BUSINESS COMBINATIONS

3 Months Ended

Mar. 31, 2012

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

NOTE 13 - BUSINESS COMBINATIONS

On February 28, 2012, Akorn India Private Limited ("AIPL"), a wholly owned subsidiary of Akorn, Inc. (the "Company") completed and closed on its previously announced acquisition of selected assets of Kilitch Drugs (India) Limited ("KDIL"). This acquisition was pursuant to the terms of the Business Transfer Agreement (the "BTA") entered into among the Company, KDIL and the members of the promoter group of KDIL on October 5, 2011. In accordance with terms contained in the BTA, the Company also closed on a related Product Transfer Agreement between the Company and NBZ Pharma Limited ("NBZ"), a company associated with KDIL. The primary asset transferred was KDIL's manufacturing plant in Paonta Sahib, Himachal Pradesh, India, along with its existing book of business. KDIL was engaged in the manufacture and sale of pharmaceutical products for contract customers in India and for export to various unregulated world markets. While the Paonta Sahib manufacturing facility is not currently certified by the U.S. Food and Drug Administration (the "FDA") for exporting drugs to the U.S., the facility was designed with future FDA certification in mind. Accordingly, the Kilitch Acquisition provided the Company with the potential for future capacity expansion for products to be sold in the U.S., as well as the opportunity to expand the Company's footprint into markets outside the U.S. The Company has determined that the assets acquired through the Kilitch Acquisition constitute a "business" as defined by Rule 11-01(d) of Regulation S-X and ASC 805, Business Combinations. Accordingly, the Company has accounted for the Kilitch Acquisition as a business combination.

       AIPL paid the equivalent of approximately USD $60.1 million at closing related to the BTA. This total consisted of approximately $52.3 million in base consideration, $4.0 million in reimbursement for capital expenditures made by KDIL between April 1, 2011 and the closing date, $2.0 million related to contingent consideration earned by the closing date, and $1.8 million in taxes and duties related to transfer of the land and the business. In addition to the amounts paid at closing, AIPL expects to owe the full contractual amount of $3.9 million in contingent consideration, subject to achievement of certain milestones. The BTA also contains a working capital guarantee that calls for KDIL or AIPL to reimburse the other party for any shortfall or excess, respectively, in the actual acquired working capital compared to the target established in the BTA.

The following table sets forth the preliminary allocation of purchase price for the Kilitch Acquisition translated into U.S. dollars as of the date of acquisition. The figures presented below are tentative and subject to adjustment related to various factors, including resolution of working capital adjustments and final calculation of the contingent consideration payable to the promoters group (amounts in thousands):

PURCHASE PRICE:
Cash paid	$	60,072
Estimated contingent consideration payable		4,075
Estimated working capital true-up		(890	)
Assumed liabilities		2,099
Deferred tax liabilities		1,368
Total purchase price	$	66,724
ALLOCATION OF PURCHASE PRICE:
Accounts receivable	$	2,130
Inventory		1,799
Land		3,714
Property, plant and equipment		8,474
Construction in progress		14,231
Goodwill		30,533
Other intangible assets		5,806
Other assets		37
Total allocation of purchase price	$	66,724

Goodwill represents expected synergies and intangible assets that do not qualify for separate recognition. The Company does not anticipate being able to deduct the value of goodwill or other intangible assets for income tax purposes in India. For book purposes, the other intangible assets acquired are being amortized over lives of four to five years. Accordingly, the Company recorded a deferred tax liability of $1,368,000 as part of purchase accounting. Goodwill is not amortized for book purposes but is subject to impairment testing per the Company's policy.

The unaudited pro forma results presented below reflect the consolidated results of the operations of the Company as if the Kilitch Acquisition had taken place at the beginning the period presented below. The pro forma results include amortization associated with the acquired intangible assets and interest on funds used for the acquisition. The unaudited pro forma financial information presented below does not reflect the impact of any actual or anticipated synergies expected to result from the acquisition. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date (amounts in thousands, except per share data):

	Three months ended March 31, 2012
Revenue	$	55,721
Net income		8,836
Net income per diluted share	$	0.08

During the quarter ended March 31, 2012, the Company recorded no adjustments to the purchase accounting for its acquisitions completed during 2011, which included Advanced Vision Research, Inc., and the acquisition of certain pharmaceutical product rights from the U.S. subsidiary of H. Lundbeck A/S.