer Product Safety Commission, the Occupational Safety and Health Administration and the

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Environmental Protection Agency. Similar state and local agencies also have jurisdiction over these activities. Noncompliance with applicable United States and/or state or local regulatory requirements can result in fines, injunctions, penalties, mandatory recalls or seizures, suspensions of production, recommendations by the FDA against governmental contracts and criminal prosecution. In addition, we are subject to oversight from federal and state government benefit programs, healthcare fraud and abuse laws and international regulations in jurisdictions in which we manufacture or sell our pharmaceutical products.

FDA. The Federal Food, Drug and Cosmetic Act (the “FDC Act”), the Controlled Substance Act and other federal statutes and regulations govern or influence the development, testing, manufacture, labeling, storage and promotion of products that we manufacture and market. The FDA inspects drug manufacturers and storage facilities to determine compliance with its current Good Manufacturing Practices (“cGMP”) regulations, non-compliance with which can result in fines, recall and seizure of products, total or partial suspension of production, refusal to approve NDAs and ANDAs and criminal prosecution. Under the FDC Act, the federal government has extensive administrative and judicial enforcement authority over the activities of finished drug product manufacturers to ensure compliance with FDA regulations. This authority includes, but is not limited to, the authority to initiate judicial action to seize unapproved or non-complying products, to enjoin non-complying activities, to halt manufacturing operations that are not in compliance with cGMP, to recall products, to seek civil and monetary penalties and to criminally prosecute violators. Other enforcement activities include refusal to approve product applications, withdrawal of previously approved applications or prohibition on marketing of certain unapproved products.

FDA approval is required before any prescription drug products can be marketed. New drugs require the filing of an NDA, including clinical studies demonstrating the safety and efficacy of the drug. Generic drugs, which are therapeutic equivalents of existing, brand name drugs, require the filing of an ANDA. An ANDA does not, for the most part, require clinical studies since safety and efficacy have already been demonstrated by the product originator. However, the ANDA must, for example, provide data to support the bioequivalence of the generic drug product. The time required by the FDA to review and approve NDAs and ANDAs is variable and, to a large extent, beyond our control.

We are subject to periodic inspections by the FDA and in the years ended December 31, 2015, 2014 and 2013, there have not been any significant impacts associated with regulatory inspection or related review activities. FDA inspections were conducted during the second quarter of 2015 at our Somerset, New Jersey facility and our Amityville, New York facility and resulted in no regulatory actions. The June 2014 FDA inspection of the Akorn India operation resulted in non-approval and a requirement for re-inspection and approval. Furthermore, in the second quarter of 2016 our Somerset facility was inspected again which resulted in no regulatory actions.

DEA. We manufacture and distribute several controlled drug substances, the distribution and handling of which are regulated by the DEA., which imposes, among other things, certain licensing, security and recordkeeping requirements, as well as quotas for the manufacture, purchase, storage and sale of controlled substances. Failure to comply with DEA regulations (and similar state regulations) can result in fines or seizure of product. There have not been any material fines, seizures or interruptions resulting from DEA inspections in any of the years ended December 31, 2015, 2014 or 2013.

We are subject to periodic inspections by the DEA in facilities where we manufacture, process or distributed controlled substances.  Our most recent DEA inspections conducted in December 2015 at our Decatur, Illinois and Amityville, New York facilities resulted in no regulatory actions.

Government Benefit Programs. We sell products that can be subject to the statutory and regulatory requirements for Medicaid, Medicare, TRICARE and other government healthcare programs. These regulations govern access and reimbursement levels, including that all pharmaceutical companies pay rebates to individual states based on a percentage of sales arising from Medicaid-reimbursed products. We are also subject to price ceilings for select products sold through the military TRICARE program. U.S. Federal and state governments may continue to enact legislation and other measures aimed at containing or reducing payment levels for prescription pharmaceuticals paid for in whole or in part with government funds. We cannot predict the nature of such potential future measures or the impact on our profitability.

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Healthcare Fraud and Abuse Laws. We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry. In the U.S. there are various federal and state anti-kickback laws that prohibit payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services or reward past purchases or recommendations. Violations of these anti-kickback laws can lead to civil and/or criminal penalties, including fines, imprisonment and exclusion from participation in government healthcare programs. See Item 1A - Risk Factor — “Any failure to comply with the complex reporting and payment obligations under Medicare, Medicaid and other government programs may result in litigation or sanctions,” for further discussion on anti-kickback laws. We are also subject to other healthcare fraud and abuse laws, notably:

Federal Civil False Claims Act. We are also subject to the provisions of the federal civil False Claims Act and, in particular, actions brought pursuant to the False Claims Act’s whistleblower or qui tam provisions. The civil False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted or caused the submission of a false claim to the federal government, and to share in any monetary recovery. In recent years, the number or suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.

HIPAA. Fraud provisions in the Health Insurance Portability and Accountability Act (“HIPAA”) of 1996 prohibits knowingly and willingly executing a scheme to defraud any healthcare benefit program, including those of private third-party payers. Also, false statement provisions within HIPAA prohibits knowingly and willingly falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Federal Physician Payments Sunshine Act. The Federal Physician Payments Sunshine Act mandates annual reporting of various types of payments to physicians and teaching hospitals. Under the regulations, applicable drug, biological, device, and medical supply manufacturers are required to report to CMS payments or other transfers of value made to physicians and teaching hospitals, and the regulations also require the manufacturers and GPOs to report ownership and investment interests held by physicians or their immediate family members. The rule sets forth a reporting process that permits physicians, teaching hospitals, and physician owners and investors to dispute information reported by applicable manufacturers and GPOs. Under the regulations, information that is the subject of a dispute not resolved within the initial allotted 60-day review and dispute resolution period will be posted on CMS’s public website in the manner in which it was submitted by the manufacturer or GPO, rather than in a manner that includes the version provided by the disputing physician, teaching hospital, or physician owner or investor. Failure to comply with required reporting requirements could subject pharmaceutical manufacturers and others to substantial civil monetary penalties.

International Regulations. The Company, and its employees are subject to the Foreign Corrupt Practices Act (“FCPA”), in addition, we have two international manufacturing facilities and are subject to laws and regulations that differ from those under which we operate in the U.S. Regulatory agencies outside of the U.S. with which we interact include Swissmedic in Switzerland and the Central Drugs Standard Control Organization in India.

Government Contracts

We maintain distribution contracts with the U.S. Federal Government, including the U.S. Department of Veterans Affairs, among others. A number of these contracts allow the US. Federal Government to terminate such contracts upon written notice. We do not believe that any single termination is likely or would be material to our operations.

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Employees

As of December 31, 2015 we had a total of 2,172 employees globally, consisting of 1,972 permanent, full-time employees and 200 part-time or temporary employees. Our full and part time or temporary employees worked in the following locations:

We believe we have good relations with our employees. Our U.S. full-time and part-time employees are not represented by collective bargaining agreements.

Environment

Our operations are subject to foreign, federal, state and local environmental laws and regulations concerning, among other matters, the generation, handling, storage, transport, treatment and disposal or, and exposure to, toxic and hazardous substances. Violation of these laws and regulations, which frequently change, can lead to substantial fines and penalties. Some of our operations require environmental permits and controls to prevent and limit pollution. We believe that our facilities are in substantial compliance with applicable environmental laws and regulations and we do not anticipate any material adverse effect from compliance with foreign, federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.

Available Information

Our internet address is http://www.akorn.com. The contents of our website are not part of this Annual Report on Form 10-K, and our internet address is included in this document as an inactive textual reference only. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

Materials filed with the SEC can also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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Item 1A. Risk Factors.

An investment in our common stock involves a high degree of risk. In addition to the other information included in this Annual Report on Form 10-K, you should carefully consider each of the risks described below before purchasing shares of our common stock. The risk factors set forth below are not the only risks that may affect our business. Our business could also be affected by additional risks not currently known to us or that we currently deem to be immaterial. If any of the following risks actually occur, our business, financial condition and results of operations could materially suffer. As a result, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Restatement.

Our history includes failures to timely file our periodic reports with the SEC, which, if compliance is not gained and retained, could result in the potential delisting of our common stock from The NASDAQ Global Select Market, which would materially and adversely affect our stock price, financial condition and/or results of operations.

We did not file our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 nor did we timely report our Annual Report on Form 10-K for the year ended December 31, 2015 and such filings have been integrated into this comprehensive Form 10-K. These failures to timely file periodic reports with the SEC for 2015 resulted in our not being in compliance with relevant NASDAQ Listing Rules. In addition to filing this form 10-K, we are required to, among other things, file a definitive proxy statement and hold a 2016 annual meeting of shareholders. Our historical failure to file periodic reports means that we are not able to definitively predict timely prospective filings in accordance with listing rules. If we fail to accurately and timely make such filings, our stock may be delisted from The NASDAQ Global Select Market, which could have a material adverse effect on us by, among other things, reducing:

·                  The liquidity of our common stock;

·                  The market price of our common stock;

·                  The number of institutional and other investors that will consider investing in our common stock;

·                  The number of market makers in our common stock;

·                  The availability of information concerning the trading prices and volume of our common stock;

·                  The number of broker-dealers willing to execute trades in shares of our common stock;

·                  Our ability to obtain equity financing for the continuation of our operations;

·                  Our ability to use our equity as consideration in any merger transaction; and

·                  The effectiveness of equity-based compensation plans for our employees used to attract and retain individuals important to our operations

Our historical failure to timely file our periodic reports with the SEC has, among other things, resulted in a default under our convertible note, a breach of covenants under our loan agreements and could further impact our credit rating, each of which could materially and adversely affect our prospective financial condition and/or results of operations.

We did not timely report our Quarterly Reports on Form 10-Q for the quarters ending March 31, 2015, June 30, 2015 and September 30, 2015 nor did we timely report our Annual Report on Form 10-K for the year ending December 31, 2015 and such filings have been integrated into this comprehensive Form 10-K. Any failure to make timely filings of one or more future periodic reports could result in further defaults and breaches and further negatively impact our credit rating, each of which could have an adverse impact on our ability to finance in the future, the cost of future financings, and/or our results of operations. For further information, see Risk Factor “One of our credit ratings was downgraded in November of 2015, which could adversely affect our access to liquidity, working capital, financing in the future, and could increase financing costs.”

We have identified material weaknesses in our internal control over financial reporting. If our remedial measures are insufficient to address the material weaknesses, or if we otherwise fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.

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In connection with our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2015, we concluded there were certain material weaknesses in internal control over financial reporting. See Item 9A — “Controls and Procedures.”  Our management or our independent registered public accounting firm may identify other material weaknesses in our internal control over financial reporting in the future. The existence of internal control material weaknesses may result in current and potential stockholders losing confidence in our financial reporting, which could harm our business, the market price of our common stock, and our ability to retain our current, or obtain new, alliance and collaboration agreements’ partners.  In addition, the existence of material weaknesses in our internal control over financial reporting may affect our ability to timely file periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The inability to timely file periodic reports could result in the SEC revoking the registration of our common stock, which would prohibit us from listing or having our stock quoted on The NASDAQ Global Select Market or any other stock exchange. This would have an adverse effect on our business and stock price by limiting the publicly available information regarding us and greatly reducing the ability of our stockholders to sell or trade our common stock.

The restatement of our previously issued 2014 financial statements and the previous delay in our filing of 2015 financial statements has resulted in various governmental investigations and shareholder lawsuits and could result in government enforcement actions, which could have a material adverse impact on our results of operations, financial condition, liquidity, and cash flows.

The restatement of our previously issued 2014 financial statements and the previous delay in our filing of 2015 financial statements has resulted in various governmental investigations and shareholder lawsuits. See Note 22, “Legal Proceedings — Shareholder and Derivative Litigation” and “— Other Matters.” Litigation Our management may be required to devote significant time and attention to these matters, and these and additional matters that arise from the restatement, any of which could result in government enforcement actions and could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows. We cannot predict the outcome of these matters or estimate the potential exposure at this time.

Management’s attention and focus has been on the restatement of 2014 financial information and the remediation of our failure to file periodic reports timely which has reduced focus on operations.

As a direct result of the restatement and investigation into the circumstances of the restatement, our management has devoted significant time and attention to the restatement, the review of accounting procedures and errors, the audit of our financial statements, remedial actions and related matters, and it will continue to devote significant time and attention to these and additional matters that arise from the restatement. This attention diverts management focus from other matters, and could have an adverse impact on our results of prospective operations, financial condition, liquidity and cash flows as a result.

We have incurred significant additional costs to complete the restatement of previously issued financials and to remediate our failure to timely file our periodic reports, which may result in reduced operating results in future periods.

As part of this Form 10-K, we have completed the process of restating previously filed financial statements, and we are in the process of remediating our previously existing material weaknesses, and evaluating if further remedial action is appropriate. These restatements, and the review of the misstatements that necessitated the restatement of our financial statements, have been time consuming, expensive and could expose us to a number of additional risks, which could materially adversely affect our financial position, results of operations, and cash flows.

In particular, we have incurred and will likely continue to incur significant expense, including significant audit, legal, consulting, and other professional fees, and lender and noteholder consent fees, in connection with the restatement of our previously issued financial statements and the ongoing remediation of material weaknesses in our internal control over financial reporting. We have taken a number of steps, including adding significant internal resources and implementing a number of additional procedures, in order to strengthen our accounting function and attempt to reduce the risk of additional

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misstatements in our financial statements. To the extent these steps are not successful, we could be forced to incur additional time and expense.

Our historical failure to timely file our periodic reports with the SEC may limit us from accessing the public markets to raise debt or equity capital, which may limit our ability to access debt capital financing, which in turn may limit our ability to pursue one of our core strategies of acquisitions.

We did not file our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 nor did we timely report our Annual Report on Form 10-K for the year ended December 31, 2015 and such filings have been integrated into this comprehensive Form 10-K. Any failure by us to make timely filings of one or more of our periodic reports for 2016 or other failure to remain current in our reporting requirements with the SEC, may inhibit our ability to access the public markets to raise debt or equity capital. The inability to access the capital may limit our options to finance our business, and may substantially limit our ability to finance potential acquisitions. One of our core business strategies is to acquire complementary businesses in order to grow our company. This limited ability to access the public markets would prevent us from pursuing transactions or implementing business strategies that we believe would be beneficial to our business. As needs arise, we may seek additional borrowings or alternative sources of financing; however, difficulties in borrowing money or raising financing could have a material adverse effect on our operations, planned capital expenditures and ability to fund further growth.

One of our credit ratings was downgraded in November of 2015, which could adversely affect our access to liquidity, working capital, and financing in the future, and could increase financing costs.

Nationally recognized credit rating organizations have issued credit ratings relating to our long-term debt. In 2015, our credit rating with S&P was downgraded from “B+” to “B.” Our current long-term credit ratings are “B1” with Moody’s and “B” with S&P, both of which are below investment grade. Additional rating agency reviews could result in a further change in outlook or downgrade. Our credit ratings could limit our access to new financing in the future, particularly short-term financing; result in an increase in financing costs, including interest expense under our debt instruments and result in less favorable covenants and financial terms of our financing arrangements.

This downgrade to our credit rating could reduce our flexibility with respect to working capital. Changes in our credit profile could affect the way that suppliers view our ability to make payments and could result in less favorable payment terms, which could adversely affect our ability to fund our working capital. We have significant working capital needs, as the nature of our business requires us to purchase and maintain inventories that enable us to fulfill wholesaler and retailer demand. We finance our working capital needs primarily through cash flow from our operations but may require borrowings under our Existing and Incremental Term Loan facilities. If we are unable to finance our working capital needs on the same terms going forward, or if our working capital requirements increase and we are unable to finance the increase, we may not be able to purchase or manufacture products required by our customers, which could result in a loss of sales and additional liabilities due to various contractual penalties.

Risks Related to Our Business.

We depend on a small number of wholesalers to distribute our products, the loss of any of which could have a material adverse effect on our business.

A small number of large wholesale drug distributors account for a significant portion of our gross sales, net revenues and accounts receivable. The following three wholesalers — Amerisource, Cardinal and McKesson — accounted for approximately 77.8% of total gross sales and 70.0% of total net revenues in 2015, and 82.8% of gross trade receivables as of December 31, 2015. In addition to acting as distributors of our products, these three companies also distribute a broad range of healthcare products on behalf of many other companies. The loss of our relationship with one or more of these wholesalers, together with a delay or inability to secure an alternative distribution source for our hospital, retail and other customers, could have a material

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adverse impact on our revenue and results of operations.  A change in purchasing patterns or inventory levels, an increase in returns of our products, delays in purchasing products and delays in payment for products by one or more of these wholesale drug distributors also could have a material adverse impact on our revenue, results of operations and cash flows.

Our growth depends on our ability to timely and efficiently develop and successfully launch and market new pharmaceutical products ahead of our competitors.

Our strategy for growth is dependent upon our ability to develop products that can be promoted through current marketing and distributions channels and, when appropriate, the enhancement of such marketing and distribution channels. We may fail to meet our anticipated time schedule for the filing of new applications or may decide not to pursue applications that we have already submitted or anticipate submitting. Our internal development of new pharmaceutical products is dependent upon the research and development capabilities of our personnel and our strategic business alliance infrastructure. We and our strategic business alliance partners might fail to develop new pharmaceutical products or acquired IPR&D or, if developed, we might fail to commercialize these new pharmaceutical products. In addition, we might not receive all necessary regulatory approvals or such approvals might involve delays, which may adversely affect the commercial success of our products. Our failure to develop new products or to receive regulatory approval of applications could have a material adverse effect on our business, financial condition and results of operations. Even if successfully developed and launched, no assurance can be given as to the actual size of the market for any product or the level of profitability and sales of the product.

Our inability to effectively manage or support our rapid growth may have a material adverse effect on our business, financial position, results of operations and liquidity and could cause the market value of our common stock to decline.

We have grown rapidly as a result of several acquisitions, and additional growth through acquisitions is possible in the future. This growth has put significant demands on our processes, systems and people. Attracting, retaining and motivating key employees in various departments and locations to support our growth are critical to our business, and competition for these people can be significant. If we are unable to hire and retain qualified employees and if we do not effectively invest in systems and processes to manage and support our rapid growth and the challenges and difficulties associated with managing a larger, more complex business, and if we cannot effectively manage and integrate our increasingly diverse and global platform, there could be a material adverse effect on our business, financial position, results of operations or cash flows, and the market value of our common stock could decline.

We have entered into several strategic business alliances that may not result in marketable products and may have a material adverse effect on our business, financial position, results of operations and liquidity.

We have entered into several strategic business alliances that are designed to provide products that can be marketed through our distribution pipeline. These agreements might not result in additional FDA approved products, and we might not be able to market any such additional products at a profit. In addition, any clinical trial expenses that we may incur in connection with these strategic business alliances may negatively impact our financial results.

We may not achieve the anticipated benefits from our acquisitions and we may face difficulties in integrating them, which could adversely affect our operating results, increase costs and place a significant strain on our management.

If we fail to manage the integration of our acquisitions and fail to achieve expected synergies and revenue growth, our business could be disrupted and our operating results could be negatively impacted. The operating success of our acquisitions involves the integration of products, processes and personnel into our business. In addition, the integration of acquisitions may require establishing or training a local management team and overseeing the operations remotely, and can involve cultural, monetary and systems challenges. Our personnel, systems, procedures, or controls may not be adequate to support both our ongoing business and the acquired businesses. If any newly-acquired businesses or assets require a disproportionate share of our resources and management’s attention, our overall financial results may suffer.

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Charges to earnings resulting from acquisitions could have a material adverse effect on our business, financial position and results of operations.

Under accounting principles generally accepted in the United States of America (“GAAP”) business acquisition accounting standards, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess amount of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and may adversely affect our cash flow:

·                  costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee retention, redeployment or relocation expenses;

·                  impairment of goodwill or intangible assets, including acquired IPR&D;

·                  amortization of intangible assets acquired;

·                  a reduction in the useful lives of intangible assets acquired;

·                  identification of or changes to assumed contingent liabilities, including, but not limited to, contingent purchase price consideration, income tax contingencies and other non-income tax contingencies, after our final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes first;

·                  charges to our operating results to eliminate certain duplicative pre-acquisition activities, to restructure our operations or to reduce our cost structure;

·                  charges to our operating results resulting from expenses incurred to effect the acquisition;

·                  changes to contingent consideration liabilities, including accretion and fair value adjustments. A significant portion of these adjustments could be accounted for as expenses that will decrease our net income and earnings per share for the periods in which those costs are incurred. Such charges could cause a material adverse effect on our business, financial position, results of operations and/or cash flow, and could cause the market value of the common stock to decline.

As of December 31, 2015, we had recorded $284.7 million of goodwill on our consolidated balance sheet.

Our revenues depend on sale of products manufactured by third parties, the loss or failure of any of which may have a material adverse effect on our business, financial position and results of operations.

Certain of the pharmaceutical products that we market, representing a significant portion of our net revenues, are manufactured by third parties that serve as our only supplier of those products. Any delays or failure of a contract manufacturing partner to supply finished goods timely or in adequate volume could impede our marketing of those products. We expect this risk to become more significant as we receive approvals for new products to be manufactured through our strategic partnerships and as we seek additional growth opportunities beyond the capacity and capabilities of our current manufacturing facilities. If we are unable to obtain or retain third-party manufacturers for these products on commercially acceptable terms, we may not be able to distribute such products as planned.  Any delays or difficulties with third-party manufacturers could adversely affect the marketing and distribution of certain of our products, which could have a material adverse effect on our business, financial condition and results of operations.

Failure to obtain regulatory certification of our manufacturing facility in India for production of pharmaceutical products for export to the United States, as well as other regulated world markets, could impair our ability to grow and adversely affect our business, financial condition and results of operations.

We operate a manufacturing campus in Paonta Sahib, India, which we acquired through a business combination in 2012. The manufacturing site is not currently approved by the FDA to manufacture products for export to the United States. It is our intention to obtain certification from the FDA and other regulatory authorities to allow this facility to manufacture

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products for export to the United States and other regulated world markets.  An inability to obtain or maintain such certification could restrict our ability to achieve our growth objectives, which would adversely affect our business, financial condition and results of operations.

We depend on our employees and must continue to attract and retain key personnel in order to compete successfully, and any failure to do so could hinder successful execution of our business and development plans and have a material adverse effect on our financial position and results of operation.

Our performance depends, to a large extent, on the continued service of our key R&D personnel, other technical employees, managers and sales personnel and our ability to continue to attract and retain such personnel. Competition for such personnel is intense, particularly for highly motivated and experienced R&D and other technical personnel. We are facing increasing competition from companies with greater financial resources for such personnel. As a result, we might not be able to attract and retain sufficient numbers of highly skilled personnel in the future, and the inability to do so could have a material adverse effect on our business, and on our results of operations and financial condition.

We become involved in legal proceedings from time to time, any of which may result in substantial losses, damage to our business and reputation and place a strain on our internal resources.

In the ordinary course of our business, we become involved in legal proceedings with both private parties and certain government agencies, including the FDA. Any substantial litigation may result in verdicts against us, which may include significant monetary awards, judgments that certain of our intellectual property rights are invalid or unenforceable and injunctions preventing the manufacture, marketing and sale of our products. If disputes are resolved unfavorably, our business, financial condition and results of operations may be adversely affected. Any litigation, whether or not successful, may damage our reputation. Furthermore, we are likely to incur substantial expense in defending these lawsuits and the time demands of such lawsuits could divert management’s attention from ongoing business concerns and interfere with our normal operations.

Risks Related to Our Industry.

Many of the raw materials and components used in our products come from a single source, the loss of any of which could have a material adverse effect on our business.

We require raw materials and components to manufacture and package pharmaceutical products. The principal components of our products are active and inactive pharmaceutical ingredients and certain packaging materials. Many of these materials are available from only a single source and, in the case of many of our products, only one supplier of raw materials has been identified and qualified. Because FDA approval of drugs requires manufacturers to specify their proposed suppliers of active ingredients and certain packaging materials in their applications, FDA approval of any new supplier would be required if such active ingredients or such packaging materials were no longer available from the specified supplier. The qualification of a new supplier could delay our development and marketing efforts. If for any reason we are unable to obtain sufficient quantities of any of the raw materials or components required to produce and package our products, we may not be able to manufacture our products as planned.

Sales of our products may be adversely affected by the continuing consolidation of our customer base, which may have a material adverse effect on our business plans, financial position and results of operation.

Drug wholesalers, drug retailers, and group purchasing organizations have undergone, and are continuing to undergo, significant consolidation. Such consolidation has provided and may continue to provide them with additional purchasing leverage, and consequently may increase the pricing pressures that we face. Our net sales and quarterly growth comparisons may be affected by fluctuations in the buying patterns of retail chains, major distributors and other trade buyers, whether resulting from seasonality, pricing, wholesaler buying decisions or other factors. In addition, since such a significant portion of our revenues is derived from relatively few customers, any financial difficulties experienced by a single customer, or any delay

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in receiving payments from a single customer, could have a material adverse effect on our business, results of operations and financial condition.

Our branded products may become subject to increased generic competition.

Trends toward moving toward increased substitution and reimbursement of generics for cost-containment purposes may reduce and limit the sales of our off-patent branded products. Additionally, increased focus by the FDA on approval of generics may accelerate this trend.

Changes in technology could render our products obsolete.

The pharmaceutical industry is characterized by rapid technological change. The products that we sell today and their drug delivery methods may be replaced by more effective methods to deliver the same care, rendering our current products obsolete. Further, the technologies that we invest in for future use may not become the preferred method of delivery.

Risks Related to Regulations.

Any failure to comply with the complex reporting and payment obligations under Medicare, Medicaid and other government programs may result in litigation or sanctions.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims, marketing and pricing laws. We are also subject to Medicaid and other government reporting and payment obligations that are highly complex and at times ambiguous. Violations of these laws and reporting obligations are punishable by criminal or civil sanctions and exclusion from participation in federal and state healthcare programs such as Medicare and Medicaid. The recent healthcare reform legislation made several changes to the federal anti-kickback statute, false claims laws, and healthcare fraud statute such as increasing penalties and making it easier for the government to bring sanctions against pharmaceutical companies. If our past, present or future operations are found to be in violation of any of the laws described above or other similar governmental regulations, we may be subject to the applicable penalty associated with the violation, which could adversely affect our ability to operate our business and negatively impact our financial results. Further, if there is a change in laws, regulations or administrative or judicial interpretations, we may have to change our business practices or our existing business practices could be challenged as unlawful, which could materially adversely affect our business, financial position and results of operations.

Changes in healthcare law and policy changes may adversely affect our business plans and results of operations.

The sales of our products depend in part on the availability of reimbursement from third-party payers such as government health administration authorities, private health insurers, health maintenance organizations including Pharmacy Benefit Managers (“PBMs”) and other healthcare-related organizations. We expect both federal and state governments in the U.S. and foreign governments to continue to propose and pass new legislation, rules and regulations designed to contain or reduce the cost of healthcare while expanding individual healthcare benefits. Existing regulations that affect the price of pharmaceutical and other medical products may also change before any of our products are approved for marketing. Cost control initiatives could decrease the price that we receive for any product we develop in the future. In addition, PBMs and other third-party payers are increasingly challenging the price and cost-effectiveness of medical products and services. Significant uncertainty exists as to the reimbursement status of newly approved pharmaceutical products. Our products may not be considered cost effective, or adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize a return on our investments. All of these may harm our ability to market our products and generate profits.

We are subject to extensive government regulations which if they change and or we are not in compliance with, could increase our costs, subject us to various obligations and fines, or prevent us from selling our products or operating our facilities.

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New, modified and additional regulations, statutes or legal interpretation, if any, could, among other things, require changes to manufacturing methods, expanded or different labeling, recall, replacement or discontinuation of certain products, additional recordkeeping procedures and expanded documentation of the properties of certain products and additional scientific substantiation. Such changes or new legislation could have a material adverse effect on our business, financial condition and results of operations.  Certain of the regulatory risks that we are subject to are outlined below:

We must obtain approval from the FDA for each prescription pharmaceutical product that we market and the timing of such approval process is unknown and uncertain. The FDA approval process is typically lengthy, and approval is never certain. Our new products could take a significantly longer time than we expect to gain regulatory approval and may never gain approval. Even if the FDA or another regulatory agency approves a product, the approval may limit the indicated uses for a product, may otherwise limit our ability to promote, sell and distribute a product or may require post-marketing studies or impose other post-marketing obligations, which could have a material adverse effect on marketability and profitability of the new products.

We and our third-party manufacturers are subject to periodic inspection by the FDA to assure regulatory compliance regarding the manufacturing, distribution, and promotion of pharmaceutical products. The FDA imposes stringent mandatory requirements on the manufacture and distribution of pharmaceutical products to ensure their safety and efficacy. The FDA also regulates drug labeling and the advertising of prescription drugs. A finding by a governmental agency or court that we are not in compliance with FDA requirements could have a material adverse effect on our business, financial condition and results of operations.

We are subject to recalls and other enforcement actions by the FDA. The FDA or other government agencies having regulatory authority over pharmaceutical products may request us to voluntarily or involuntarily conduct product recalls due to disputed labeling claims, manufacturing issues, quality defects or for other reasons. Restriction or prohibition on sales, halting of manufacturing operations, recalls of our pharmaceutical products or other enforcement actions could have a material adverse effect on our business, financial condition and results of operations. Further, such actions, in certain circumstances, may constitute an event of default under the terms of our various financing arrangements.

If the FDA changes its regulatory policies, it could force us to delay or suspend our manufacturing, distribution or sales of certain products. FDA interpretations of existing or pending regulations and standards may change over time with the advancement of associated technologies, industry trends, or prevailing scientific rationale. If the FDA changes its regulatory policies due to such factors, it could result in delay or suspension of the manufacturing, distribution or sales of certain of our products. In addition, modifications or enhancements of approved products are in many circumstances subject to additional FDA approvals which may or may not be granted and which may be subject to a lengthy application process. Any change in the FDA’s enforcement policy or any decision by the FDA to require an approved application for one of our products not currently subject to the approved application requirements or any delay in the FDA approving an application for one of our products could have a material adverse effect on our business, financial condition and results of operations.

We are subject to extensive DEA regulation, which could result in our being fined or otherwise penalized if we are in non-compliance. The DEA could limit or reduce the amount of controlled substances which we are permitted to manufacture and market or issue fines and penalties against us for non-compliance with DEA regulations, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to the Federal Drug Supply Chain Security Act (“ DSCSA”) that requires development of an electronic pedigree to track and trace each prescription drug at the salable unit level through the distribution system, which will become incrementally effective over a 10-year period. Beginning in November 2017, all prescription drug manufacturers, including us, must label prescription products with a unique serial number at the saleable unit level. Failure to meet this deadline would likely have a significant adverse impact on our business.

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The FDA may require us to stop marketing certain unapproved drugs, which could have a material adverse effect on our business, financial position and results of operation.

We market several generic prescription products which do not have formal FDA approvals. These products are non-application drugs that are manufactured and marketed without FDA approved filings on the basis of their having been marketed by the pharmaceutical industry prior to the 1962 Amendments of the FDC Act.  The FDA has increased its efforts to require companies to file and seek FDA approval for unapproved products, and when a product is approved, the FDA has typically increased its effort to remove other unapproved products from the market by issuing notices to companies currently manufacturing these products to cease its distribution of said products. If the FDA issues Warning Letters or notices with respect to one or more of our unapproved products, we may be forced to discontinue manufacture and marketing of the affected products, which could have an adverse effect on our revenues and results of operations. In 2013, we discontinued marketing of a previously unapproved product after receipt of a Warning Letter in October 2012.

We marketed six such unapproved products during 2015, generating net sales revenue of approximately $103.9 million. Of the six products marketed during 2015, none were approved through either an ANDA or an NDA prior to the filing of this Form 10-K.

In 2016, prior to the filing of this Form 10-K we have become aware that other entities have received approval for two products that the Company currently markets as unapproved products. At this time, we are unable to determine the specific effect that this may have on our financial statements or disclosures.

The FDA may authorize sales of some prescription pharmaceuticals on a non-prescription basis, which may reduce the profitability of our prescription products.

The FDA may change the designation of some prescription pharmaceuticals we currently sell to non-prescription. If we are unable to gain approval of our product on a non-prescription designation we may experience an adverse effect on our business.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and operating results.

The Company and its employees are subject to the FCPA, which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business or other benefits. In addition, the FCPA imposes recordkeeping standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. If our employees, third-party sales representatives or other agents are found to have engaged in such practices, we could suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures, including further changes or enhancements to our procedures, policies and controls, as well as potential personnel changes and disciplinary actions.

Risks Related to Our Intellectual Property.

Third parties may claim that we infringe their proprietary rights and may prevent or delay us from manufacturing and selling some of our new products.

The manufacture, use and sale of new products that are the subject of conflicting patent rights have been the subject of substantial litigation in the pharmaceutical industry. Pharmaceutical companies with patented brand products frequently sue companies that file applications to produce generic equivalents of their patented brand products for alleged patent infringement or other violations of intellectual property rights, which may delay or prevent the entry of such generic products into the

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market. Generally, a generic drug may not be marketed until the applicable patent(s) on the brand name drug expire or are held to be not infringed, invalid, or unenforceable. When we or our development partners submit a filing to the FDA for approval of a generic drug, we or our development partners must certify either (i) that there is no patent listed by the FDA as covering the relevant brand product, (ii) that any patent listed as covering the brand product has expired, (iii) that the patent listed as covering the brand product will expire prior to the marketing of the generic product, in which case the filing will not be finally approved by the FDA until the expiration of such patent, or (iv) that any patent listed as covering the brand drug is invalid or will not be infringed by the manufacture, sale or use of the generic product for which the filing is submitted.

Under any circumstance in which an act of infringement is alleged to occur, there is a risk that a brand pharmaceutical company may sue us for alleged patent infringement or other violations of intellectual property rights. Also, competing pharmaceutical companies may file lawsuits against us or our strategic partners alleging patent infringement or may file declaratory judgment actions of non-infringement, invalidity, or unenforceability against us relating to our own patents. We have been sued for patent infringement related to several of our filings and we anticipate that we may be sued once we file for other products in our pipeline. Such litigation is often costly and time-consuming and could result in a substantial delay in, or prevent the introduction and/or marketing of our products, which could have a material adverse effect on our business, financial condition and results of operations.

Even if the parties settle their intellectual property disputes through licensing or similar arrangements, the costs associated with these arrangements may be substantial and could include ongoing royalties, and the necessary licenses might not be available to us on terms we believe to be acceptable.

Our patents and proprietary rights may be challenged, circumvented or otherwise compromised by competitors, which may result in our protected products losing their market exclusivity and becoming subject to generic competition before their patents expire.

The patent and proprietary rights position of competitors in the pharmaceutical industry generally is highly uncertain, involves complex legal and factual questions, and is the subject of much litigation. There can be no assurance that any patent applications or other proprietary rights, including licensed rights, relating to our potential products or processes will result in patents being issued or other proprietary rights secured, or that the resulting patents or proprietary rights, if any, will provide protection against competitors who: (i) successfully challenge our patents or proprietary rights; (ii) obtain patents or proprietary rights that may have an adverse effect on our ability to conduct business; or (iii) are able to circumvent our patent or proprietary rights position. It is possible that other parties have conducted or are conducting research and could make discoveries of pharmaceutical formulations or processes that would precede any discoveries made by us, which could prevent us from obtaining patent or other protection for these discoveries or marketing products developed therefrom. Consequently, others could independently develop pharmaceutical products similar to or rendering obsolete those that we are planning to develop, or duplicate any of our products. Our inability to obtain patents for, or other proprietary rights in, our products and processes or the ability of competitors to circumvent or obsolete our patents or proprietary rights could have a material adverse effect on our business, financial condition and results of operations.  Additionally, our inability to successfully defend our existing patents against Paragraph IV challenges by competing drug companies could have a material adverse effect on our business, financial condition and results of operations. For example, the patents that protect Azasite® were challenged by two generic competitors. We settled with one competitor and the courts found in our favor with the other. We expect that the Zioptan® patent will also be challenged.

Further, the majority of the drug products that we market are generics, with essentially no patent or proprietary rights attached. While this fact allowed us the opportunity to develop or to purchase and obtain FDA approval to market our generic products, it also allows competing drug companies to do the same. Should multiple additional drug companies choose to develop and market the same generic products that we actively market, our profit margins could decline, which would have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Financing.

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Our indebtedness reduces our financial and operating flexibility.

We have entered into various credit arrangements to fund certain of our operations and activities, principally business combinations. During the prior year ended December 31, 2014 we significantly increased our debt obligations through new term loans. As of December 31, 2015, our debt includes an Existing Term Loan Facility with a remaining principal balance of $592.5 million, an Incremental Term Loan Facility with a remaining principal balance of $439.4 million, and $43.2 million principal balance in our Convertible Senior Notes due 2016 (the “Notes”) and we also have available borrowing capacity under our credit facilities (See Part II, Item 8 — Note 8 — “Financing Arrangements” for definitions and descriptions of our Existing Term Loan Facility, Incremental Term Loan Facility and Notes and our credit facilities). A high level of indebtedness subjects us to a number of risks. In particular, a significant portion of our current indebtedness has variable interest terms meaning we are subject to the risks associated with higher interest rates, and moreover, a high level of indebtedness may impair our ability to obtain additional financing in the future and increases the risk that we may default on our debt obligations. In addition, our current debt arrangements require that we devote a significant portion of our cash flows to service amounts outstanding under those debt arrangements. We also are subject to various covenants with respect to our indebtedness, including the obligation to meet certain defined financial ratios and our ability to pay distributions to our shareholders is restricted. Further, our indebtedness may restrict or otherwise impair our ability to raise additional capital through other debt financing, which could restrict our ability to grow our business. Our ability to meet our debt obligations, to comply with all required covenants, and to reduce our level of indebtedness depends on our future performance. General economic conditions and financial, business and other factors affect our operations and our future performance. Many of these factors are beyond our control. If we do not have sufficient funds on hand to pay our debt when due, we may be required to seek a waiver or amendment from our lenders, refinance our indebtedness, incur additional indebtedness, sell assets or sell additional shares of securities. We may not be able to complete such transactions on terms acceptable to us, or at all. Our failure to generate sufficient funds to pay our debts or to undertake any of these actions successfully could result in a default on our debt obligations, which would materially adversely affect our business, results of operations and financial condition.

We may not generate cash flow sufficient to pay interest and make required principal repayments on our Term Loans.

On April 17, 2014, upon completing the Hi-Tech Acquisition, we entered into a $600.0 million term loan with certain other lenders with JPMorgan Chase Bank, N.A. acting as the administrative agent (the “Existing Term Loan”) and on August 12, 2014, upon completing the VersaPharm Acquisition, we entered into a $445.0 million term loan with certain other lenders with JPMorgan Chase Bank, N.A. acting as the administrative agent (the “Incremental Term Loan”). These term loans significantly increased our debt obligations. The Existing Term Loan and Incremental Term Loan each bear interest at a variable rate at a margin above prime or LIBOR, at our election. As a result of the restatements experienced in the year, the variable rate above prime or LIBOR was modified on November 13, 2015 to represent a variable amount dependent on the Company’s credit rating as of the date at which the Company becomes current with SEC reporting requirements. The Company will be required to pay this increased interest rate until termination. In addition to our interest obligation, we are required to repay 0.25% of the principal balance quarterly, beginning with the second and first full quarter, respectively after entering into the loan agreements. The remaining outstanding balance under each of the Existing Term Loan and the Incremental Term Loan will be due and payable on April 17, 2021. If we do not generate sufficient operating cash flows to fund these payments or obtain additional funding from external sources at acceptable terms, we may not have sufficient funds to satisfy our principal and interest payment obligations when those obligations are due, which would place us into default under the terms of the Existing Term Loan and the Incremental Term Loan. Such default would have a material adverse effect on our business, financial condition and results of operations. Further, our borrowings are secured by all or substantially all of the Company’s assets. If the Company defaults on its obligations under the Existing Term Loan or the Incremental Term Loans, the lenders may be able to foreclose upon its security interest and otherwise be entitled to obtain or control Company assets.

We may need to obtain additional capital to continue to grow our business.

We may require additional funds in order to materially grow our business. We require substantial liquidity to implement long-term cost savings and productivity improvement plans, continue capital spending to improve our manufacturing facilities

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to increase capacity and support product development programs, meet scheduled term debt and lease maturities, to effect acquisitions and to run our normal business operations. We may seek additional funds through public and private financing, including equity and debt offerings. However, adequate funds through the financial markets or from other sources may not be available to us when needed or on favorable terms. Without sufficient additional capital funding, we may be required to delay, scale back or abandon some or all of our product development, manufacturing, acquisition, licensing and marketing initiatives, or operations. Further, such additional financing, if obtained, may require the granting of rights, preferences or privileges senior to those of the common stock and result in substantial dilution of the existing ownership interests of the common stockholders and could include covenants and restrictions that limit our ability to operate or expand our business in a manner that we deem to be in our best interest.

Risks Related to Our Common Stock.

Exercise of options and granting of restricted stock units, may have a substantial dilutive effect on our common stock.

If the price per share of our common stock at the time of exercise of any stock options is in excess of the various exercise prices of such options, exercise of such options would have a dilutive effect on our common stock. As of December 31, 2015, holders of our outstanding options would receive 4.8 million shares of our common stock at a weighted average exercise price of $20.33 per share.

We may issue preferred stock and the terms of such preferred stock may reduce the market value of our common stock.

We are authorized to issue up to a total of 5,000,000 shares of preferred stock in one or more series. Subject to certain limitations, our Board of Directors may authorize issuance of shares of preferred stock and the terms of such preferred stock without further action by holders of our common stock. If we issue shares of preferred stock, it could affect the rights or reduce the market value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions. We continue to seek capital for the growth of our business, and this additional capital may be raised through the issuance of preferred stock.

Other Risks.

We may be subject to significant disruptions or failures in our information technology systems and network infrastructures that could have a material adverse effect on our business.

We rely on the efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. We also hold data in various data center facilities upon which our business depends. Although we have experienced occasional, actual or attempted breaches of our cybersecurity, none of these breaches has had a material effect on our business, operations or reputation.  Any significant disruption, infiltration or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, third-party security breaches, employee error, theft, misuse or malfeasance could cause breaches of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information. Any of these events could result in the loss of key information, impair our production and supply chain processes, damage our reputation in the marketplace, deter people from purchasing our products, cause us to incur significant costs to remedy any damages, subject us to significant civil and criminal liability and require us to incur significant technical, legal and other expenses, and ultimately materially and adversely affect our business, results of operations, financial condition and value of our common stock.

The Chairman of our Board of Directors is subject to conflicts of interest, and through his stock ownership and position as Chairman has substantial influence over our business strategies and policies.

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John N. Kapoor, Ph.D., the Chairman of our Board of Directors and a principal shareholder, is the President of EJ Financial Enterprises, Inc. (“EJ Financial”), a healthcare consulting investment company. EJ Financial is involved in the management of healthcare companies in various fields, and Dr. Kapoor is involved in various capacities with the management and operation of these companies. The John N. Kapoor Trust dated September 20, 1989 (the “Kapoor Trust”), the beneficiary and sole trustee of which is Dr. Kapoor, is a principal shareholder of each of these companies. As a result, Dr. Kapoor does not devote his full time to our business. Although such companies do not currently compete directly with us, certain companies with which EJ Financial is involved are in the pharmaceutical business. Discoveries made by one or more of these companies could render our products less competitive or obsolete. Potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations.

As of December 31, 2015, Dr. Kapoor beneficially controls more than 25% of our common stock. Decisions made by Dr. Kapoor with respect to his and his related parties’ ownership or trading of our common stock could have an adverse effect on the market value of our common stock and an adverse effect on our business.

We could experience business interruptions at our manufacturing facilities, which may have a material adverse effect on our business, financial position and results of operations.

We manufacture drug products at two international and three domestic manufacturing facilities. Any one or more of these facilities may be forced to shut down or may be unable to operate at full capacity as a result of hurricanes, tornadoes, earthquakes, storms and other extreme weather events as well as strikes, war, violent upheavals, terrorist acts and other force majeure events. For example, our manufacturing facility in Somerset, New Jersey was shut down for approximately two weeks in October and November 2012 as a result of power outages and related business disruptions caused by Superstorm Sandy. A significant disruption at any of these facilities, even on a short-term basis, could impair our ability to produce and ship drug products to the market on a timely basis, which may have a material adverse effect on our business, financial position and results of operations.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

As of December 31, 2015 we have two company-owned facilities in Decatur, Illinois.  The Wyckles Road facility, which consists of 76,000 square feet of building space located on 15 acres of land, is used for packaging, warehousing, distribution, and office space.  The Grand Avenue facility is a 65,000 square-foot manufacturing facility. We recently acquired less than one acre of land adjacent to the Grand Avenue facility which may be used for expansion.  Our Decatur facilities support our Prescription Pharmaceuticals and Consumer Health segments.

Through the acquisition of the Akorn AG location in Hettlingen, Switzerland in January 2015, we acquired 5 buildings which support our Prescription Pharmaceuticals segment with approximately 17,500 square feet of manufacturing, office and storage space and approximately 1.5 acres of additional currently undeveloped land.

Through the merger with Hi-Tech in the prior year, we acquired seven buildings which support our Prescription Pharmaceuticals and Consumer Health segments with approximately 225,000 square feet which includes:

·                  42,000 square-foot facility dedicated to liquid and semi-solid production,

·                  28,000 square-foot facility housing a sterile manufacturing facility, DEA manufacturing, chemistry and microbiology laboratories,

·                  72,000 square-foot facility used for the warehousing of finished goods and which also houses our Health Care Products division,

·                  22,000 square-foot facility with 4,000 square feet of office space and 18,000 square feet of warehouse space,

·                  8,000 square-foot office building which is utilized for administrative functions,

·                  35,000 square-foot facility with mixed office, laboratory and manufacturing space,

·                  18,000 square-foot building located in Copiague, New York, which is used for research and development activities

Our wholly owned subsidiary, AIPL, owns and operates approximately 245,000 square feet of pharmaceutical manufacturing, warehousing and distribution facilities situated on approximately 14 acres of land in Paonta Sahib, Himachal Pradesh, India.  This facility manufactures drugs primarily for contract customers in India and for export to various unregulated world markets.

Our wholly owned subsidiary, Akorn (New Jersey) Inc. leases a 50,000 square-foot facility in Somerset, New Jersey pursuant to a seven-year lease agreement that began on August 1, 2010. This lease allows us the option to renew for up to four additional five-year periods beyond the initial expiration date of July 31, 2017.  The Somerset facility is used for drug manufacturing, R&D and administrative activities related to our Prescription Pharmaceuticals segment. Akorn (New Jersey) Inc. recently amended this lease agreement to add 15,000 square feet at an adjacent building to run concurrent with the original lease to be used for quality laboratory and additional office space. Akorn (New Jersey) Inc. also leases a 6,600 square foot on-site warehouse which is subject to annual renewals. We lease another 52,000 square-foot warehouse in Somerset, New Jersey pursuant to a ten-year lease agreement expiring on January 1, 2024, subject to two five-year renewals at the Company’s option.

In connection with the acquisition of VersaPharm during the prior year, our wholly owned subsidiary, Clover Pharmaceuticals Corp, leased a research and development facility in Warminster, Pennsylvania for an initial term ending December 31, 2017, with the option to renew for an additional three years.  The Warminster facility is approximately 12,000 square feet and is used for drug R&D and administrative activities related to our Prescription Pharmaceuticals segment. As part of the VersaPharm acquisition, we also took over a lease of a warehouse and office space in Marietta, Georgia consisting of approximately 20,000 square feet and terminated March 31, 2016. All other leases maintained by VersaPharm and its subsidiaries prior to the acquisition have been terminated. We also lease a small manufacturing facility in Dekalb, Mississippi for manufacture of several products with an initial term ending June 30, 2017 subject to two two-year automatic renewals.

Our manufacturing facilities in Decatur, Illinois, Somerset, New Jersey, Amityville, New York and Hettlingen, Switzerland are expected to be adequate to accommodate our current manufacturing needs.  We will gain additional capacity to support

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continued growth if our manufacturing facility in Paonta Sahib, India receives FDA approval to manufacture products for shipment to the U.S. market.

Our corporate headquarters and administrative offices consist of 58,000 square feet of leased space in two office buildings in Lake Forest, Illinois, with one lease expiring on March 31, 2018 and the other lease expiring on August 31, 2023.  We maintain a leased space in Gurnee, Illinois, which was recently expanded by 38,000 square feet to a total of approximately 112,000 square feet, in order to accommodate our product warehousing and distribution needs.  Both the Lake Forest lease and the Gurnee lease extend through March 2018.  Our leased R&D facility located in Vernon Hills, Illinois was recently expanded by 5,000 square feet to a total of 24,000 square feet and is maintained pursuant to leases expiring August 31, 2020.  Our subsidiary, Akorn Consumer Health, maintains its corporate offices in a 3,200-square foot leased facility in Ann Arbor, Michigan.

Item 3. Legal Proceedings.

Legal proceedings which may have a material effect on the Company have been further disclosed in Part II, Item 8 — Note 22 “Legal Proceedings” and are herein incorporated by reference.

Item 4. Mine Safety Disclosures.

Not applicable.

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Executive Officers of the Company

The following table identifies our current executive officers, the positions they hold, and age as of April 29, 2016, along with the year in which they became executive officers.  Our officers are appointed by the Board to hold office until their successors are elected and qualified.

Raj Rai.  Mr. Rai was appointed Interim Chief Executive Officer in June 2009, and appointed Chief Executive Officer in May 2010.  He had been appointed Strategic Consultant to the Special Committee of the Board in February 2009, following the departure of our former President and Chief Executive Officer.  Prior to joining Akorn, Mr. Rai was the President and CEO of Option Care, Inc., a leading provider of home infusion pharmacy and specialty pharmacy services, which was acquired by Walgreen Co. (now known as Walgreens Boots Alliance, Inc.) in August 2007.  Mr. Rai previously served on the board of directors of SeQual Technologies Inc.

Duane A. Portwood.   Mr. Portwood joined Akorn from The Home Depot, Inc., where he was their Vice President & Corporate Controller since 2006. In that role, he was responsible for all of Home Depot’s accounting and financial reporting functions, as well as its financial operations and internal controls. Prior to Home Depot, Mr. Portwood served with the Wm. Wrigley Jr. Company from 1999 to 2006 in a number of accounting and finance leadership roles of increasing responsibility, most recently as Corporate Controller. Mr. Portwood began his career with PricewaterhouseCoopers LLP, where he held numerous leadership positions in their audit and transaction support practices. Mr. Portwood holds an M.B.A. with Honors from the University of Chicago Booth School of Business and a B.S. in Business Administration from the University of Montana. Mr. Portwood is a Certified Public Accountant.

Joseph Bonaccorsi.  Mr. Bonaccorsi joined Akorn in 2009 as Senior Vice President, Secretary and General Counsel.  Mr. Bonaccorsi came to Akorn from Walgreen Co., where he served as Senior Vice President Mergers & Acquisition and Counsel for the Walgreens-Option Care Home Care division. Mr. Bonaccorsi joined Option Care, Inc. in 2002, where he served as Senior Vice President, General Counsel, Secretary and Corporate Compliance Officer through 2007. Prior to joining Option Care, Inc., he was in private law practice in Chicago, Illinois.  He received his BS degree from Northwestern University and his Juris Doctorate from Loyola University School of Law, Chicago.

Bruce Kutinsky, Pharm.D. Dr. Kutinsky joined Akorn in late 2009 as Senior Vice President of Corporate Strategy and was named President, Consumer Health Division following the Company’s acquisition of Advanced Vision Research, Inc. in May 2011.  In September 2012, Dr. Kutinsky was appointed to serve as Akorn’s Chief Operating Officer.  Before joining Akorn, Dr. Kutinsky was Vice President — Strategic Solutions for Walgreens.  Prior to that, Dr. Kutinsky served in various roles at Option Care from 1997 to 2007, the most recent of which was as Executive Vice President, Specialty Pharmacy.  Dr. Kutinsky holds a Doctor of Pharmacy degree from the University of Michigan.

Steve Lichter, Mr. Lichter joined Akorn in early 2015 as Executive Vice President, Pharmaceutical Operations. Mr. Lichter joins Akorn from Abbott Laboratories, where he served in various leadership roles over 32 years, most recently as

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Corporate Vice President, Operations, for Abbott’s Established Pharmaceutical Division in Switzerland. In this role, Mr. Lichter was responsible for the division’s global supply chain operations including active and finished drug product manufacturing, procurement, manufacturing, engineering and commercial operations. Mr. Lichter holds a B.S. in Business Management and an MBA from Northern Illinois University.

Randall E. Pollard.   Mr. Pollard joined Akorn in April 2015 from Novartis Pharmaceuticals, where he most recently served as the head of accounting and reporting for Novartis’ generic division, Sandoz. During his tenure at Novartis, Mr. Pollard also served as Controller of the Sandoz division. Prior to Novartis/Sandoz, he had served in various financial leadership roles at Wyeth and Mayne Pharma. Mr. Pollard began his career in public accounting at Arthur Andersen. Mr. Pollard is a Certified Public Accountant and holds a B.S. in Accounting from Pennsylvania State University and an MBA from Fairleigh Dickinson University.

Jonathon Kafer. Mr. Kafer joined Akorn in April 2015 as Executive Vice President, Sales and Marketing. Mr. Kafer joins Akorn from Allergan, Inc., where he was previously the Vice President, Account Management. At Allergan, Mr. Kafer was responsible for all trade activity within Allergan’s wholesale, retail specialty pharmacy, e-Solutions and managed market channels for all of Allergan’s business units. Prior to Allergan, Mr. Kafer was the Vice President of Sales and Marketing for Health Systems at Teva Pharmaceuticals. Mr. Kafer has also served in various senior management roles at aaiPharma, Xanodyne Pharmaceuticals, HealthNexis and Novartis. Mr. Kafer holds a B.A. in Organizational Communications from The Ohio State University.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The following table sets forth, for the fiscal periods indicated, the high and low sales prices for our common stock for the two most recent fiscal years and through the first quarter and a portion of the second quarter of our current fiscal year.  From February 7, 2007 to the date of this report, our common stock has been listed on The NASDAQ Global Select Market under the symbol “AKRX”.  Previously, from November 24, 2004 until February 6, 2007, our common stock was listed on the American Stock Exchange (currently known as the NYSE MKT) under the symbol “AKN.”

As of April 29, 2016, there were 119,427,471 shares of our common stock outstanding, held by approximately 309 stockholders of record. This number does not include stockholders for which shares are held in a “nominee” or “street” name. The closing price of our common stock on April 29, 2016 was $25.45 per share.

We did not pay cash dividends in 2015, 2014 or 2013 and do not expect to pay dividends on our common stock in the foreseeable future. Moreover, we may be restricted or limited from making dividend payments pursuant to the terms of our financing arrangements with certain other financial institutions (see Part II, Item 8 - Note 8 “Financing Arrangements”).

For information regarding securities authorized for issuance under equity compensation plans, refer to Part II, Item 8- Note 11 “Stock Options, Employee Stock Purchase Plan and Restricted Stock” in this Annual Report on Form 10-K.

We did not repurchase any shares of our common stock during the years 2015, 2014 or 2013.

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PERFORMANCE GRAPH

The following Stock Performance Graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor should such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference in such filing.

The graph below compares the cumulative shareholder return on our common stock with the NASDAQ (U.S.) Composite Index, and the NASDAQ Health Care Index (NASDAQ: ^IXHC) over the last five years through December 31, 2015.  The graph assumes $100 was invested in our common stock, as well as the two indices presented, at the end of December 2010 and that all dividends were reinvested during the subsequent five-year period.

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Item 6. Selected Financial Data

The following table sets forth selected summary historical financial data.  We have prepared this table using our consolidated financial statements for the five years ended December 31, 2015, 2014, 2013, 2012 and 2011.  Our consolidated financial statements upon which the selected summary historical financial data is derived were audited by our former independent registered public accounting firm, during each of the two years ended December 31, 2012 and 2011, and were audited by BDO USA, LLP (“BDO”), independent registered public accounting firm during each of the years ended December 31, 2015, 2014 and 2013.  This summary should be read in conjunction with our audited Consolidated Financial Statements and Notes thereto, and Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and other financial information included herein. As discussed in Part I, Item 1 the 2014 financials denoted below have been restated for errors identified in prior filings; see Item 8 - Note 2 “Restatement of previously filed financial information” for further clarification and a reconciliation of errors corrected and balances restated.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The 2014 Management Discussion and Analysis of Financial Condition denoted below have been restated for errors identified in prior filings. Please see Item 8 - Note 2 “Restatement of previously filed financial information” for further clarification and a reconciliation of errors corrected for the year ended December 31, 2014. Management’s discussion and analysis of financial condition for the quarter and year to date periods ended March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014 have also been restated.

OVERVIEW

We together with our wholly-owned subsidiaries, are a specialty generic pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals and branded and private-label OTC consumer health products and animal health pharmaceuticals. We are an industry leader in the development, manufacturing and marketing of specialized generic pharmaceutical products. As such, we specialize in difficult-to-manufacture sterile and non-sterile dosage forms including, but not limited to, ophthalmics, injectables, oral liquids, otics, topicals, inhalants and nasal sprays.

We have identified two reportable segments:

·                              Prescription Pharmaceuticals, we manufacture and market generic and branded prescription pharmaceuticals including ophthalmics, injectables, oral liquids, otics, topical, inhalants, and nasal sprays.

·                              Consumer Health, we manufacture and market branded and private-label animal health and OTC products, respectively.

For a more detailed description of the products and customers that comprise our reportable segments, see Part I, Item 1 - Business.

Acquisitions:

In recent periods, we have completed several business, asset and product acquisitions, including the various acquisitions described below. As a result of purchase accounting, we generally only reflect the results of an acquired business from the date of acquisition, which significantly affects the comparability of our financial results from period to period.

We have made several recent acquisitions of businesses that we believe complement our existing business and strategy. On January 2, 2015, we completed the Akorn AG acquisition, a Swiss contract manufacturer specializing in ophthalmic products. The purchase price of this acquisition was $28.4 million, which was net of certain working capital and inventory adjustments. On August 12, 2014, we completed the VersaPharm acquisition, a developer and marketer of multi-source prescription pharmaceuticals. The purchase price of this acquisition was approximately $433.0 million, subject to net working capital adjustments. On April 17, 2014, we completed the Hi-Tech acquisition, a specialty pharmaceutical company which develops, manufactures and markets generic and branded prescription and OTC products. The purchase price of this acquisition was approximately $650.0 million.

Similarly, we have made several recent acquisitions of products and assets that we believe complement our existing product offerings. On October 2, 2014, we acquired certain rights and inventory related to a suite of animal health injectable products formerly owned by Lloyd, Inc. These products have uses in pain management and anesthesia. The aggregate upfront and deferred purchase price of this product acquisition was $18.0 million. On October 1, 2014, we acquired certain rights and inventory related to the branded product Xopenex® Inhalation Solution. This product is indicated for the treatment or prevention of bronchospasm in adults, adolescents and certain children with reversible obstructive airway disease. The purchase price of this product acquisition was $45.0 million, partially offset by acquired reserves. On April 1, 2014 and January 2, 2014, we acquired certain rights to Zioptan® and Betimol® respectively. Both products are prescription ophthalmic eye drops indicated for treatment of intraocular hypertension. The purchase price of the Zioptan® product acquisition was $11.2 million. The total consideration of the Betimol® product acquisition was $12.2 million. There is also the potential of a $2.0

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million increase to the total consideration should net sales of Betimol® exceed a sizable threshold in any one of the first five years following the acquisition, but the Company has not assessed value to this contingent consideration as it is unlikely.

For a more detailed description of our recent company and product acquisitions, see Part I, Item 1 — Business.

New Product Development:

During 2015, we submitted 18 new ANDA filings and one NDA filing, respectively to the FDA. In 2014, we submitted 23 ANDA filings while in 2013 we submitted 15 ANDA filings to the FDA. In 2015, Akorn and its partners received 11 ANDA product approvals, two ANADA filings, one NDA product approval, one supplemental ANDA approval and two tentative ANDA approvals from the FDA.  As of December 31, 2015, we had 87 ANDA filings under review by the FDA. We plan to continue to regularly submit additional ANDA filings based on perceived market opportunities.  We continue to develop new products internally, as well as partner with other drug companies for products that we would not intend to manufacture ourselves.  Our R&D expense in the year ended December 31, 2015 was $40.7 million compared to $31.3 million in the year ended December 31, 2014.

Revenue & Gross Profit:

Our revenue increased to $985.1 million in 2015, an increase of 77.5% over revenue of $555.0 million in 2014.  Of this $430.1 million increase, approximately $263.4 million or 61.2% of the total change was related to growth in 2015 revenues of products acquired since the start of 2014, principally through business combinations and acquisitions including, but not limited to; Betimol, Zioptan, Hi-Tech, VersaPharm, Xopenex, Lloyd Products and Akorn AG. Of the acquired revenue growth, the Hi-Tech and VersaPharm Acquisitions combined to account for $213.2 million of the comparative revenue increase.  We also saw a $138.7 million increase, or 32.2% of the total change, in revenue from existing products, with $29.0 million, or 20.9% of the change from increased volumes and $109.7 million from price changes due to the competitive nature of our business and industry, and a $31.2 million increase, or 7.3% of the total change, related to new or recently re-launched products.  Our gross profit increased by $334.7 million, an increase of 128.0% over gross profit of $261.4 million in 2014. Our overall gross profit margin was 60.5% in 2015 compared to 47.1% in 2014.  The increased gross margin experienced in 2015 is largely the result of a full year of activity from the acquisitions consummated in 2014, price increase on organic products and reduced inventory step-up amortization in 2015 resulting from the various acquisitions which occurred in 2014.

In 2014 our revenue increased to $555.0 million, an increase of 74.7% over revenue of $317.7 million in 2013.  Of this $237.3 million increase, $236.3 million or 99.6% of the total change was related to new products released, approved or acquired since the start of 2013.  The Hi-Tech and VersaPharm Acquisitions combined to account for $175.2 million of the revenue increase.  We also saw a $3.6 million increase in revenue from existing products principally due to price increases and we experienced a $3.3 million increase in private label revenues, partially offset by a reduction in revenues from divested and discontinued products of $5.8 million.  Our gross profit increased by $89.5 million, an increase of 52.0% over gross profit of $171.9 million in 2013. Our overall gross profit margin was 47.1% in 2014 compared to 54.1% in 2013.  The lower margin percentage experienced in 2014, is primarily due to the effect of fees incurred due to price increases during the year and inventory step-up amortization resulting from the various acquisitions which occurred in 2014.

Sales Practices:

We have, often late in a fiscal quarter, offered to certain customers, incentives, such as extended payment terms or discounts, primarily in an effort to increase customer orders during that quarter and achieve sales targets and goals, which may have impacted sales in subsequent quarterly periods. We also from time to time offer incentives with respect to the launch of new products. We believe these practices are consistent with industry practice. For all sales under which these incentives were provided during the periods presented in this Management’s Discussion & Analysis, revenue received from such sales was properly accounted for in accordance with ASC 605 — “Revenue Recognition” and was recognized in the proper applicable accounting period.

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RESULTS OF OPERATIONS

For the years 2015, 2014 and 2013, we have identified and reported operating results for two distinct business segments: Prescription Pharmaceuticals and Consumer Health. Our reported results by segment are based upon various internal financial reports that disaggregate certain operating information. Our Chief Operating Decision Maker (CODM), as defined in Accounting Standards Codification (“ASC”) 280 - Segment Reporting, is our Chief Executive Officer (CEO).  Our CEO oversees operational assessments and resource allocations based upon the results of our reportable segments, all of which have available discrete financial information. During the prior year ended December 31, 2014, the Company acquired Hi-Tech and as a result, underwent a change in the organizational and reporting structure of the Company’s reportable segments, establishing two reporting segments that each report to the CODM. Historical results for the year ended December 31, 2013 have been recast in accordance with those reporting segments (See Note 14 — “Segment Information” for further discussion).

The following table sets forth amounts and percentages of total revenue for certain items from our Consolidated Statements of Comprehensive Income and our segment reporting information for the years ended December 31, 2015 and December 31, 2014, with recast segment reporting information for the year ended December 31, 2013 (dollar amounts in thousands):

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COMPARISON OF YEARS ENDED DECEMBER 31, 2015 AND 2014

Our revenues were $985.1 million in 2015, an increase of $430.1 million, or 77.5%, as compared to 2014.  The increase in revenue was primarily due to the full year effect of acquisitions completed during the prior year including Hi-Tech, which generated $324.5 million of revenue in the year and VersaPharm, which generated $63.9 million of revenue in the year, in comparison to prior year revenues of $150.7 million for Hi-Tech and $24.5 million for VersaPharm, and other product acquisitions which generated $75.1 million in the year compared to $24.9 million in the prior year. Of the remaining $166.6 million increase, existing Akorn organic revenues increased $138.7 million from 2014. With $29.0 million, or 20.9% of the change from increased volumes and $109.7 million from price changes due to the competitive nature of our business and industry, $31.2 million related to new or recently re-launched products, partially offset by a $3.3 million decline in yearly revenues due to products which were either divested or discontinued during the year.

2015 revenues from our Prescription Pharmaceuticals segment were $924.5 million, an increase of $419.8 million, or 83.2%, from the prior year.  This increase was primarily related to the full year impact of acquisitions completed in the prior year which generated $256.9 million of the change, sales of new and re-launched products, which accounted for $31.2 million of the increase, and increased sales of existing products which accounted for $135.0 million. These increases were partially offset by declining revenues from products divested or discontinued in the current or prior year which reduced comparative period revenues by $3.3 million.  The Consumer Health segment revenues were $60.6 million, an increase of $10.3 million, or 20.5%, from the prior year.  Of the increase, $6.5 million was related to the full year effect of Consumer Health revenues generated through the prior year acquisition of Hi-Tech and Lloyd Products, while $3.8 million was related to increased sales of existing products.

Our 2015 revenues of $985.1 million were net of adjustments totaling $1,526.6 million for chargebacks and rebates, returns, discounts and allowances, administrative fees and Advertising, promotions and other.  Chargeback and rebate expense for 2015 was $1,361.0 million, or 54.2% of gross revenue, compared to $776.0 million, or 54.1% of gross revenue, in 2014.  The $585.1 million increase in chargeback and rebate expense was due to the full year effect of acquisitions completed during 2014, pricing changes on certain products, a shift to more indirect contract sales, and customer consolidation in the industry.  The increase in chargeback and rebate expense as a percentage of gross sales was attributable to higher overall chargeback and rebate expenses as a percent of gross revenues from the acquisitions consummated in 2014.  Our products returns provision in 2015 was $34.3 million, or 1.4% of gross sales, compared to $21.0 million, or 1.5% of gross sales, in 2014.  Discounts and allowances increased from $30.8 million in 2014, or 2.1% of gross sales, to $50.4 million in 2015, or 2.0% of gross sales while administration fees increased to $71.7 million in 2015, or 2.9% of gross sales, from a 2014 expense of $44.6 million, or 3.1% of gross sales. Finally, advertisement and promotion expense increased from $6.3 million, or 0.4% of gross sales in 2014 to $9.2 million, or 0.4% of gross sales in 2015.

Our consolidated gross profit for 2015 was $596.0 million, or 60.5% of revenue, compared to $261.4 million, or 47.1% of revenue, in 2014.  This $334.7 million, or 128.0%, increase in gross profit was principally due to the full year impact of our revenue growth from acquisitions entered into during the prior year.  The increase in our overall gross profit margin was primarily due to the effect of price changes due to the competitive nature of our business and industry and volume gains as the Company integrated businesses acquired in the prior year. Partially offsetting these gains were fees incurred to effect price increases and inventory step-up amortization resulting from acquisitions.

The gross profit margin from sales of Prescription Pharmaceuticals segment was 61.3% in 2015 compared to 46.3% in 2014.  The 15.0% increase in the gross margin percentage was due to the full year effect of the acquisitions consummated in the prior year and diminished fees incurred to effect price increases on various products in comparison to the prior year.  The gross profit margin on Consumer Health segment sales was 49.0% in 2015 compared to 54.7% in the prior year.  This decrease was due to product mix shifts due to acquisitions consummated through the prior year and decreasing margins in our private label and OTC products.

Total operating expenses were $301.4 million in 2015, an increase of $100.9 million, or 50.3%, over the prior year, which was primarily due to the full year effect of acquisitions entered into during the prior year and the additional costs associated

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with the operations of those businesses and other expenses associated with the restatement of 2014 financials. The main drivers of the increase were comprised of the following fluctuations:

Selling, general and administrative (“SG&A”) expenses were $162.2 million in 2015, an increase of $69.3 million, or 74.5%, over the prior year expense of $93.0 million. Significant increases in SG&A expenses in comparison to the prior year included $27.4 million of costs associated with the restatement and remediation efforts incurred in the year, a $8.8 million increase in wages and related costs, a $6.2 million increase in accounting, audit and legal expenses and a $4.8 million increase in stock option and restricted stock grant expenses. As a percentage of sales, SG&A expenses decreased to 16.5% in 2015 compared to 16.7% in the prior year.

We recorded $1.8 million of acquisition-related costs during 2015, compared to $32.8 million in 2014, a decrease of $31.0 million or 94.4%.  The current year expenses were primarily related to the Akorn AG acquisition and small amounts of remaining spend at Hi-Tech and VersaPharm, while expenses in the prior year were principally focused on the Hi-Tech and VersaPharm acquisitions and other product acquisitions including Betimol®, Zioptan®, Xopenex® and Lloyd Products. As a percentage of sales, acquisition expenses decreased to 0.2% in 2015 compared to 5.9% in the prior year.

R&D expense was $40.7 million in 2015, an increase of $9.4 million or 30.2% over the R&D expense of $31.3 million recorded in the prior year.  This increase was principally related to the full year effect of Hi-Tech and VersaPharm acquisitions consummated in the prior year which included the addition of R&D facilities in Copiague, New York and Warminster, Pennsylvania and other planned expansions of existing Akorn locations. In addition, the Company recognized $2.6 million related to the write-off of IPR&D associated with two projects acquired in the VersaPharm acquisition. As a percentage of sales, R&D expenses decreased to 4.1% in 2015 compared to 5.6% in the prior year.

Amortization of intangibles consists of the amortization of drug acquisition costs over the anticipated market lives of the acquired products, as well as the amortization of other intangible assets acquired through acquisitions.  Amortization of intangibles was $66.3 million in 2015, compared to $43.5 million in 2014.  This increase of $22.8 million or 52.4% was wholly related to the full year effect of acquisitions consummated during the prior year, principally Hi-Tech, VersaPharm and Xopenex. As a percentage of sales, amortization expenses decreased to 6.7% in 2015 compared to 7.8% in the prior year.

During 2015 the Company impaired one currently marketed product given recent trends in customer concentration and market dynamics. The total impairment expense in 2015 was $30.4 million or 3.1% of sales.

Amortization of deferred financing costs totaled approximately $4.3 million in 2015, a decrease of $5.7 million as compared to the $10.0 million recognized in 2014.  The decrease in deferred financing fees expense in the year was principally the result of financing fees incurred in 2014 partially offset by the amortization of consent waivers incurred in 2015 and a full year impact of financing amortization for debt entered into during 2014.

Total interest expense was $52.0 million in 2015, compared to $35.7 million in the prior year.  The increase in the year is primarily due to the full year impact of the addition of the Existing and Incremental Term loans entered into upon the consummation of the Hi-Tech and VersaPharm acquisitions, respectively during 2014.

Income tax expense was $81.4 million based on an effective tax provision rate of approximately 35.0% in 2015, compared to $11.0 million in the prior year based on an effective tax provision rate of approximately 43.2%.  The decrease in comparison to the prior year provision rate was principally due to tax benefits due to domestic production credits.

We reported a net income of $150.8 million in 2015, or 15.3% of revenues, compared to net income of $13.9 million, or 2.5% of revenues in 2014.

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COMPARISON OF YEARS ENDED DECEMBER 31, 2014 AND 2013

Our revenues were $555.0 million in 2014, an increase of $237.3 million, or 74.7%, as compared to 2013.  The increase in revenue was primarily due to the partial effect of acquisitions completed during 2014 including two full quarters of Hi-Tech, which generated $150.7 million of revenue in the year, a full quarter of VersaPharm operations, which generated $24.5 million of revenue in the year and other product acquisitions. Of the remaining $62.1 million increase, $54.0 million was related to other acquisitions completed during the year and late in the prior year including AzaSite®, Cosopt® PF, Betimol®, Zioptan®, Xopenex®, and Lloyd Products, a $3.6 million increase related to existing products, $7.0 million related to new or recently re-launched products and a $3.3 million increase in Consumer Health private label products, partially offset by a $5.8 million decline in yearly revenues due to products which were either divested or discontinued during the year.

2014 revenues from our Prescription Pharmaceuticals segment were $504.7 million, an increase of $224.8 million, or 80.3%, over the prior year in 2013.  This increase was primarily related to the partial effect of acquisitions completed in 2014 which generated $218.2 million of the change, sales of new and re-launched products, which accounted for $7.0 million of the increase, and increased sales of existing products which accounted for $5.5 million, partially offset by declining revenues from divested or discontinued products which reduced revenues by $5.8 million.  Consumer Health segment revenues were $50.4 million, an increase of $12.6 million, or 33.2%, over the prior year in 2013.  Of the increase, $11.2 million was related to Consumer Health revenues generated through the acquisition of Hi-Tech and Lloyd Products, while $3.3 million of the remainder was due to increased sales of private label products, wholly generated through volume increases during the year, partially offset by a $1.9 million decline in existing business revenues.

Our 2014 revenues of $555.0 million was net of adjustments totaling $878.3 million for chargebacks and rebates, returns, discounts and allowances, administrative fees and Advertising, promotions and other.  Chargeback and rebate expense for 2014 was $776.0 million, or 54.1% of gross revenue, compared to $183.4 million, or 34.7% of gross revenue, in 2013.  The 592.6 million increase in chargeback and rebate expense was due to the acquisitions completed during the year and corresponding contract shifts and the impact of costs of price increases for various products.  The increase in chargeback and rebate expense as a percentage of gross sales was attributable to fees incurred to effect price increases taken on various products and higher overall chargeback and rebate expenses as a percent of gross revenues from the acquisitions consummated throughout the year.  Our products returns provision in 2014 was $21.0 million, or 1.5% of gross sales, compared to $5.0 million, or 0.9% of gross sales, in 2013.  Discounts and allowances increased from $8.5 million in 2013, or 1.6% of gross sales, to $30.8 million in 2014, or 2.1% of gross sales while administration fees increased to $44.6 million in 2014, 3.1% of gross sales, up from a 2013 expense of $9.5 million, or 1.8% of gross sales. Finally, advertisement and promotion expense increased from $4.5 million, or 0.9% of gross sales in 2013 to $6.3 million, or 0.4% of gross sales in 2014. The increase in the percentage of returns, discounts and allowances, administration fees and advertisements and promotions to gross revenues were individually due to the shift in the product mix as a result of the acquisitions completed during the year.

Our consolidated gross profit for 2014 was $261.4 million, or 47.1% of revenue, compared to $171.9 million, or 54.1% of revenue, in 2013.  This $89.5 million, or 52.0%, increase in gross profit was principally due to our revenue growth from the partial effect of acquisitions entered into during 2014.  The lower overall gross profit margin was primarily due to fees incurred to effect price increases on various products taken throughout the year and amortization of acquisition related inventory step-up occurring in 2014. Additionally, shifts in product mix were also a contributing factor to the lower gross profit margin.

The gross profit margin from sales of Prescription Pharmaceuticals was 46.3% in 2014 compared to 54.0% in 2013.  The decrease in the gross margin percentage was due to fees incurred to effect price increases on various products throughout the year and shifts in the product mix to comparatively lower margin products.  The gross profit margin on Consumer Health sales was 54.7% in 2014 compared to 54.8% in the prior year.  This slight decrease was due to product mix shifts due to the partial effect of acquisitions consummated throughout 2014.

Total operating expenses were $200.5 million in 2014, an increase of $116.8 million, or 139.6%, over the prior year, which was primarily due to the partial effect of acquisitions entered into during 2014 and the additional costs associated with the operations of those businesses. The main drivers of the increase were comprised of the following fluctuations:

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SG&A expense was $93.0 million in 2014, an increase of $39.4 million, or 73.7%, over the 2013 expense of $53.5 million. Significant increases in SG&A expenses in comparison to the prior year included a $18.4 million increase in wages and related costs and a $10.4 million increase in other SG&A expenses. Additionally, marketing and advertising expenses increased $4.4 million, while FDA fee amortization expenses increased by $2.3 million and depreciation expenses increased $2.1 million. As a percentage of sales, SG&A expense slightly decreased to 16.7% in 2014 from 16.8% in the prior year.

We recorded $32.8 million of acquisition-related costs during 2014, compared to $2.9 million in 2013.  Of the 2014 expenses, $21.3 million was related to the Hi-Tech acquisition, $8.1 million was related to the VersaPharm acquisition, and $1.1 million was aggregated from the acquisitions of Betimol®, Zioptan®, Xopenex®, Lloyd Products, and Akorn AG during the year. In 2013, acquisition-related expenses were primarily related to the Hi-Tech and Merck acquisitions. As a percentage of sales, acquisition expenses increased to 5.9% in 2014 compared to 0.9% in the prior year.

R&D expense was $31.3 million in 2014, an increase of $11.4 million or 57.4% over the R&D expense of $19.9 million recognized in 2013.  This increase was primarily related to the partial year effect of Hi-Tech and VersaPharm acquisitions consummated in 2014 which included the acquisition of R&D facilities in Copiague, New York and Warminster, Pennsylvania.  The Hi-Tech acquisition accounted for $8.5 million of the increase while the VersaPharm acquisition accounted for $1.3 million increase, with existing Akorn R&D expense growth generating the remaining fluctuation. As a percentage of sales, R&D expense decreased to 5.6% in 2014 compared to 6.3% in the prior year.

Amortization of intangibles consists of the amortization of drug acquisition costs over the anticipated market lives of the acquired products, as well as the amortization of other intangible assets acquired through acquisitions.  Amortization of intangibles was $43.5 million in 2014, compared to $7.4 million in 2013.  This increase of $36.1 million or 486.0% was wholly related to the partial year effect of the acquisitions occurring in 2014, principally Hi-Tech and VersaPharm. As a percentage of sales, amortization expense increased to 7.8% in 2015 compared to 2.3% in the prior year.

Amortization of deferred financing costs totaled approximately $10.0 million in 2014, an increase of $9.2 million as compared to the $0.8 million recognized in 2013.  The increase in deferred financing fees expense in the year was wholly the result of the partial effect of the new debt instruments entered into during the year.

Total interest expense was $35.7 million in 2014, compared to $8.6 million in the prior year.  The increase in the year is primarily due to the addition of the Existing Term and Incremental Term loans entered into upon the consummation of the Hi-Tech and VersaPharm acquisitions, respectively.

Income tax expense was $11.0 million based on an effective tax provision rate of approximately 43.2% in 2014, compared to $30.5 million in the prior year based on an effective tax provision rate of approximately 36.8%.  The increase in comparison to the prior year provision rate was principally due to the non-deductibility of certain acquisition expenses.

We reported a net income of $13.8 million in 2014, or 2.5% of revenues, compared to net income of $52.4 million or 16.5% of revenues in 2013.

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MANAGEMENT’S QUARTERLY DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth the amounts and percentages of total revenue for certain items from our Condensed Consolidated Statements of Comprehensive Income and our segment reporting information for the three-month periods ended March 31, 2015 and 2014 (dollar amounts in thousands):

THREE MONTHS ENDED MARCH 31, 2015 COMPARED TO THREE MONTHS ENDED MARCH 31, 2014

Our revenue was $227.4 million during the quarter ended March 31, 2015, representing an increase of $136.8 million, or 150.9%, over our revenue of $90.6 million for the prior year quarter ended March 31, 2014. The increase in revenue in the quarter was primarily due to the acquisitions completed during the prior year including Hi-Tech, VersaPharm and other product acquisitions, which generated $121.1 million of revenue in the quarter compared to $2.8 million in the prior year quarter.  Of the remaining $18.5 million of increase, $13.7 million was related to organic growth in existing products with $3.5 million, or 25.6% of the change from volume increases and $10.2 million due to price changes due to the competitive nature of our business and industry and $6.1 million related to newly-approved products, partially offset by a $1.3 million decline in products which were either divested or discontinued in the year.

The Prescription Pharmaceuticals segment revenues of $210.6 million represented an increase of $128.7 million, or 157.2%, over the prior year quarter, with acquisitions completed in the prior year accounting for $112.8 million of the increase, sales of new and re-launched products which accounted for $6.1 million of the increase and increased sales of existing products which accounted for $11.1 million, partially offset by divested or discontinued products of $1.3 million. The Consumer Health segment revenues of $16.8 million represented an increase of $8.0 million, or 91.8%, over the prior year quarter, with acquisitions completed in the prior year accounting for $5.5 million of the increase and organic revenue increases accounting for the remaining $2.5 million.

Consolidated gross profit for the quarter ended March 31, 2015 was $130.2 million, or 57.2% of revenue, compared to $49.7 million, or 54.8% of revenue, in the corresponding prior year quarter.  The $80.5 million increase in gross profit dollars was principally due to the effect of business and product acquisitions in the prior year, with a secondary cause being our organic growth.  The increase in gross profit margin from 54.8% in the prior year quarter to 57.2% in the quarter ended March 31, 2015 was principally due to the effect of recent acquisitions and organic growth in gross margin.

SG&A expenses were $30.0 million in the quarter ended March 31, 2015, compared to $16.6 million in the prior year quarter.  Of this $13.4 million increase, the largest components of the increase were a $6.0 million increase in wages and related costs, a $3.5 million increase in other SG&A expenses and a $1.3 million increase in marketing and advertising expenses to support our growing business. As a percentage of sales, SG&A expenses decreased to 13.2% in the quarter ended March 31, 2015 compared to 18.3% in the comparative prior year quarter.

Acquisition-related costs incurred in the quarter ended March 31, 2015 were $1.3 million, compared to $0.5 million, in the prior year quarter. The acquisition-related costs principally consisted of advisor and legal fees related to the Akorn AG facility acquisition in 2015. As a percentage of sales, acquisition expenses remained flat, increasing slightly to 0.6% in the quarter ended March 31, 2015 compared to 0.5% in the comparative prior year quarter.

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R&D expense was $9.3 million in the quarter ended March 31, 2015 compared to $4.4 million in the prior year quarter.  This increase was primarily related to the acquisition of Hi-Tech and VersaPharm and increases in existing R&D due to the timing and expansion of development activities to support the growing Company. As a percentage of sales, R&D expenses decreased to 4.1% in the quarter ended March 31, 2015 compared to 4.9% in the comparative prior year quarter.

Amortization of intangible assets was $16.4 million in the quarter ended March 31, 2015 compared to $4.8 million in the prior year quarter.  This $11.6 million increase was primarily due to the amortization of intangible assets acquired through the Hi-Tech and VersaPharm acquisition and the other product acquisitions we completed during the prior year. As a percentage of sales, amortization expenses increased to 7.2% in the quarter ended March 31, 2015 compared to 5.2% in the comparative prior year quarter.

In the quarter ended March 31, 2015, we recognized non-operating expense totaling $14.9 million compared to $5.8 million in the prior year quarter.  This increase of $9.1 million was principally related to a $11.3 million increase in interest expense related to the indebtedness obtained to finance the Hi-Tech and VersaPharm acquisitions partially offset by a $3.3 million decrease in deferred financing fees amortization in comparison to the three month period ended March 31, 2014, primarily due to reduced deferred financing fee amortization in the current year.

For the quarter ended March 31, 2015, we recorded an income tax provision of $20.8 million based on an effective tax provision rate of approximately 35.6%.  In the prior year quarter ended March 31, 2014, our income tax provision was $8.1 million based on an effective tax provision rate of approximately 46.0%.  The decrease in comparison to the prior year provision rate was principally due to tax benefits due to domestic production credits.

We reported net income of $37.5 million for the quarter ended March 31, 2015, or 16.5% of revenues, compared to net income of $9.5 million for the quarter ended March 31, 2014, representing 10.5% of revenues.

The following table sets forth the amounts and percentages of total revenue for certain items from our Condensed Consolidated Statements of Comprehensive Income and our segment reporting information for the three and six month periods ended June 30, 2015 and 2014 (dollar amounts in thousands):