After Fresenius deal collapse, Akorn inks $74M settlement with investors over data integrity woes

Akorn inked a tentative agreement with investors over claims it misled the market about data integrity problems at its facilities. (Pixabay)

Akorn has had a busy two years in court following a flurry of data integrity woes that led former merger partner Fresenius to walk away from their deal. Now, it’s putting one issue to rest by settling with investors who lost money during the tumultuous stretch. 

The Illinois drugmaker on Wednesday entered a non-binding agreement to resolve shareholder allegations that it made misleading statements that caused investors to lose money. Last year, Akorn shareholders sued the drugmaker for concealing data integrity problems that caused them to lose money when the truth went public. 

Akorn and Fresenius agreed to tie up in 2017, but the following February, Fresenius said it was looking into alleged breaches of FDA data integrity requirements at Akorn sites. The news caused Akorn’s shares to tumble by 38% in one day, and 9% the following day, according to investor lawsuits. 

Investors said the company and execs “knew or recklessly disregarded widespread institutional data integrity problems” at Akorn facilities, while making "misleading statements and omissions of material fact concerning the company’s data integrity at these facilities in order to attempt to market and sell Akorn.”

As penance, Akorn has agreed to issue about 6.5 million shares and contingent cash payouts that could be worth up to $60 million over five years. Further, plaintiffs could get up to $30 million in director and officer liability insurance proceeds.

Akorn set aside $74 million for the deal, but a lawyer representing plaintiffs told the Chicago Tribune the value could reach up to $130 million. The deal won’t be official until certain conditions are met and until a court signs off on the accord. Akorn admits no wrongdoing under the potential agreement.  

RELATED: Judge frees Fresenius from buyout, citing 'extensive and recurring' data problems at Akorn 

Fresenius sought to exit its Akorn merger in April 2018 after embarking on a data integrity investigation two months prior. A legal saga ensued, and Fresenius won the right to walk away from the deal in October. As it's pressed on independently, Akorn has suffered a series of FDA warning letters. It appointed new CEO Douglas Boothe to right the course.  

Meanwhile, the company is working with lenders to avoid defaulting by November 15. Per a “standstill agreement” filed in May, Akorn’s lenders won’t declare it in default while they negotiate changes to the loan agreement. 

RELATED: Akorn lenders will declare it in default if a new loan agreement is not reached but progress is being made   

Since Boothe took the helm late last year, the new CEO said Akorn has made structural and organizational changes to “emphasize compliance, transparency and accountability,” at its three U.S. manufacturing facilities. Akorn is also exploring a sale for its India site.