UNCONSOLIDATED JOINT VENTURE

9 Months Ended

Sep. 30, 2012

UNCONSOLIDATED JOINT VENTURE [Abstract]

UNCONSOLIDATED JOINT VENTURE

NOTE 17 — UNCONSOLIDATED JOINT VENTURE

The Company is party to a 50/50 joint venture agreement (the "Joint Venture Agreement"), initiated on September 22, 2004, with Strides Arcolab Limited ("Strides"), a pharmaceutical manufacturer based in India, for the development, manufacturing and marketing of various generic pharmaceutical products for sale in the United States.  The joint venture, known as Akorn-Strides LLC (the "Joint Venture Company"), launched its first commercialized product during 2008 and operated until May 2011, at which point it ceased operations after the sale and transfer of its operating assets to Pfizer, Inc. pursuant to an Asset Purchase Agreement entered into on December 29, 2010.

Under the Joint Venture Agreement, Strides was primarily responsible for developing and manufacturing injectable pharmaceutical products while the Company was responsible for marketing and selling these products.  For its sales and marketing efforts, the Company earned revenue from the Joint Venture Company in the form of a fee calculated as a percentage of the Joint Venture Company's monthly net sales revenue.  To supplement Strides' manufacturing capabilities, the Company manufactured one of the Joint Venture Company's products from the second quarter of 2010 through the first quarter of 2011.

On December 29, 2010, the Joint Venture Company entered into an Asset Purchase Agreement with Pfizer, Inc. ("Pfizer") to sell the rights to all of its abbreviated new drug applications ("ANDAs") for $63.2 million in cash.  In accordance with an amendment to the Joint Venture Agreement, the proceeds were split unevenly, with the Company receiving $35.0 million and Strides receiving $28.2 million.  The Asset Purchase Agreement included an initial closing date of December 29, 2010 and a final closing date of May 1, 2011.  The ANDAs for dormant and in-development products were transferred on the initial closing date, while the ANDAs for actively-marketed products were transferred to Pfizer on the final closing date.  The Joint Venture Company recognized a gain of $63.1 million from the sale, of which $38.9 million was recognized in the fourth quarter of 2010 and the remaining $24.2 million was recognized in the second quarter of 2011.  Having sold all of its ANDAs, the Joint Venture Company discontinued product sales in the second quarter of 2011 and its operations ceased.  It is anticipated that the Joint Venture Company will continue to exist until all products that it sold are beyond the potential product return period.

The following tables set forth condensed statements of income of the Joint Venture Company for the three and nine-month periods ended September 30, 2012 and 2011, as well as condensed balance sheets as of September 30, 2012 and December 31, 2011.

CONDENSED STATEMENTS OF INCOME (IN THOUSANDS)
	Three months ended				Nine months ended
	September 30,				September 30,
	2012		2011		2012		2011
Revenues	$	-	$	-	$	-	$	6,332
Cost of sales		-		-		-		3,534
Gross profit		-		-		-		2,798
Operating expenses		-		-		-		497
Operating income		-		-		-		2,301
Gain from Pfizer ANDA Sale		-		-		-		24,160
Income before income taxes		-		-		-		26,461
Income tax provision		-		-		-		—
Net income	$	-	$	-	$	-	$	26,461
Allocation of net income to Akorn, Inc.	$	-	$	-	$	-	$	14,530

CONDENSED BALANCE SHEETS
(IN THOUSANDS)
	September 30,		December 31,
	2012		2011
Assets:
Cash	$	793	$	859
Other assets		8		75
Total assets	$	801	$	934
Liabilities and members' equity:
Trade accounts payable and other accrued liabilities	$	438	$	543
Accounts payable – members		—		28
Total liabilities				571
Members' equity (deficit), net of advances		363		363
Total liabilities & members' equity	$	801	$	934